G.R. No.
78909 June 30, 1989 On July 17, 1986, the Labor Standard and Welfare Officers submitted
MATERNITY CHILDREN'S HOSPITAL, represented by ANTERA
L. DORADO, President, petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR AND THE
REGIONAL DlRECTOR OF LABOR, REGION X, respondents.
MEDIALDEA, J.:
This is a petition for certiorari seeking the annulment of the Decision
of the respondent Secretary of Labor dated September 24, 1986,
affirming with modification the Order of respondent Regional Director
of Labor, Region X, dated August 4, 1986, awarding salary
differentials and emergency cost of living allowances (ECOLAS) to
employees of petitioner, and the Order denying petitioner's motion for
reconsideration dated May 13, 1987, on the ground of grave abuse of
discretion.
Petitioner is a semi-government hospital, managed by the Board of
Directors of the Cagayan de Oro Women's Club and Puericulture
Center, headed by Mrs. Antera Dorado, as holdover President. The
hospital derives its finances from the club itself as well as from paying
patients, averaging 130 per month. It is also partly subsidized by the
Philippine Charity Sweepstakes Office and the Cagayan De Oro City
government.
Petitioner has forty-one (41) employees. Aside from salary and living
allowances, the employees are given food, but the amount spent
therefor is deducted from their respective salaries (pp. 77-78, Rollo).
On May 23, 1986, ten (10) employees of the petitioner employed in
different capacities/positions filed a complaint with the Office of the
Regional Director of Labor and Employment, Region X, for
underpayment of their salaries and ECOLAS, which was docketed as
ROX Case No. CW-71-86.
On June 16, 1986, the Regional Director directed two of his Labor
Standard and Welfare Officers to inspect the records of the petitioner
to ascertain the truth of the allegations in the complaints (p. 98, Rollo).
Payrolls covering the periods of May, 1974, January, 1985, November,
1985 and May, 1986, were duly submitted for inspection.
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their report confirming that there was underpayment of wages and
ECOLAs of all the employees by the petitioner, the dispositive portion
of which reads:
IN VIEW OF THE FOREGOING, deficiency on wage and ecola as
verified and confirmed per review of the respondent payrolls and
interviews with the complainant workers and all other information
gathered by the team, it is respectfully recommended to the Honorable
Regional Director, this office, that Antera Dorado, President be
ORDERED to pay the amount of SIX HUNDRED FIFTY FOUR
THOUSAND SEVEN HUNDRED FIFTY SIX & 01/100
(P654,756.01), representing underpayment of wages and ecola to the
THIRTY SIX (36) employees of the said hospital as appearing in the
attached Annex "F" worksheets and/or whatever action equitable under
the premises. (p. 99, Rollo)
Based on this inspection report and recommendation, the Regional
Director issued an Order dated August 4, 1986, directing the payment
of P723,888.58, representing underpayment of wages and ECOLAs to
all the petitioner's employees, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent Maternity and
Children Hospital is hereby ordered to pay the above-listed
complainants the total amount indicated opposite each name, thru this
Office within ten (10) days from receipt thereof. Thenceforth, the
respondent hospital is also ordered to pay its employees/workers the
prevailing statutory minimum wage and allowance.
SO ORDERED. (p. 34, Rollo)
Petitioner appealed from this Order to the Minister of Labor and
Employment, Hon. Augusto S. Sanchez, who rendered a Decision on
September 24, 1986, modifying the said Order in that deficiency
wages and ECOLAs should be computed only from May 23, 1983 to
May 23, 1986, the dispositive portion of which reads:
WHEREFORE, the August 29, 1986 order is hereby MODIFIED in
that the deficiency wages and ECOLAs should only be computed from
May 23, 1983 to May 23, 1986. The case is remanded to the Regional
Director, Region X, for recomputation specifying the amounts due
each the complainants under each of the applicable Presidential
Decrees. (p. 40, Rollo)
On October 24, 1986, the petitioner filed a motion for reconsideration
which was denied by the Secretary of Labor in his Order dated May
13, 1987, for lack of merit (p. 43 Rollo).
The instant petition questions the all-embracing applicability of the
award involving salary differentials and ECOLAS, in that it covers not
only the hospital employees who signed the complaints, but also those
(a) who are not signatories to the complaint, and (b) those who were
no longer in the service of the hospital at the time the complaints were
filed.
Petitioner likewise maintains that the Order of the respondent Regional
Director of Labor, as affirmed with modifications by respondent
Secretary of Labor, does not clearly and distinctly state the facts and
the law on which the award was based. In its "Rejoinder to Comment",
petitioner further questions the authority of the Regional Director to
award salary differentials and ECOLAs to private respondents,
(relying on the case of Encarnacion vs. Baltazar, G.R. No. L-16883,
March 27, 1961, 1 SCRA 860, as authority for raising the additional
issue of lack of jurisdiction at any stage of the proceedings, p.
52, Rollo), alleging that the original and exclusive jurisdiction over
money claims is properly lodged in the Labor Arbiter, based on Article
217, paragraph 3 of the Labor Code.
The primary issue here is whether or not the Regional Director had
jurisdiction over the case and if so, the extent of coverage of any
award that should be forthcoming, arising from his visitorial and
enforcement powers under Article 128 of the Labor Code. The matter
of whether or not the decision states clearly and distinctly statement of
facts as well as the law upon which it is based, becomes relevant after
the issue on jurisdiction has been resolved.
This is a labor standards case, and is governed by Art. 128-b of the
Labor Code, as amended by E.O. No. 111. Labor standards refer to the
minimum requirements prescribed by existing laws, rules, and
regulations relating to wages, hours of work, cost of living allowance
and other monetary and welfare benefits, including occupational,
safety, and health standards (Section 7, Rule I, Rules on the
Disposition of Labor Standards Cases in the Regional Office, dated
September 16, 1987). 1 Under the present rules, a Regional Director
exercises both visitorial and enforcement power over labor standards
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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:
Art. 127. Visitorial and enforcement powers. —
xxx xxx xxx
(b) The Secretary of Labor or his duly authorized representatives shall
have the power to order and administer, after due notice and
hearing, compliance with the labor standards provisions of this Code
based on the findings of labor regulation officers or industrial safety
engineers made in the course of inspection, and to issue writs of
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execution to the appropriate authority for the enforcement of their
order.
xxx xxx xxx
Labor Arbiters, on the other hand, lost jurisdiction over labor standards
cases. Article 216, as then amended by PD 850, provided in part:
SEC. 22. Article 216 of the Code is hereby amended to read as
follows:
Art. 216. Jurisdiction of Labor Arbiters and the Commission. — (a)
The Labor Arbiters shall have exclusive jurisdiction to hear and
decide the following cases involving all workers, whether agricultural
or non-agricultural:
xxx xxx xxx
(3) All money claims of workers involving non-payment or
underpayment of wages, overtime or premium compensation,
maternity or service incentive leave, separation pay and other money
claims arising from employer-employee relations, except claims for
employee's compensation, social security and medicare benefits and as
otherwise provided in Article 127 of this Code.
xxx xxx xxx
(Emphasis supplied)
Under the then Labor Code therefore (PD 442 as amended by PD 570-
a, as further amended by PD 850), there were three adjudicatory units:
The Regional Director, the Bureau of Labor Relations and the Labor
Arbiter. It became necessary to clarify and consolidate all governing
provisions on jurisdiction into one document. 2 On April 23, 1976,
MOLE Policy Instructions No. 6 was issued, and provides in part (on
labor standards cases) as follows:
POLICY INSTRUCTIONS NO. 6
TO: All Concerned
SUBJECT: DISTRIBUTION OF JURISDICTION OVER LABOR
CASES
xxx xxx xxx
1. The following cases are under the exclusive original jurisdiction of
the Regional Director.
a) Labor standards cases arising from violations of labor standard
laws discovered in the course of inspection or complaints where
employer-employee relations still exist;
xxx xxx xxx
2. The following cases are under the exclusive original jurisdiction of
the Conciliation Section of the Regional Office:
a) Labor standards cases where employer-employee
relations no longer exist;
xxx xxx xxx
6. The following cases are certifiable to the Labor Arbiters:
a) Cases not settled by the Conciliation Section of the Regional Office,
namely:
1) labor standard cases where 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
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"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.
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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
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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
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private respondents' salary differentials and ECOLAs on September
24, 1986. The amendment of the visitorial and enforcement powers of
the Regional Director (Article 128-b) by said E.O. 111 reflects the
intention enunciated in Policy Instructions Nos. 6 and 37 to empower
the Regional Directors to resolve uncontested money claims in cases
where an employer-employee relationship still exists. This intention
must be given weight and entitled to great respect. As held
in Progressive Workers' Union, et. al. vs. F.P. Aguas, et. al. G.R. No.
59711-12, May 29, 1985, 150 SCRA 429:
. . The interpretation by officers of laws which are entrusted to their
administration is entitled to great respect. We see no reason to detract
from this rudimentary rule in administrative law, particularly when
later events have proved said interpretation to be in accord with the
legislative intent. ..
The proceedings before the Regional Director must, perforce, be
upheld on the basis of Article 128(b) as amended by E.O. No. 111,
dated December 24, 1986, this executive order "to be considered in the
nature of a curative statute with retrospective application."
(Progressive Workers' Union, et al. vs. Hon. F.P. Aguas, et al. (Supra);
M. Garcia vs. Judge A. Martinez, et al., G.R. No. L- 47629, May 28,
1979, 90 SCRA 331).
We now come to the question of whether or not the Regional Director
erred in extending the award to all hospital employees. We answer in
the affirmative.
The Regional Director correctly applied the award with respect to
those employees who signed the complaint, as well as those who did
not sign the complaint, but were still connected with the hospital at the
time the complaint was filed (See Order, p. 33 dated August 4, 1986 of
the Regional Director, Pedrito de Susi, p. 33, Rollo).
The justification for the award to this group of employees who were
not signatories to the complaint is that the visitorial and enforcement
powers given to the Secretary of Labor is relevant to, and exercisable
over establishments, not over the individual members/employees,
because what is sought to be achieved by its exercise is the observance
of, and/or compliance by, such firm/establishment with the labor
standards regulations. Necessarily, in case of an award resulting from a
violation of labor legislation by such establishment, the entire
members/employees should benefit therefrom. As aptly stated by then
Minister of Labor Augusto S. Sanchez:
. . It would be highly derogatory to the rights of the workers, if after
categorically finding the respondent hospital guilty of underpayment
of wages and ECOLAs, we limit the award to only those who signed
the complaint to the exclusion of the majority of the workers who are
similarly situated. Indeed, this would be not only render the
enforcement power of the Minister of Labor and Employment
nugatory, but would be the pinnacle of injustice considering that it
would not only discriminate but also deprive them of legislated
benefits.
. . . (pp. 38-39, Rollo).
This view is further bolstered by the provisions of Sec. 6, Rule II of
the "Rules on the Disposition of Labor Standards cases in the Regional
Offices" (supra) presently enforced, viz:
SECTION 6. Coverage of complaint inspection. — A complaint
inspection shall not be limited to the specific allegations or violations
raised by the complainants/workers but shall be a thorough inquiry
into and verification of the compliance by employer with existing
labor standards and shall cover all workers similarly situated.
(Emphasis supplied)
However, there is no legal justification for the award in favor of those
employees who were no longer connected with the hospital at the time
the complaint was filed, having resigned therefrom in 1984, viz:
Jean (Joan) Venzon (See Order, p. 33, Rollo)
Rosario Paclijan
Adela Peralta
Mauricio Nagales
Consesa Bautista
Teresita Agcopra
Felix Monleon
Teresita Salvador
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
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is in aid of the enforcement power of the Regional Director; hence, not
applicable where the employee seeking to be paid underpayment of
wages is already separated from the service. His claim is purely a
money claim that has to be the subject of arbitration proceedings and
therefore within the original and exclusive jurisdiction of the Labor
Arbiter.
Petitioner has likewise questioned the order dated August 4, 1986 of
the Regional Director in that it does not clearly and distinctly state the
facts and the law on which the award is based.
We invite attention to the Minister of Labor's ruling thereon, as
follows:
Finally, the respondent hospital assails the order under appeal as null
and void because it does not clearly and distinctly state the facts and
the law on which the awards were based. Contrary to the pretensions
of the respondent hospital, we have carefully reviewed the order on
appeal and we found that the same contains a brief statement of the (a)
facts of the case; (b) issues involved; (c) applicable laws; (d)
conclusions and the reasons therefor; (e) specific remedy granted
(amount awarded). (p. 40, Rollo)
ACCORDINGLY, this petition should be dismissed, as it is hereby
DISMISSED, as regards all persons still employed in the Hospital at
the time of the filing of the complaint, but GRANTED as regards those
employees no longer employed at that time.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Cortes, Griño-Aquino and Regalado, JJ.,
concur.
G.R. No. 159577 May 3, 2006
CHARLITO PEÑARANDA, 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 Peñaranda 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, Peñaranda 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:
"[Peñaranda] 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 attorney’s fees having been forced to litigate the present
complaint.
9|Page
"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 complainant’s
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, [Peñaranda] 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
petitioner’s Complaint was premature because he was still employed
by BPC.11 The temporary closure of BPC’s plant did not terminate his
employment, hence, he need not reapply when the plant reopened.
According to the labor arbiter, petitioner’s 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 attorney’s 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
Peñaranda’s 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 [Peñaranda] is a regular,
common employee entitled to monetary benefits under Art. 82 [of the
Labor Code].
"II. The finding that [Peñaranda] is entitled to the payment of
OVERTIME PAY and OTHER MONETARY BENEFITS."18
The Court’s Ruling
The Petition is not meritorious.
Preliminary Issue:
Resolution on the Merits
The CA dismissed Peñaranda’s 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.
10 | P a g e
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
Petitioner’s 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;
"(2) They customarily and regularly direct the work of two or more
employees therein;
"(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 promotion or any other change of status of other
employees are given particular weight."31
The Court disagrees with the NLRC’s 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
11 | P a g e
As shift engineer, petitioner’s duties and responsibilities were as
follows:
"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.
"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.
"6. Recommend parts and supplies purchases.
"7. To recommend personnel actions such as: promotion, or
disciplinary action.
"8. To check water from the boiler, feedwater and softener, regenerate
softener if beyond hardness limit.
"9. Implement Chemical Dosing.
"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 Petitioner’s 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 respondent’s 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.
SO ORDERED.
[G.R. No. 86963. August 6, 1999]
BATONG BUHAY GOLD MINES, INC., petitioner, vs.
HONORABLE DIONISIO DELA SERNA IN HIS CAPACITY AS
THE UNDERSECRETARY OF THE DEPARTMENT OF LABOR
AND EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO
MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE
OTHER COMPLAINANTS* IN CASE NO. NCR-LSED-CI-2047-87;
MFT CORPORATION AND SALTER HOLDINGS PTY.
LTD., respondents.
RESOLUTION
PURISIMA, J.:
At bar is a Petition for Certiorari under Rule 65 of the Revised Rules
of Court with a Prayer for Preliminary Injunction and or Restraining
Order brought by Batong Buhay Gold Mines, Inc. (BBGMI for brevity)
to annul three orders issued by respondent Undersecretary Dionisio
dela Serna of the Department of Labor and Employment, dated
September 16, 1988, December 14, 1988 and February 13, 1989,
respectively.
The Order of September 16, 1988 stated the facts as follows:
"xxx on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L.
Mendelebar, Ma. Concepcion O. Reyes and 1,247 others filed a
complaint against Batong Buhay Gold Mines, Inc. for: (1) Non-
payment of their basic pay and allowances for the period of 6 July
1983 to 5 July 1984, inclusive, under Wage Order No. 2; (2) Non-
payment of their basic pay and allowances for the period 16 June 1984
to 5 October 1986, inclusive under Wage Order No. 5; (3) Non-
payment of their salaries for the period 16 March 1986 to the present;
(4) Non-payment of their 13th month pay for 1985, 1986 and 1987; (5)
Non-payment of their vacation and sick leave, and the compensatory
leaves of mine site employees; and (6) Non-payment of the salaries of
employees who were placed on forced leaves since November, 1985 to
the present, if this is not feasible, the affected employees be awarded
corresponding separation pay.
12 | P a g e
On 9 February 1987, the Regional Director set the case for hearing on
17 February 1987.
On 17 February 1987, the respondent moved for the resetting of the
case to 2 March 1987.
On 27 February 1987, the complainants filed a Motion for the issuance
of an inspection authority.
xxx
On 13 July 1987, the Labor Standards and Welfare Officers submitted
their report with the following recommendations:
WHEREFORE, premises considered, this case is hereby submitted
with the recommendation that an Order of Compliance be issued
directing respondent Batong Buhay Gold Mines Inc. to pay
complainants Elsie Rosalina Ty, et al. FOUR MILLION EIGHT
HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED FORTY-
SIX PESOS AND FORTY CENTAVOS (P4,818,746.40) by way
of unpaid salaries of workers from March 16, 1987 to present, unpaid
and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th
months pay for 1985 and 1986, and upaid (sic)
vacation/sick/compensatory leave benefits.
On 31 July 1987, the Regional Director[1] adopted the recommendation
of the LSWOs and issued an order directing the respondent to pay the
complainants the sum of P4,818,746.40 representing their unpaid 13th
month pay for 1985 and 1986, wage and ECOLA differentials under
wage order Nos. 2 and 5, unpaid salaries from 16 March 1986 to
present and vacation/sick leave benefits for 1984, 1985 and 1986.
On 19 August 1987, the complainants filed an ex-parte motion for the
issuance of a writ of execution and appointment of special sheriff.
xxx
On 21 August 1987, the Regional Director issued an Order directing
the respondent to put up a cash or surety bond otherwise a writ of
execution will be issued.
xxx
When the respondent failed to post a cash/surety bond, and upon
motion for the issuance of a writ of execution by the complainants, the
Regional Director, on 14 September 1987 issued a writ of execution
appointing Mr. John Espiridion C. Ramos as Special Sheriff and
directing him to do the following:
You are to collect the above-stated amount from the respondent and
deposit the same with Cashier of this Office for appropriate
disposition to herein complainants under the supervision of the office
of the Director. Otherwise, you are to execute this writ by attaching
the goods and chattels of the respondent not exempt from execution or
in case of insufficiency thereof against the real or immovable property
of the respondent.
The Special Sheriff proceeded to execute the appealed Order on 17
September 1987 and seized three (3) units of Peterbuilt trucks and then
sold the same by public auction. Various materials and motor vehicles
were also seized on different dates and sold at public auction by said
sheriff.
xxx xxx xxx
On 11 December 1987, the respondent finally posted a supersedeas
bond which prompted this Office to issue an Order dated 26 January
1988, restraining the complainants and sheriff Ramos from enforcing
the writ of execution. xxx[2]
BBGMI appealed the Order dated July 31, 1987 of Regional Director
Luna C. Piezas to respondent Undersecretary Dionisio de la Serna,
contending that the Regional Director had no jurisdiction over the
case.
On September 16, 1988, the public respondent issued the first
challenged Order upholding the jurisdiction of the Regional Director
and annulling all the auction sales conducted by Special Sheriff John
Ramos. The decretal portion of the said Order ruled:
WHEREFORE, the Order dated 31 July 1987 of the Regional
Director, National Capital Region, is hereby
AFFIRMED. Accordingly, the writ of execution dated 14 September
1987 issued in connection thereto is hereby declared VALID.
However, the public auction sales conducted by special sheriff John
Ramos pursuant to the writ of execution dated 14 September 1987 on
24 September 2, 20, 23, and 29 October 1987 are all hereby declared
NULL AND VOID. Furthermore, the personal properties sold and the
proceeds thereof which have been turned over to the complainants
thru their legal counsel are hereby ordered returned to the custody of
the respondent and the buyers respectively.
SO ORDERED.[3]
13 | P a g e
G.R. No. L-26298 September 28, 1984
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;
14 | P a g e
(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
15 | P a g e
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.
SO ORDERED.
G.R. No. L-19937 April 3, 1979
ASSOCIACION DE AGRICULTORES DE TALISAY-SILAY,
INC., TRINO MONTINOLA, FERNANDO CUENCA,
EDUARDO LEDESMA, EMILIO JISON, NILO LIZARES,
NICOLAS JALANDONI and SECRETARY OF
LABOR, plaintiffs-appellees, vs. TALISAY-SILAY MILLING
CO., INC., and LUZON SURETY CO., INC., defendants-
appellants, PHILIPPINE NATIONAL BANK and THE SUGAR
QUOTA ADMINISTRATOR, defendants-appellees.
BARREDO, J.:
Motion for reconsideration signed by Attorney Camilo L. Sabio on his
own behalf and on behalf of the law firm of Attorneys Montemayor &
Dimaano as "counsel for the laborers" involved in this case, but not
joined by any Attorney of the Ministry of Labor, for the
reconsideration, for the grounds therein discussed, of the decision of
this Court dated February 19,
1979.chanroblesvirtualawlibrary chanrobles virtual law library
Brushing aside as of secondary importance the issue of whether or not
private counsel who has signed the subject motion for reconsideration
and whose authority to appear for the Minister of Labor was not
affirmed by the Minister when asked to do so by the Court, has the
personality to appear in this case as counsel of record, and attending
instead to the grounds vehemently and lengthily expounded in said
motion in order that no argument as to the merits of the cause of the
16 | P a g e
laborers involved herein may not remain unresolved, the Court has
opted to take up the points raised by counsel Sabio which, to be sure,
are not really new.chanroblesvirtualawlibrary chanrobles virtual law
library
In synthesis, the basic argument advanced by counsel is that in effect
Republic Act 809 enjoins that, first, contracts between the millers and
the planters in all sugar milling districts entered into subsequent to
June 22, 1952, the date of its effectivity, may not be taken into account
in determining whether or not there was a majority of planters in the
district with written milling contracts with the central during the crop
years material to this case, for purposes of the Act's application, and,
second, that should any such contracts be entered into, the rate of
sharing between the miller and the planters should not be less than that
prescribed in Section 1 of the Act. As may be seen in Our decision, the
Court has already fully considered the points raised by counsel and has
found them to be insufficiently persuasive, albeit quite impressive and
to a certain degree plausible. We are fully convinced, however, that the
language of the pertinent provisions of the Act, notwithstanding the
individual opinions of certain members of Congress quoted by
counsel, does not evince a definite intent deny to the Planters and
millers the freedom of contract to the extent indicated in the motion.
Such a sacred fundamental right, of the parties may be denied only
expressly or by indubitable implication from the terms and tenor of the
statute itself and not in the light of the arguments of particular
legislators during the debates in the course of its enactment, which can
be inconclusive. To Our mind, the provision of Section 1 to the effect
that "the unrefined sugar ... as wen as by products" produced in the
district "shall be divided between the central and the planters" in the
proportions therein prescribed "in the absence of written milling
agreements between the majority of planters and the millers"
unequivocally means that when there are such written milling
agreements, the section would not apply. Notably, this language does
not distinguish between contracts in force at the time of the
enforcement of the Act, on the one hand, and contracts to be executed
thereafter, on the other. To construe said provision as contemplating
only the contracts then in existence and about to expire to the
exclusion of new ones to be executed later is to read into the law
something it does not suggest at all considering particularly that in the
contrary sense, it would be tantamount to an injunction against the
execution of new contracts, which would be violative of the
fundamental right of freedom of contract as distinguished from the
constitutional prohibition against impairment of contractual
obligations. The Court cannot see its way clear to the adoption of such
a construction, much as it feels that any doubt, if any exists, must be
resolved in favor of giving labor the maximum benefit derivable from
social legislations, such as Republic Act 809 should be deemed to be.
Indeed, if social justice is to remain a noble and worthy ideal, it must
be practiced without unnecessary infringement of the inalienable
liberties consecrated in the fundamental law of the land for the
promotion of the general welfare, unless there is clear and
unmistakable warrant for the exertion of state power. We have said in
Our decision 'that in appropriate instances social justice may be more
compelling and imperious than police power where labor is involved,
but the basis for such occasion must be definite not equivocal, to avoid
the imbalance of rights and opportunities which is precisely the aim of
social justice to equalize for the protection of the poor and the
underprivileged to which the working class
belong.chanroblesvirtualawlibrarychanrobles virtual law library
Moreover, We take judicial notice of the fact in actuality, contracts
have been entered to the rates of sharing different from those
prescribed in Section in practically all the milling districts in the
Philippines after the passage of the Republic Act 809. Such
contemporary construction of the law In actual practice, if indeed
challenged by labor in some instances, only proves that, the
construction proposed by counsel is not commonly accepted by the
others concerned much less
indubitable.chanroblesvirtualawlibrary chanrobles virtual law library
As regards the plaint that under the terms of Our judgment, payment of
money corresponding to the laborers should be made to the
Association or the planters who in turn are sentenced to pay the
laborers, instead of said money being paid directly to the laborers thru
the Minister of Labor, all that needs be stated is that under Section 1 of
the Act, the primary distribution is between the miller and the planters,
and the requirement in Section 9 thereof that "any increase in
17 | P a g e
the participation granted the planters ... shall be divided between the
planter and his laborer" in the proportion therein fixed is evidently
predicated on the fact that as the employer, the planter is the one
supposed to pay the laborers, albeit it is provided that such payment
must be done under the supervision of the Minister of Labor pursuant
to such orders for the enforcement of the said provision as he may
issue, obviously to insure the due identity of and full payment to all the
laborers concerned. To avoid however, that the money paid to the
Association or the planters purportedly for the share of the laborers
fixed in the law may served its purpose, it is understood that no Part of
the 60% of the money to be paid to the planters shall be available to
the planter concerned until after the Ministry of Labor shall have
certified that all his laborers entitled thereto have been fully
paid.chanroblesvirtualawlibrarychanrobles virtual law library
In view of the foregoing, the Court resolved to DENY the motion for
reconsideration aforementioned, and in order to terminate once and for
all this litigation of more than a quarter of a century. We hereby
declare this DENIAL to be FINAL, and Our decision may now be
executed. Accordingly, with the same finality, We hereby DENY the
motions of the Association, the CENTRAL and the amicus
curiae Attorneys Tañada, Sanchez, Tañada and Tañada, for extension
of time to file their own respective motions for reconsideration.
Castro, C.J., Makasiar, Antonio, Concepcion, Jr., Santos, Fernandez,
Guerrero, and De Castro, JJ.,
concur.chanroblesvirtualawlibrary chanrobles virtual law library
[G.R. NO. 159828 : April 19, 2006]
KASAPIAN NG MALAYANG MANGGAGAWA SA COCA-
COLA (KASAMMA-CCO)-CFW LOCAL 245, Petitioner, v. THE
HON. COURT OF APPEALS and COCA-COLA BOTTLERS'
PHILS., INC., Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the
Rules of Civil Procedure assailing the Decision1 of the Court of
Appeals which affirmed the Decision2 of public respondent National
Labor Relations Commission (NLRC) dismissing petitioner's
complaint against private respondent for violations of the
Memorandum of Agreement (MOA)/Collective Bargaining Agreement
(CBA), nonpayment of overtime pay and 13th month pay, illegal
dismissal, unfair labor practice, recovery of moral and exemplary
damages and attorney's fees.
On 30 June 1998, the CBA for the years 1995-1998 executed between
petitioner union and private respondent company expired. As the duly
certified collective bargaining agent for the rank-and-file employees of
private respondent's Manila and Antipolo plants, petitioner submitted
its demands to the company for another round of collective bargaining
negotiations. However, said negotiations came to a gridlock as the
parties failed to reach a mutually acceptable agreement with respect to
certain economic and non-economic issues.
Thereafter, petitioner filed a notice of strike on 11 November 1998
with the National Conciliation and Mediation Board (NCMB),
National Capital Region, on the ground of CBA negotiation deadlock.
With the aim of resolving the impasse, several conciliation
conferences were conducted but to no avail as the parties failed to
reach a settlement. On 19 December 1998, petitioner held the strike in
private respondent's Manila and Antipolo plants.
Subsequently, through the efforts of NCMB Administrator
Buenaventura Magsalin, both parties came to an agreement settling the
labor dispute. Thus, on 26 December 1998, both parties executed and
signed a MOA providing for salary increases and other economic and
non-economic benefits. It likewise contained a provision for the
regularization of contractual, casual and/or agency workers who have
been working with private respondent for more than one year. Said
MOA was later incorporated to form part of the 1998-2001 CBA and
was thereafter ratified by the employees of the company.
Pursuant to the provisions of the MOA, both parties identified 64
vacant regular positions that may be occupied by the existing casual,
contractual or agency employees who have been in the company for
more than one year. Fifty-eight (58)3 of those whose names were
submitted for regularization passed the screening and were thereafter
extended regular employment status, while the other five failed the
medical examination and were granted six months within which to
secure a clean bill of health. Within the six-month period, three4 of the
five employees who have initially failed in the medical examination
18 | P a g e
were declared fit to work and were accorded regular employment
status. Consequently, petitioner demanded the payment of salary and
other benefits to the newly regularized employees retroactive to 1
December 1998, in accord with the MOA. However, the private
respondent refused to yield to said demands contending that the date of
effectivity of the regularization of said employees were 1 May 1999
and 1 October 1999. Thus, on 5 November 1999, petitioner filed a
complaint before the NLRC for the alleged violations of the subject
MOA by the private respondent.
Meanwhile, a certification election was conducted on 17 August 1999
pursuant to the order of the Department of Labor and Employment
(DOLE) wherein the KASAMMA-CCO Independent surfaced as the
winning union and was then certified by the DOLE as the sole and
exclusive bargaining agent of the rank-and-file employees of private
respondent's Manila and Antipolo plants for a period of five years
from 1 July 1999 to 30 June 2004. On 23 August 1999, the
KASAMMA-CCO Independent demanded the renegotiation of the
CBA which expired on 30 June 1998. Such request was denied by
private respondent on the contention that there was no basis for said
demand as there was already an existing CBA which was negotiated
and concluded between petitioner and private respondent, thus, it was
untimely to reopen the said CBA which was yet to expire on 30 June
2001.
On 9 December 1999, despite the pendency of petitioner's complaint
before the NLRC, private respondent closed its Manila and Antipolo
plants resulting in the termination of employment of 646 employees.
On the same day, about 500 workers were given a notice of
termination effective 1 March 2000 on the ground of redundancy. The
affected employees were considered on paid leave from 9 December
1999 to 29 February 2000 and were paid their corresponding salaries.
On 13 December 1999, four days after its closure of the Manila and
Antipolo plants, private respondent served a notice of closure to the
DOLE.
As a result of said closure, on 21 December 1999, petitioner amended
its complaint filed before the NLRC to include "union busting, illegal
dismissal/illegal lay-off, underpayment of salaries, overtime, premium
pay for holiday, rest day, holiday pay, vacation/sick leaves, 13th
month pay, moral and exemplary damages and attorney's fees."
On 14 January 2000, KASAMMA-CCO Independent filed a notice of
strike due to unfair labor practice with the NCMB-NCR. Failing to
arrive at an amicable settlement of the labor dispute with the private
respondent, KASAMMA-CCO Independent held a strike from 9
March 2000 to 4 May 2000. On 4 May 2000, the Secretary of Labor
issued an order assuming jurisdiction over the labor dispute subject of
the strike and certified the case to the NLRC for compulsory
arbitration.
On 9 July 2001, the NLRC rendered its Decision dismissing the
complaint for lack of merit. According to the Commission:
Evaluating, with utmost caution, both parties' contrasting factual
version, supporting proofs, related legal excerpts and applicable
jurisprudential citations, we discern that, under the Memorandum of
Agreement (MOA) dated December 26, 1998, the 61 regularized
employees are not entitled to their claims for the P60.00 per day salary
increase, mid-year gratuity pay of P5,000.00, one sack of rice, and
overtime and thirteenth month differentials effective December 1,
1998 onward.
Initially, under the MOA, only the employees who were regular on
July 1998 and continued being such upon the signing of the MOA on
December 26, 1998 deserve retroactive payment of the MOA benefits
amounting to a lump sum of P35,000.00.
This entitlement springs from the following pertinent provisions of the
MOA:
"All covered employees who were regular as of July 1, 1998 and
upon the signing of this Agreement shall each be entitled to a lump
sum in the amount of THIRTY FIVE THOUSAND PESOS
(P35,000.00) which shall, subject to the ratification of the employees
within the bargaining unit, be released on or before 31 December
1998.
"The aforesaid amount shall be in lieu of the wage increase as well as
THE Operation Performances Incentive DESCRIBED UNDER
Item 11(B) hereof, all premium pay, the 13th month and 14th
month pay differentials, sick leave and vacation leave credits for
19 | P a g e
the period July 1, 1998 to December 31, 1999." Underscoring
supplied)
In the case at bar, since the 61 regularized employees were regularized
only on May 1, 1999 and October 1, 1999, as the case may be, they
therefore have no right whatsoever to claim entitlement to the MOA
benefits.
Moreover, CFW Local 245's insistence that the 61 regularized
employees became regular on December 1, 1998 is non sequitor. It
merely flows from its specious interpretation of the MOA provisions.
The MOA does not provide that non-regular employees who would be
deployed to fill up vacant plantilla positions covered by the 1998 and
1999 manpower budget of CCBPC should be automatically considered
regular effective December 1, 1998. What the MOA stipulates are that:
1) effective December 1, 1998, non-regular employees who have been
occupying the position to be filled up for at least one year shall be
given priority in filling up the positions; and 2) that in that case, they
will not undergo the company's regular recruitment procedures, like
interviews and qualifying examinations.
The only importance of the date of December 1, 1998 is its being the
reckoning date from which the one year employment requirement
should be computed. Consequently, under the MOA, only the non-
regular employees who had worked with the company for at least a
year counted retroactively from December 1, 1998 should be given
priority in the filling up of vacant plantilla positions.
Anyway, even assuming ex gratia argumenti that the 61 regularized
employees were regularized effective December 1, 1998, they, still,
are not entitled to the MOA benefits. As discussed above, only
employees who were regular on July 1, 1998 and were still so until the
signing of the MOA on December 26, 1998 could be covered by the
retroactivity clause.
Furthermore, entitling the 61 regularized employees to the MOA
benefits would certainly infringe the well-entrenched principle of "no-
work-no-pay". Since such employees started becoming regular only on
May 1, 1999 and October 1, 1999, as the case may be, it would thus be
most unfair to require CCBPI to pay them for their unworked period,
for they would certainly, be unjustly enriched at the expense of
CCBPI.
We also hold that the allegedly redundant six hundred thirty-nine (639)
employees were not illegally dismissed.
Initially, there was just cause for the employees' dismissal.
It bears to stress that, aimed at 1) attaining efficiency and cost
effectiveness, 2) maximizing its production capacity and 3) ensuring
that its customers obtain products manufactured only under the most
stringent quality standards of CCBPI's modern, technologically
advanced production plants, CCBPI conducted an extensive study on
the operational mechanics of its Manila and Antipolo plants.
From this study, it was established that there was inadequate water
supply at CCBPI's Manila and Antipolo plants. As a consequence, the
company was constrained to transport water from several sources to its
production line in Manila in 1998 and 1999. Worse, it was discovered
that the quality of water supply was fast deteriorating due to the rise of
its salt level. This reality prompted the company to reduce its
production capacity. Moreover, the bottling process of treating this
water of decadent quality resulted in higher production costs. Under
these twin conditions, the company could not thus efficiently continue
on with its operations.
The study also reveals the decadent state of the production equipment
of CCBPI's Manila and Antipolo Plants. Their production lines were
among the oldest and hence, had very low line efficiency. In
comparison with the line efficiency of 71.18% of the company's other
plants, the Manila and Antipolo Plants had only efficiency ratings of
61.09% and 58.39%, respectively. Whereas the other production lines
had an average wastage rating of 1.01%, the twin plants had a higher
average wastage ratings of 2.05% and 1.77%, respectively. The
company's production studies in 1998 and 1999 likewise reveal
substantial issues on Good Manufacturing Practice (GMP) and process
control for such plants.
From this study, the impracticability of rehabilitating the twin plants
was also found out. Although the problems cited may be remedied by
way of a major reconstruction, this would, however, entail an
investment of huge capital. Further, the congestion of the twin plants'
sites would render impracticable such a major reconstruction. Besides,
there was utter lack of effective solution to the retrograding water
supply.
20 | P a g e
The foregoing significant facts are substantially evidenced by the
Technical Evaluation of Production Requirements, Annex "20",
CCBPI's Rejoinder; Affidavit of its Operations Manager dated 3
March 2000, Annex "1", its Position Paper dated 20 July 2000; and
Certification dated May 21, 2001 of Mr. Bruce A. Herbert, its Sur-
Rejoinder.
To solve the problems cited, however, CCBPI, as soundly
recommended by the study, integrated the production capacities of the
different CCBPI modern and technologically advanced production
facilities. This imperative integration indispensably prompted CCBPI
to close, its production lines at the Manila and Antipolo Plants.
This measure taken by CCBPI indeed draws jurisprudential
justification from the following sound pronouncement of the Supreme
Court:
"Business enterprises today are faced with the pressures of economic
recession, stiff competition and labor unrest. Thus, businessmen are
always pressured to adopt certain changes and programs in order to
enhance their profits and protect their investments. Such changes may
take various forms. Management may even choose to close a branch,
department, a plant, or a shop." (Philippine Engineering Corp. v. CR,
41 SCRA 89)
Urgently propelled by this closure, CCBPI inevitably redundated the
services of 639 employees based at the Manila and Antipolo Plants.
The fact that their services became superfluous or in excess of what
were reasonably demanded by the actual requirements of the company
as a consequence of the closure certainly shows the undertone of good
faith on CCBPI's part in resorting to the redundation measure.
Well in support of this urgent economic measure taken is the following
postulation of the Supreme Court in the case of Wiltshire File Co., Inc.
v. NLRC, et al., 193 SCRA 665:
"We believe that redundancy, for purposes of our Labor Code,
exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is a
superfluity, and superfluity of a position or positions may be the
outcome of a number of facets, such as over hiring of workers,
decreased volume of business, or dropping of a particular product line
or service activity previously manufactured or undertaken by the
enterprises. The employer has no legal obligation to keep in its payroll
more employees than are necessary for the operation of its business.
"x x x.
"x x x The characterization of (the employee's) service as no longer
necessary or sustainable, and therefore properly terminable, was an
exercise of business judgment on the part of (the employer). The
wisdom or soundness of such characterizing or decision was not
subject to discretionary review on the part of the Labor Arbiter nor of
the NLRC so long, of course, as violation of law or merely arbitrary
and malicious action is not shown. X x x The determination of the
continuing necessity of a particular officer or position in a business
corporation is management's prerogative, and the courts will not
interfere with the exercise of such so long as no abuse of discretion or
merely arbitrary or malicious action on the part of management is
shown."
Another reason why the dismissal of the 639 employees was legal is
that the same was attended by the observance of the requirements of
due process. Indeed, as early as 9 December 1999, more than thirty
(30) days prior to their actual dismissal on 1 March 2000, CCBPI
served on the affected employees a written notice informing them of
the closure of the two plants and subsequent redundation. Later, by 13
December 1999, CCBPI filed with the DOLE the required written
notice informing it of the subject closure and consequent redundation.
This finding is perfectly in line with the following applicable legal
excerpts:
"ART. 283. Closure of establishment and reduction of personnel. - - -
The employer may also terminate the employment of any employee
due to '.redundancy'. or the closing or cessation of operation of the
establishment or undertaking 'by serving a written notice on the
workers and the Department of Labor and Employment at least one (1)
month before the intended date thereof."ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ
"For termination of employment based on just causes defined in
Article 282 of the Labor Code:
21 | P a g e
(i) A written notice served [on] the employee specifying the ground or
grounds for termination, and giving said employee reasonable
opportunity within which to explain his side;
(ii) A hearing or conference during which the employee concerned,
with the assistance of counsel if he so desires is given opportunity to
respond to the charge, present his evidence or rebut the evidence
presented against him; andcralawlibrary
(iii) a written notice of termination served on the employee, indicating
that upon, due consideration of all the circumstances, grounds have
been established to justify his termination.
"For termination of employment as defined in Article 283 of the Labor
Code, the requirement of due process shall be deemed complied with
upon the service of a written notice to the employee and the
appropriate Regional Office of the Department of Labor and
Employment at least thirty days before [effectivity] of the termination,
specifically the ground or grounds for termination." (Par. D, Section 2,
Rule 1, Book VI, Omnibus Rules Implementing the Labor Code)
Needless to state, having been lawfully redundated, as
comprehensively discussed above, the affected employees are entitled
to payment of separation pay equivalent to one (1) month pay for
every year of service, pursuant to Article 283 of the Labor Code which
provides:
"In case of termination due to the installation of labor saving devices
or redundancy, the worker affected thereby shall be entitled to
separation pay equivalent to at least his one (1) month pay or to at least
One (1) month pay for every year of service, whichever is higher."
However, due to the economic adversity besetting our workers today
brought about by the ever increasing standards of living, CCBPI
realized that such a legal package was no longer conformable with
such on obtaining economic reality. Accordingly, CCBPI granted the
affected employees separation package much bigger than that legal
separation package. Specifically, CCBPI paid affected employees with
less than fifteen (15) years of service 150% monthly salary for every
year of service and those with fifteen (15) years and above of service
195%.
xxxx
We, moreover, view that CCBPI is not guilty of unfair labor practice.
Contrary to KASAMMA-CCO-Independent's contention, CCBPI did
not resort to the closure of Manila and Antipolo plants and resultant
redundation of their 637 employees just to prevent the renegotiation of
the CBA entered into between CCBPI and CFW Local 245. First, there
is no substantial evidence on record supporting this claim. Secondly,
as exhaustively explained supra, CCBPI's decision to undertake the
subject closure and subsequent redundation was due to legitimate
business considerations, namely 1) the production lines at the two
plants had very low line efficiency; 2) the quality of water supply at
such plants was rapidly deteriorating; and 3) the rehabilitation of such
plants was not feasible due to the huge capital investment required as
well as the congestion of their areas.
xxxx
WHEREFORE, premises considered, KASAMMA-CCO Independent,
and CFW Local 245's charges in the instant labor dispute for non-grant
of the CBA salary increase, mid-year gratuity, one sack of rice,
overtime pay and thirteenth (13th) month pay; illegal dismissal; unfair
labor practice; and recovery of moral and exemplary damages and
attorney's fees are hereby DISMISSED for lack of merit.
Petitioner Coca-Cola Bottlers Phils., Inc., however, is directed to grant
the separation package adverted above to the affected employees who
have not yet received the same. Further, the company is ordered to
accord the affected employees priority in rehiring in the event the
company needs, in the future, additional personnel.5
Petitioner's motion for reconsideration was denied in a resolution dated
24 September 2001, thus on 22 November 2001 petitioner filed a
petition for certiorari before the Court of Appeals, which was
disposed by the appellate court in this wise:
After painstaking efforts and a careful examination of the records, we
rule against the contention of the petitioner. The conflicting factual
submissions of the parties in the case at bar cannot close our eyes to
the fact that the instant case pose upon an obligation on this Court to
review and re-examine the factual findings and to re-evaluate the
pieces of evidence which supported the conclusion of the public
respondent in its disposition of the present controversy. This issue has
already been settled in Deles, Jr. v. NLRC [327 SCRA 540 (2000)],
where the Supreme Court ruled:
22 | P a g e
"On its face, petitioner's contention would require the Court to delve
into the findings of fact a quo. This we cannot do. In the review of
NLRC decisions through a special civil action for certiorari, we are
confined only to issues of want of jurisdiction and grave abuse of
discretion on the part of the labor tribunal. We are precluded from
inquiring unto the correctness of the evaluation of that evidence that
underpins the labor tribunal's conclusion on matters of fact. Nor could
we examine the evidence, re-evaluate the credibility of the witnesses,
nor substitute our findings of fact for those of an administrative body
which has the authority and expertise in its specialized field. Arguably,
there may even be an error in judgment. This however is not within the
ambit of the extraordinary remedy of certiorari ."
Moreover, the pronouncement of the High Tribunal in Dela Salle
University v. Dela Salle University Employees Association [330
SCRA 363 (2000)], citing established jurisprudence, has clarified the
guidelines in the resolution of petitions for certiorari involving labor
cases in this wise:
"As we reiterated in the case of Caltex Refinery Employees
Association (CREA) v. Jose S. Brillantes, the following are the well-
settled rules in a petition for certiorari involving labor cases.
First, the factual findings of quasi-judicial agencies (such as the
DOLE), when supported by substantial evidence, are binding on this
Court and entitled to great respect, considering the expertise of these
agencies in their respective fields. It is well established that findings of
these administrative agencies are generally accorded not only respect
but even finality.
Second, substantial evidence in labor cases is such amount of relevant
evidence which a reasonable mind will accept as adequate to justify a
conclusion.
Third, in Flores v. NLRC, we explained the role and function of Rule
65 as an extraordinary remedy. It should be noted, in the first place,
that the instant petition is a special civil action for certiorari under
Rule 65 of the Rules of Court. An extraordinary remedy, its use is
available only and restrictively in truly exceptional cases - those
wherein the action of an inferior court, board or officer performing
judicial or quasi-judicial acts is challenged for being wholly void on
grounds of jurisdiction.
The sole office of the writ of certiorari is the correction of errors of
jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction. It does not include
correction of public respondent NLRC's evaluation of the evidence and
the factual findings based thereon, which are generally accorded not
only great respect but even finality."
In the light of the rulings established under the abovecited cases, we
find no ground for disturbing the factual findings of the public
respondent vis - Ã -vis its resolution with regard to the issue of the
validity of the claims of the newly-regularized members of the
petitioner union, as the same is supported by substantial evidence and
in accord with established jurisprudence herein cited. It must be
stressed that factual findings of labor officials are conclusive and
binding on the Supreme Court when supported by substantial
evidence.
Anent the issue of the closure of the Manila and Antipolo plants of the
private respondent which resulted in the termination from employment
of 639 or 646 employees working under the said facilities, we find the
same in order and in accord with law.
xxxx
It must be noted that in sustaining the contention of the private
respondent on the said issue, the public respondent has relied on the
grounds asserted by the private respondent as basis in effecting the
closure and the resultant cessation of business operations in the
aforesaid plants. The recent accretion to the corpus of our
jurisprudence is the principle enunciated in National Federation of
Labor v. NLRC [327 SCRA 158 (2000)] which holds the view that:
The closure of establishment contemplated under Article 283 of the
Labor Code is a unilateral and voluntary act on the part of the
employer to close the business establishment as may be gleaned from
the use of the word "may" - it does not contemplate a situation where
the closure of the business establishment is forced upon the employer
and ultimately for the benefit of the employees.
Although the Constitution provides for protection to labor, capital and
management must also be protected under a regime of justice and the
rule of law.
23 | P a g e
Hence, the claim of the petitioner that the technical evaluation of the
private respondent which served as basis for the closure of the said
facilities must be presented to the petitioner union first before the
private respondent can implement the said action is bereft of legal
basis. The same fate must suffer with respect to the claim of the
petitioner that a prior consultation is a condition sine qua non as
required under the Labor Code vis - Ã -vis the provision on the
participation of the employees in the decision-making processes of the
employer private respondent, before the latter can effectuate the said
closure, is devoid of legal and jurisprudential basis.
As aptly stated by an authority in labor laws [Cesario A. Azucena, Jr.,
Everyone's Labor Code, 2001 Edition, p. 302], the author opined that
even if the business is not losing but its owner, for reasons of his own,
wants to stop doing business, he can lawfully do so anytime provided
he is in good faith. He further lamented in saying that "just as no law
forces anyone to go into business, no law compels anybody to stay in
business."
Moreover, the private respondent has complied with the aforesaid
requirements of the law when it decided to close the said
establishments. The records disclose that the alleged redundant, or
more appropriately, separated employees affected by the said closure
were in fact individually served with a notice of termination. All of the
subject employees were offered and given a separation package by the
private respondent more than what is provided by the law and more
than what is stipulated under their CBA, although, some refused to
accept the said benefits, and insisted on their being reinstated. We take
note that as of the present, 546 of the 639 terminated or separated
employee-members of the petitioner union were ale to receive the said
separation benefits. Moreover, the receipt of the said separation
benefits was admitted by the petitioner. The Department of Labor and
Employment (DOLE) was also notified of such closure through a letter
sent by the private respondent dated December 10, 1999.
The petitioner claims that the private respondent failed to comply with
the one-month notice requirement as required under the said legal
provision since the subject employees were no longer allowed to report
for work effective immediately upon receipt of their termination
notice. However, they were still paid their salaries effective from
December 9, 1999 until February 29, 2000, although they did not
anymore render service for the period. Significantly, this peculiar fact
which petitioner claims as an indirect circumvention of the said law
has already been addressed, albeit by analogy, in the recent case
of Serrano v. NLRC [331 SCRA 341 (2000)]. In the said case, the
Supreme Court held:
In that case (Associate Labor Unions-VIMCONTU v. NLRC [204
SCRA 913]), the employees and the then Ministry of Labor and
Employment (MOLE) were notified in writing on August 5, 1983 that
the employees' services would cease on august 31, 1983 but that they
would be paid their salaries and other benefits until September 5,
1983. It was held that such written notice was "more than substantial
compliance with the notice requirement of the Labor Code."
Indeed, there was more than substantial compliance with the law in
that case because, in addition to the advance written notice required
under Art. 284 (now Art. 283) of the Labor Code, the employees were
paid for five days, from September 1 to 5, 1993, even if they rendered
no service for the period.ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
Had private respondent given a written notice to the petitioner on
October 1, 1991, at the latest, that effective October 31, 1991 his
employment would cease although from October 1 he would no longer
be required to work, there would be basis for private respondent's
boast that '[p]ayment of this salary even [if he is] no longer working is
effective notice and is much better than 30 days formal notice but
working until the end of the 30 days period." This is not the case here,
however. What happened here was that on October 11, 1991,
petitioner was given a memorandum terminating his employment
effective on the same day on the ground of retrenchment (actually
redundancy).
xxx
WHEREFORE, premises considered, the instant petition is
DISMISSED for lack of merit. The assailed decision dated July 9,
2001 and the Order dated September 24, 2001 issued by public
respondent National Labor Relations Commission (NLRC) are hereby
AFFIRMED. No costs.6
24 | P a g e
Petitioner's motion for reconsideration was denied in a resolution dated
5 September 2003. Hence, the instant petition.
Petitioner presents before this Court two issues for resolution, namely:
1) whether or not private respondent violated the terms and conditions
contained in the MOA dated 26 December 1998 when it did not
recognize the regularization of the 61 employees as effective on 1
December 1998; and 2) whether or not the closure of private
respondent's Manila and Antipolo plants, resulting in the termination
of employment of 646 employees, was legal.
In dismissing the petition before it, the Court of Appeals opined that
the resolution of the validity of the claims of the newly regularized
employees would entail a review and re-examination of the factual
findings and the re-evaluation of the pieces of evidence which
supported the conclusion of the NLRC in the latter's disposition of the
instant controversy. We do not agree with the Court of Appeals. The
said issue is not a question of fact which will necessitate the appellate
court to again examine the evidence. It is, rather, a question of law.
There is a question of law when the issue does not call for an
examination of the probative value of evidence presented, the truth or
falsehood of facts being admitted and the doubt concerns the correct
application of law and jurisprudence on the matter.7 On the other hand,
there is a question of fact when the doubt or controversy arises as to
the truth or falsity of the alleged facts. When there is no dispute as to
fact, the question of whether or not the conclusion drawn therefrom is
correct is a question of law.8
What is necessary in determining whether the private respondent
violated the provisions of the MOA with respect to the date of
regularization of the 61 employees is an interpretation of the pertinent
provision of the MOA as agreed upon by the parties. It must be noted
that both parties admit the existence of said MOA and that they have
voluntarily entered into said agreement. Furthermore, neither of the
parties deny that the 61 employees have indeed been regularized by
private respondent. Clearly, as the facts are admitted by the parties, the
appellate court does not have to inquire into the veracity of any fact in
order to establish the rights of the parties. All that the Court of Appeals
must do is to interpret the provisions of the MOA and resolve whether
said regularization must be made retroactive to 1 December 1998,
which according to petitioner is provided for under the said MOA. The
MOA, being a contract freely entered into by the parties, now
constitute as the law between them, and the interpretation of its
contents purely involves an evaluation of the law as applied to the
facts herein.
Thus, the issue being a question of law, this Court will now endeavor
to resolve such matter. According to the pertinent provision of the
MOA:
1. Non-economic issues
A. Filling-up of vacant regular plantilla positions; regularization
The company shall fill-up all vacant plantilla positions covered by the
1998 manpower budget as already identified by the Task Force created
by the parties for the purpose following the following procedures:
1. Non-regular employee (casual, contractual or agency worker) who
has already served the company and is presently occupying or has
occupied the position to be filled-up for at least one (1) year shall be
given priority in filling-up the position by converting his non-regular
employment status to regular employment status, effective 01
December 1998 without need of undergoing through the company's
regular recruitment procedures such as interview and qualifying
examination. x x x9
It is the contention of petitioner that the date 1 December 1998 refers
to the effective date of regularization of said employees, while private
respondent maintains that said date is merely the reckoning date from
which the one year employment requirement shall be computed. We
agree with petitioner. It is erroneous for the NLRC to conclude that the
regularization of the 61 employees does not retroact to 1 December
1998. A fastidious reading of the above quoted provision will clearly
point to the conclusion that what is pertained to by the phrase
"effective December 1, 1998" is the phrase immediately preceding it
which is "converting his non-regular employment status to regular
employment status." It will be defying logic to adopt private
respondent's contention that the phrase "effective December 1, 1998"
designates the period when the non-regular employees will be given
priority in filling-up the positions, simply because the MOA was
signed only on 26 December 1998. Therefore, it is logically absurd
that the company will only begin to extend priority to these employees
25 | P a g e
on a date that has already passed, when in fact they have already
extended priority to these employees by agreeing to the contents of the
MOA and signing said agreement. Consequently, we hold that the
effectivity date of the regularization of the 61 employees was 1
December 1998.
We, too, cannot agree with the NLRC's rationale that entitling the 61
regularized employees to the MOA benefits would certainly infringe
the well-entrenched principle of "no-work-no-pay," since they only
became regular, according to private respondent, on 1 May 1999 and 1
October 1999. As stated in the MOA, only those who have worked
with the company for one year as of 1 December 1998 and are still
working for the company as of the signing of the MOA, will be
considered for regularization. Evidently, it is erroneous for the NLRC
to conclude that extending to them the benefits of the MOA would
violate the principle of "no-work-no-pay" as they are actually
rendering service to the company even before 1 December 1998, and
continued to do so thereafter. Truly, they were accorded the status of
regular employees precisely because they were rendering service to the
company for the required period.
Moreover, at this point it must be stressed that under Article 280 of the
Labor Code, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity
exists. Also, under the law, a casual employee is only casual for one
year, and it is the passage of time that gives him a regular status.
Hence, even without the subject MOA provision, the 61 employees
must be extended regular employment status after the lapse of one
year. Even if we were to follow private respondent's contention that
the date 1 December 1998 provided in the MOA is merely a reckoning
date to determine who among the non-regular employees have
rendered one year of service as of said date, all those who have been
with the company for one year by said date must automatically be
considered regular employees by operation of law. Therefore, contrary
to the interpretation of the NLRC, private respondent violated the
provision of the MOA when it did not consider the regularization of
the 61 employees effective 1 December 1998, and accorded to them
the full benefits of the MOA.
Relative to the issue of whether the closure of private respondent's
Manila and Antipolo plants was legal, we agree in the conclusions of
the NLRC and the Court of Appeals that the closure of said plants is
for an authorized cause.
As correctly pointed out by the NLRC, the Court has already resolved
that the characterization of the employee's service as no longer
necessary or sustainable, and therefore properly terminable, is an
exercise of business judgment on the part of the employer.10 The
wisdom or soundness of such characterizing or decision is not subject
to discretionary review on the part of the Labor Arbiter nor of the
NLRC so long, of course, as violation of law or merely arbitrary and
malicious action is not shown.11 The determination of the continuing
necessity of a particular officer or position in a business corporation is
management's prerogative, and the courts will not interfere with the
exercise of such so long as no abuse of discretion or merely arbitrary
or malicious action on the part of management is shown.12 In the case
at bar, the closure of the Manila and Antipolo plants and the resulting
termination of the employment of 646 employees is not tainted with
bad faith. As found by the NLRC, the private respondent's decision to
close the plant was a result of a study conducted which established that
the most prudent course of action for the private respondent was to
stop operations in said plants and transfer production to other more
modern and technologically advanced plants of private respondent.
Other than its mere allegations, petitioner union failed to show that the
closure of the two plants was without factual basis and done in utter
bad faith. No evidence was presented by petitioner to prove its
assertion that private respondent resorted to the closure of the Manila
and Antipolo plants to prevent the renegotiations of the CBA entered
into between the parties. As adequately explained by the NLRC, the
subject closure and the resulting termination of the 639 employees was
due to legitimate business considerations, as evidenced by the
technical study conducted by private respondent.
Anent the allegation that private respondent failed to comply with the
notice requirements as provided by the Labor Code in the cessation of
its operations, we have already settled this matter in a similar case
26 | P a g e
which was accordingly cited by the appellate court. In the case
of Serrano v. National Labor Relations Commission,13 we held that:
In that case [Associate Labor Unions-VIMCONTU v. NLRC (204
SCRA 913)], the employees and the then Ministry of Labor and
Employment (MOLE) were notified in writing on August 5, 1983 that
the employees' services would cease on August 31, 1983 but that they
would be paid their salaries and other benefits until September 5,
1983. It was held that such written notice was "more than substantial
compliance" with the notice requirement of the Labor Code.
Indeed, there was "more than substantial compliance" with the law in
that case because, in addition to the advance written notice required
under Art. 284 (now Art. 283) of the Labor Code, the employees were
paid for five days, from September 1 to 5, 1993, even if they rendered
no service for the period. x x x Had private respondent given a written
notice to the petitioner on October 1, 1991, at the latest, that effective
October 31, 1991 his employment would cease although from October
1 he would no longer be required to work, there would be basis for
private respondent's boast that '[p]ayment of this salary even [if he is]
no longer working is effective notice and is much better than 30 days
formal notice but working until the end of the 30 days period." This is
not the case here, however. What happened here was that on October
11, 1991, petitioner was given a memorandum terminating his
employment effective on the same day on the ground of retrenchment
(actually redundancy).14
In the instant case, the employees were served notice on 9 December
1999 that their employment were being severed effective 1 March
2000; however they were no longer required to report for work but
they will continue to receive their salary up to 29 February 2000.
Therefore, as enunciated in the ruling in Serrano v. NLRC, said act of
private respondent constitutes substantial compliance with the notice
requirement of the Labor Code.
WHEREFORE, premises considered, the assailed Decisions of the
Court of Appeals in CA-G.R. SP No. 67775 and of the National Labor
Relations Commission in NLRC Case No. 30-11-00466-99 and NLRC
CC No. 000182-00 are hereby AFFIRMED with MODIFICATION.
The 61 subject employees are hereby declared regular employees as of
1 December 1998 and are entitled to the CBA salary increase, mid-
year gratuity pay, one sack of rice, overtime pay and thirteenth (13th)
month pay as provided for in the Memorandum of Agreement. No
costs.
SO ORDERED.
G.R. No. 170054 January 21, 2013
GOYA, INC., Petitioner,
vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of
Civil Procedure seeks to reverse and set aside the June 16, 2005
Decision1 and October 12, 2005 Resolution2 of the Court of Appeals in
CA-G.R. SP No. 87335, which sustained the October 26, 2004
Decision3 of Voluntary Arbitrator Bienvenido E. Laguesma, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the
Company is NOT guilty of unfair labor practice in engaging the
services of PESO.
The company is, however, directed to observe and comply with its
commitment as it pertains to the hiring of casual employees when
necessitated by business circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a
domestic corporation engaged in the manufacture, importation, and
wholesale of top quality food products, hired contractual employees
from PESO Resources Development Corporation (PESO) to perform
temporary and occasional services in its factory in Parang, Marikina
City. This prompted respondent Goya, Inc. Employees Union–FFW
(Union) to request for a grievance conference on the ground that the
contractual workers do not belong to the categories of employees
stipulated in the existing Collective Bargaining Agreement
(CBA).5 When the matter remained unresolved, the grievance was
referred to the National Conciliation and Mediation Board (NCMB)
for voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union
manifested before Voluntary Arbitrator (VA) Bienvenido E. Laguesma
27 | P a g e
that amicable settlement was no longer possible; hence, they agreed to
submit for resolution the solitary issue of "[w]hether or not the
Company is guilty of unfair labor acts in engaging the services of
PESO, a third party service provider, under the existing CBA, laws,
and jurisprudence."6 Both parties thereafter filed their respective
pleadings.
The Union asserted that the hiring of contractual employees from
PESO is not a management prerogative and in gross violation of the
CBA tantamount to unfair labor practice (ULP). It noted that the
contractual workers engaged have been assigned to work in positions
previously handled by regular workers and Union members, in effect
violating Section 4, Article I of the CBA, which provides for three
categories of employees in the Company, to wit:
Section 4. Categories of Employees.– The parties agree on the
following categories of employees:
(a) Probationary Employee. – One hired to occupy a regular rank-and-
file position in the Company and is serving a probationary period. If
the probationary employee is hired or comes from outside the
Company (non-Goya, Inc. employee), he shall be required to undergo
a probationary period of six (6) months, which period, in the sole
judgment of management, may be shortened if the employee has
already acquired the knowledge or skills required of the job. If the
employee is hired from the casual pool and has worked in the same
position at any time during the past two (2) years, the probationary
period shall be three (3) months.
(b) Regular Employee. – An employee who has satisfactorily
completed his probationary period and automatically granted regular
employment status in the Company.
(c) Casual Employee, – One hired by the Company to perform
occasional or seasonal work directly connected with the regular
operations of the Company, or one hired for specific projects of
limited duration not connected directly with the regular operations of
the Company.
It was averred that the categories of employees had been a part of the
CBA since the 1970s and that due to this provision, a pool of casual
employees had been maintained by the Company from which it hired
workers who then became regular workers when urgently necessary to
employ them for more than a year. Likewise, the Company sometimes
hired probationary employees who also later became regular workers
after passing the probationary period. With the hiring of contractual
employees, the Union contended that it would no longer have
probationary and casual employees from which it could obtain
additional Union members; thus, rendering inutile Section 1, Article
III (Union Security) of the CBA, which states:
Section 1. Condition of Employment. – As a condition of continued
employment in the Company, all regular rank-and-file employees shall
remain members of the Union in good standing and that new
employees covered by the appropriate bargaining unit shall
automatically become regular employees of the Company and shall
remain members of the Union in good standing as a condition of
continued employment.
The Union moreover advanced that sustaining the Company’s position
would easily weaken and ultimately destroy the former with the
latter’s resort to retrenchment and/or retirement of employees and not
filling up the vacant regular positions through the hiring of contractual
workers from PESO, and that a possible scenario could also be created
by the Company wherein it could "import" workers from PESO during
an actual strike.
In countering the Union’s allegations, the Company argued that: (a)
the law expressly allows contracting and subcontracting arrangements
through Department of Labor and Employment (DOLE) Order No. 18-
02; (b) the engagement of contractual employees did not, in any way,
prejudice the Union, since not a single employee was terminated and
neither did it result in a reduction of working hours nor a reduction or
splitting of the bargaining unit; and (c) Section 4, Article I of the CBA
merely provides for the definition of the categories of employees and
does not put a limitation on the Company’s right to engage the services
of job contractors or its management prerogative to address
temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Union’s charge of
ULP for being purely speculative and for lacking in factual basis, but
the Company was directed to observe and comply with its commitment
under the CBA. The VA opined:
28 | P a g e
We examined the CBA provision Section 4, Article I of the
CBAallegedly violated by the Company and indeed the agreement
prescribes three (3) categories of employees in the Company and
provides for the definition, functions and duties of each. Material to
the case at hand is the definition as regards the functions of a casual
employee described as follows:
Casual Employee – One hired by the COMPANY to perform
occasional or seasonal work directly connected with the regular
operations of the COMPANY, or one hired for specific projects of
limited duration not connected directly with the regular operations of
the COMPANY.
While the foregoing agreement between the parties did eliminate
management’s prerogative of outsourcing parts of its operations, it
serves as a limitation on such prerogative particularly if it involves
functions or duties specified under the aforequoted agreement. It is
clear that the parties agreed that in the event that the Company needs
to engage the services of additional workers who will perform
"occasional or seasonal work directly connected with the regular
operations of the COMPANY," or "specific projects of limited
duration not connected directly with the regular operations of the
COMPANY", the Company can hire casual employees which is akin
to contractual employees. If we note the Company’s own declaration
that PESO was engaged to perform "temporary or occasional services"
(See the Company’s Position Paper, at p. 1), then it should have
directly hired the services of casual employees rather than do it
through PESO.
It is evident, therefore, that the engagement of PESO is not in keeping
with the intent and spirit of the CBA provision in question. It must,
however, be stressed that the right of management to outsource parts
of its operations is not totally eliminated but is merely limited by the
CBA. Given the foregoing, the Company’s engagement of PESO for
the given purpose is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of the VA
Decision,8 the Company immediately filed a petition for
review9 before the Court of Appeals (CA) under Rule 43 of the
Revised Rules of Civil Procedure to set aside the directive to observe
and comply with the CBA commitment pertaining to the hiring of
casual employees when necessitated by business circumstances.
Professing that such order was not covered by the sole issue submitted
for voluntary arbitration, the Company assigned the following errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED
HIS POWER WHICH WAS EXPRESSLY GRANTED AND
LIMITED BY BOTH PARTIES IN RULING THAT THE
ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE
INTENT AND SPIRIT OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED
A PATENT AND PALPABLE ERROR IN DECLARING THAT
THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE
INTENT AND SPIRIT OF THE CBA.11
On June 16, 2005, the CA dismissed the petition. In dispensing with
the merits of the controversy, it held:
This Court does not find it arbitrary on the part of the Hon. Voluntary
Arbitrator in ruling that "the engagement of PESO is not in keeping
with the intent and spirit of the CBA." The said ruling is interrelated
and intertwined with the sole issue to be resolved that is, "Whether or
not the Company is guilty of unfair labor practice in engaging the
services of PESO, a third party service provider, under existing CBA,
laws, and jurisprudence." Both issues concern the engagement of
PESO by the Company which is perceived as a violation of the CBA
and which constitutes as unfair labor practice on the part of the
Company. This is easily discernible in the decision of the Hon.
Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of Section 4,
Article I of the CBA, it does not constitute unfair labor practice as it
(sic) not characterized under the law as a gross violation of the CBA.
Violations of a CBA, except those which are gross in character, shall
no longer be treated as unfair labor practice. Gross violations of a
CBA means flagrant and/or malicious refusal to comply with the
economic provisions of such agreement. x x x
Anent the second assigned error, the Company contends that the Hon.
Voluntary Arbitrator erred in declaring that the engagement of PESO
is not in keeping with the intent and spirit of the CBA. The Company
justified its engagement of contractual employees through PESO as a
management prerogative, which is not prohibited by law. Also, it
29 | P a g e
further alleged that no provision under the CBA limits or prohibits its
right to contract out certain services in the exercise of management
prerogatives.
Germane to the resolution of the above issue is the provision in their
CBA with respect to the categories of the employees:
xxxx
A careful reading of the above-enumerated categories of employees
reveals that the PESO contractual employees do not fall within the
enumerated categories of employees stated in the CBA of the parties.
Following the said categories, the Company should have observed and
complied with the provision of their CBA. Since the Company had
admitted that it engaged the services of PESO to perform temporary or
occasional services which is akin to those performed by casual
employees, the Company should have tapped the services of casual
employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO
was a management prerogative. It bears stressing that a management
prerogative refers to the right of the employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments,
working methods, processes to be followed, regulation regarding
transfer of employees, supervision of their work, lay-off and
discipline, and dismissal and recall of work, presupposing the
existence of employer-employee relationship. On the basis of the
foregoing definition, the Company’s engagement of PESO was indeed
a management prerogative. This is in consonance with the
pronouncement of the Supreme Court in the case of Manila Electric
Company vs. Quisumbing where it ruled that contracting out of
services is an exercise of business judgment or management
prerogative.
This management prerogative of contracting out services, however, is
not without limitation. In contracting out services, the management
must be motivated by good faith and the contracting out should not be
resorted to circumvent the law or must not have been the result of
malicious arbitrary actions. In the case at bench, the CBA of the
parties has already provided for the categories of the employees in the
Company’sestablishment. These categories of employees particularly
with respect to casual employees serve as limitation to the Company’s
prerogative to outsource parts of its operations especially when hiring
contractual employees. As stated earlier, the work to be performed by
PESO was similar to that of the casual employees. With the provision
on casual employees, the hiring of PESO contractual employees,
therefore, is not in keeping with the spirit and intent of their CBA.
(Citations omitted)12
The Company moved to reconsider the CA Decision,13 but it was
denied;14 hence, this petition.
Incidentally, on July 16, 2009, the Company filed a
Manifestation15 informing this Court that its stockholders and directors
unanimously voted to shorten the Company’s corporate existence only
until June 30, 2006, and that the three-year period allowed by law for
liquidation of the Company’s affairs already expired on June 30, 2009.
Referring to Gelano v. Court of Appeals,16 Public Interest Center, Inc.
v. Elma,17 and Atienza v. Villarosa,18 it urged Us, however, to still
resolve the case for future guidance of the bench and the bar as the
issue raised herein allegedly calls for a clarification of a legal
principle, specifically, whether the VA is empowered to rule on a
matter not covered by the issue submitted for arbitration.
Even if this Court would brush aside technicality by ignoring the
supervening event that renders this case moot and academic19 due to
the permanent cessation of the Company’s business operation on June
30, 2009, the arguments raised in this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole
issue submitted for voluntary arbitration. Resultantly, the CA did not
commit serious error when it sustained the ruling that the hiring of
contractual employees from PESO was not in keeping with the intent
and spirit of the CBA. Indeed, the opinion of the VA is germane to, or,
in the words of the CA, "interrelated and intertwined with," the sole
issue submitted for resolution by the parties. This being said, the
Company’s invocation of Sections 4 and 5, Rule IV20 and Section 5,
Rule VI21 of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings dated October 15, 2004 issued by
the NCMB is plainly out of order.
Likewise, the Company cannot find solace in its cited case of Ludo &
Luym Corporation v. Saornido.22 In Ludo, the company was engaged
in the manufacture of coconut oil, corn starch, glucose and related
30 | P a g e
products. In the course of its business operations, it engaged the
arrastre services of CLAS for the loading and unloading of its finished
products at the wharf. The arrastre workers deployed by CLAS to
perform the services needed were subsequently hired, on different
dates, as Ludo’s regular rank-and-file employees. Thereafter, said
employees joined LEU, which acted as the exclusive bargaining agent
of the rank-and-file employees. When LEU entered into a CBA with
Ludo, providing for certain benefits to the employees (the amount of
which vary according to the length of service rendered), it requested to
include in its members’ period of service the time during which they
rendered arrastre services so that they could get higher benefits. The
matter was submitted for voluntary arbitration when Ludo failed to act.
Per submission agreement executed by both parties, the sole issue for
resolution was the date of regularization of the workers. The VA
Decision ruled that: (1) the subject employees were engaged in
activities necessary and desirable to the business of Ludo, and (2)
CLAS is a labor-only contractor of Ludo. It then disposed as follows:
(a) the complainants were considered regular employees six months
from the first day of service at CLAS; (b) the complainants, being
entitled to the CBA benefits during the regular employment, were
awarded sick leave, vacation leave, and annual wage and salary
increases during such period; (c) respondents shall pay attorney’s fees
of 10% of the total award; and (d) an interest of 12% per annum or 1%
per month shall be imposed on the award from the date of
promulgation until fully paid. The VA added that all separation and/or
retirement benefits shall be construed from the date of regularization
subject only to the appropriate government laws and other social
legislation. Ludo filed a motion for reconsideration, but the VA denied
it. On appeal, the CA affirmed in toto the assailed decision; hence, a
petition was brought before this Court raising the issue, among others,
of whether a voluntary arbitrator can award benefits not claimed in the
submission agreement. In denying the petition, We ruled:
Generally, the arbitrator is expected to decide only those questions
expressly delineated by the submission agreement. Nevertheless, the
arbitrator can assume that he has the necessary power to make a final
settlement since arbitration is the final resort for the adjudication of
disputes. The succinct reasoning enunciated by the CA in support of its
holding, that the Voluntary Arbitrator in a labor controversy has
jurisdiction to render the questioned arbitral awards, deserves our
concurrence, thus:
In general, the arbitrator is expected to decide those questions
expressly stated and limited in the submission agreement. However,
since arbitration is the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to make a final settlement.
Thus, assuming that the submission empowers the arbitrator to decide
whether an employee was discharged for just cause, the arbitrator in
this instance can reasonably assume that his powers extended beyond
giving a yes-or-no answer and included the power to reinstate him
with or without back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary
Arbitrator had plenary jurisdiction and authority to interpret the
agreement to arbitrate and to determine the scope of his own authority
subject only, in a proper case, to the certiorari jurisdiction of this
Court. The Arbitrator, as already indicated, viewed his authority as
embracing not merely the determination of the abstract question of
whether or not a performance bonus was to be granted but also, in the
affirmative case, the amount thereof.
By the same token, the issue of regularization should be viewed as
two-tiered issue. While the submission agreement mentioned only the
determination of the date or regularization, law and jurisprudence give
the voluntary arbitrator enough leeway of authority as well as adequate
prerogative to accomplish the reason for which the law on voluntary
arbitration was created – speedy labor justice. It bears stressing that the
underlying reason why this case arose is to settle, once and for all, the
ultimate question of whether respondent employees are entitled to
higher benefits. To require them to file another action for payment of
such benefits would certainly undermine labor proceedings and
contravene the constitutional mandate providing full protection to
labor.23
Indubitably, Ludo fortifies, not diminishes, the soundness of the
questioned VA Decision. Said case reaffirms the plenary jurisdiction
and authority of the voluntary arbitrator to interpret the CBA and to
determine the scope of his/her own authority. Subject to judicial
review, the leeway of authority as well as adequate prerogative is
31 | P a g e
aimed at accomplishing the rationale of the law on voluntary
arbitration – speedy labor justice. In this case, a complete and final
adjudication of the dispute between the parties necessarily called for
the resolution of the related and incidental issue of whether the
Company still violated the CBA but without being guilty of ULP as,
needless to state, ULP is committed only if there is gross violation of
the agreement.
Lastly, the Company kept on harping that both the VA and the CA
conceded that its engagement of contractual workers from PESO was a
valid exercise of management prerogative. It is confused. To
emphasize, declaring that a particular act falls within the concept of
management prerogative is significantly different from acknowledging
that such act is a valid exercise thereof. What the VA and the CA
correctly ruled was that the Company’s act of contracting
out/outsourcing is within the purview of management prerogative.
Both did not say, however, that such act is a valid exercise thereof.
Obviously, this is due to the recognition that the CBA provisions
agreed upon by the Company and the Union delimit the free exercise
of management prerogative pertaining to the hiring of contractual
employees. Indeed, the VA opined that "the right of the management
to outsource parts of its operations is not totally eliminated but is
merely limited by the CBA," while the CA held that "this management
prerogative of contracting out services, however, is not without
limitation. x x x These categories of employees particularly with
respect to casual employees serve as limitation to the Company’s
prerogative to outsource parts of its operations especially when hiring
contractual employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the
law between the parties and they are obliged to comply with its
provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated
contract between a legitimate labor organization and the employer
concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit.1âwphi1 As in all contracts, the
parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the law
between the parties and compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave
no doubt upon the intention of the contracting parties, the literal
meaning of their stipulations shall control. x x x.24
In this case, Section 4, Article I (on categories of employees) of the
CBA between the Company and the Union must be read in
conjunction with its Section 1, Article III (on union security). Both are
interconnected and must be given full force and effect. Also, these
provisions are clear and unambiguous. The terms are explicit and the
language of the CBA is not susceptible to any other interpretation.
Hence, the literal meaning should prevail. As repeatedly held, the
exercise of management prerogative is not unlimited; it is subject to
the limitations found in law, collective bargaining agreement or the
general principles of fair play and justice25 Evidently, this case has one
of the restrictions- the presence of specific CBA provisions-unlike in
San Miguel Corporation Employees Union-PTGWO v.
Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol Corporation v.
NLRC,28 and Serrano v. NLRC29cited by the Company. To reiterate,
the CBA is the norm of conduct between the parties and compliance
therewith is mandated by the express policy of the law.30
WHEREFORE, the petition is DENIED. The assailed June 16, 2005
Decision, as well as the October 12, 2005 Resolution of the Court of
Appeals, which sustained the October 26, 2004 Decision of the
Voluntary Arbitrator, are hereby AFFIRMED.
SO ORDERED.
G.R. No. 164301 October 19, 2011
BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs.
BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF
UNIONS IN BPI UNIBANK, Respondent.
RESOLUTION
LEONARDO-DE CASTRO, J.:
32 | P a g e
In the present incident, petitioner Bank of the Philippine Islands (BPI)
moves for reconsideration1 of our Decision dated August 10, 2010,
holding that former employees of the Far East Bank and Trust
Company (FEBTC) "absorbed" by BPI pursuant to the two banks’
merger in 2000 were covered by the Union Shop Clause in the then
existing collective bargaining agreement (CBA)2 of BPI with
respondent BPI Employees Union-Davao Chapter-Federation of
Unions in BPI Unibank (the Union).
To recall, the Union Shop Clause involved in this long standing
controversy provided, thus:
ARTICLE II
xxxx
Section 2. Union Shop - New employees falling within the bargaining
unit as defined in Article I of this Agreement, who may hereafter be
regularly employed by the Bank shall, within thirty (30) days after
they become regular employees, join the Union as a condition of their
continued employment. It is understood that membership in good
standing in the Union is a condition of their continued employment
with the Bank.3 (Emphases supplied.)
The bone of contention between the parties was whether or not the
"absorbed" FEBTC employees fell within the definition of "new
employees" under the Union Shop Clause, such that they may be
required to join respondent union and if they fail to do so, the Union
may request BPI to terminate their employment, as the Union in fact
did in the present case. Needless to state, BPI refused to accede to the
Union’s request. Although BPI won the initial battle at the Voluntary
Arbitrator level, BPI’s position was rejected by the Court of Appeals
which ruled that the Voluntary Arbitrator’s interpretation of the Union
Shop Clause was at war with the spirit and rationale why the Labor
Code allows the existence of such provision. On review with this
Court, we upheld the appellate court’s ruling and disposed of the case
as follows:
WHEREFORE, the petition is hereby DENIED, and the Decision
dated September 30, 2003 of the Court of Appeals is AFFIRMED,
subject to the thirty (30) day notice requirement imposed herein.
Former FEBTC employees who opt not to become union members but
who qualify for retirement shall receive their retirement benefits in
accordance with law, the applicable retirement plan, or the CBA, as
the case may be.4
Notwithstanding our affirmation of the applicability of the Union Shop
Clause to former FEBTC employees, for reasons already extensively
discussed in the August 10, 2010 Decision, even now BPI continues to
protest the inclusion of said employees in the Union Shop Clause.
In seeking the reversal of our August 10, 2010 Decision, petitioner
insists that the parties to the CBA clearly intended to limit the
application of the Union Shop Clause only to new employees who
were hired as non-regular employees but later attained regular status at
some point after hiring. FEBTC employees cannot be considered new
employees as BPI merely stepped into the shoes of FEBTC as an
employer purely as a consequence of the merger.5
Petitioner likewise relies heavily on the dissenting opinions of our
respected colleagues, Associate Justices Antonio T. Carpio and Arturo
D. Brion. From both dissenting opinions, petitioner derives its
contention that "the situation of absorbed employees can be likened to
old employees of BPI, insofar as their full tenure with FEBTC was
recognized by BPI and their salaries were maintained and safeguarded
from diminution" but such absorbed employees "cannot and should not
be treated in exactly the same way as old BPI employees for there are
substantial differences between them."6 Although petitioner admits
that there are similarities between absorbed and new employees, they
insist there are marked differences between them as well. Thus,
adopting Justice Brion’s stance, petitioner contends that the absorbed
FEBTC employees should be considered "a sui generis group of
employees whose classification will not be duplicated until BPI has
another merger where it would be the surviving
corporation."7 Apparently borrowing from Justice Carpio, petitioner
propounds that the Union Shop Clause should be strictly construed
since it purportedly curtails the right of the absorbed employees to
abstain from joining labor organizations.8
Pursuant to our directive, the Union filed its Comment9 on the Motion
for Reconsideration. In opposition to petitioner’s arguments, the
Union, in turn, adverts to our discussion in the August 10, 2010
Decision regarding the voluntary nature of the merger between BPI
and FEBTC, the lack of an express stipulation in the Articles of
33 | P a g e
Merger regarding the transfer of employment contracts to the
surviving corporation, and the consensual nature of employment
contracts as valid bases for the conclusion that former FEBTC
employees should be deemed new employees.10 The Union argues that
the creation of employment relations between former FEBTC
employees and BPI (i.e., BPI’s selection and engagement of former
FEBTC employees, its payment of their wages, power of dismissal and
of control over the employees’ conduct) occurred after the merger, or
to be more precise, after the Securities and Exchange Commission’s
(SEC) approval of the merger.11 The Union likewise points out that
BPI failed to offer any counterargument to the Court’s reasoning that:
The rationale for upholding the validity of union shop clauses in a
CBA, even if they impinge upon the individual employee's right or
freedom of association, is not to protect the union for the union's sake.
Laws and jurisprudence promote unionism and afford certain
protections to the certified bargaining agent in a unionized company
because a strong and effective union presumably benefits all
employees in the bargaining unit since such a union would be in a
better position to demand improved benefits and conditions of work
from the employer. x x x.
x x x Nonetheless, settled jurisprudence has already swung the balance
in favor of unionism, in recognition that ultimately the individual
employee will be benefited by that policy. In the hierarchy of
constitutional values, this Court has repeatedly held that the right to
abstain from joining a labor organization is subordinate to the policy
of encouraging unionism as an instrument of social justice.12
While most of the arguments offered by BPI have already been
thoroughly addressed in the August 10, 2010 Decision, we find that a
qualification of our ruling is in order only with respect to the
interpretation of the provisions of the Articles of Merger and its
implications on the former FEBTC employees’ security of tenure.
Taking a second look on this point, we have come to agree with Justice
Brion’s view that it is more in keeping with the dictates of social
justice and the State policy of according full protection to labor to
deem employment contracts as automatically assumed by the surviving
corporation in a merger, even in the absence of an express stipulation
in the articles of merger or the merger plan. In his dissenting opinion,
Justice Brion reasoned that:
To my mind, due consideration of Section 80 of the Corporation Code,
the constitutionally declared policies on work, labor and employment,
and the specific FEBTC-BPI situation — i.e., a merger with complete
"body and soul" transfer of all that FEBTC embodied and possessed
and where both participating banks were willing (albeit by deed, not
by their written agreement) to provide for the affected human
resources by recognizing continuity of employment — should point
this Court to a declaration that in a complete merger situation where
there is total takeover by one corporation over another and there is
silence in the merger agreement on what the fate of the human
resource complement shall be, the latter should not be left in legal
limbo and should be properly provided for, by compelling the
surviving entity to absorb these employees. This is what Section 80 of
the Corporation Code commands, as the surviving corporation has the
legal obligation to assume all the obligations and liabilities of the
merged constituent corporation.
Not to be forgotten is that the affected employees managed, operated
and worked on the transferred assets and properties as their means of
livelihood; they constituted a basic component of their corporation
during its existence. In a merger and consolidation situation, they
cannot be treated without consideration of the applicable constitutional
declarations and directives, or, worse, be simply disregarded. If they
are so treated, it is up to this Court to read and interpret the law so that
they are treated in accordance with the legal requirements of mergers
and consolidation, read in light of the social justice, economic and
social provisions of our Constitution. Hence, there is a need for the
surviving corporation to take responsibility for the affected employees
and to absorb them into its workforce where no appropriate provision
for the merged corporation's human resources component is made in
the Merger Plan.13
By upholding the automatic assumption of the non-surviving
corporation’s existing employment contracts by the surviving
corporation in a merger, the Court strengthens judicial protection of
the right to security of tenure of employees affected by a merger and
avoids confusion regarding the status of their various benefits which
34 | P a g e
were among the chief objections of our dissenting colleagues.
However, nothing in this Resolution shall impair the right of an
employer to terminate the employment of the absorbed employees for
a lawful or authorized cause or the right of such an employee to resign,
retire or otherwise sever his employment, whether before or after the
merger, subject to existing contractual obligations. In this manner,
Justice Brion’s theory of automatic assumption may be reconciled with
the majority’s concerns with the successor employer’s prerogative to
choose its employees and the prohibition against involuntary
servitude.1avvphi1
Notwithstanding this concession, we find no reason to reverse our
previous pronouncement that the absorbed FEBTC employees are
covered by the Union Shop Clause.
Even in our August 10, 2010 Decision, we already observed that the
legal fiction in the law on mergers (that the surviving corporation
continues the corporate existence of the non-surviving corporation) is
mainly a tool to adjudicate the rights and obligations between and
among the merged corporations and the persons that deal with
them.14 Such a legal fiction cannot be unduly extended to an
interpretation of a Union Shop Clause so as to defeat its purpose under
labor law. Hence, we stated in the Decision that:
In any event, it is of no moment that the former FEBTC employees
retained the regular status that they possessed while working for their
former employer upon their absorption by petitioner. This fact would
not remove them from the scope of the phrase "new employees" as
contemplated in the Union Shop Clause of the CBA, contrary to
petitioner's insistence that the term "new employees" only refers to
those who are initially hired as non-regular employees for possible
regular employment.
The Union Shop Clause in the CBA simply states that "new
employees" who during the effectivity of the CBA "may be regularly
employed" by the Bank must join the union within thirty (30) days
from their regularization. There is nothing in the said clause that limits
its application to only new employees who possess non-regular status,
meaning probationary status, at the start of their employment.
Petitioner likewise failed to point to any provision in the CBA
expressly excluding from the Union Shop Clause new employees who
are "absorbed" as regular employees from the beginning of their
employment. What is indubitable from the Union Shop Clause is that
upon the effectivity of the CBA, petitioner's new regular employees
(regardless of the manner by which they became employees of BPI)
are required to join the Union as a condition of their continued
employment.15
Although by virtue of the merger BPI steps into the shoes of FEBTC
as a successor employer as if the former had been the employer of the
latter’s employees from the beginning it must be emphasized that, in
reality, the legal consequences of the merger only occur at a specific
date, i.e., upon its effectivity which is the date of approval of the
merger by the SEC. Thus, we observed in the Decision that BPI and
FEBTC stipulated in the Articles of Merger that they will both
continue their respective business operations until the SEC issues the
certificate of merger and in the event no such certificate is issued, they
shall hold each other blameless for the non-consummation of the
merger.16We likewise previously noted that BPI made its assignments
of the former FEBTC employees effective on April 10, 2000, or after
the SEC approved the merger.17 In other words, the obligation of BPI
to pay the salaries and benefits of the former FEBTC employees and
its right of discipline and control over them only arose with the
effectivity of the merger. Concomitantly, the obligation of former
FEBTC employees to render service to BPI and their right to receive
benefits from the latter also arose upon the effectivity of the merger.
What is material is that all of these legal consequences of the merger
took place during the life of an existing and valid CBA between BPI
and the Union wherein they have mutually consented to include a
Union Shop Clause.
From the plain, ordinary meaning of the terms of the Union Shop
Clause, it covers employees who (a) enter the employ of BPI during
the term of the CBA; (b) are part of the bargaining unit (defined in the
CBA as comprised of BPI’s rank and file employees); and (c) become
regular employees without distinguishing as to the manner they
acquire their regular status. Consequently, the number of such
employees may adversely affect the majority status of the Union and
even its existence itself, as already amply explained in the Decision.
35 | P a g e
Indeed, there are differences between (a) new employees who are
hired as probationary or temporary but later regularized, and (b) new
employees who, by virtue of a merger, are absorbed from another
company as regular and permanent from the beginning of their
employment with the surviving corporation. It bears reiterating here
that these differences are too insubstantial to warrant the exclusion of
the absorbed employees from the application of the Union Shop
Clause. In the Decision, we noted that:
Verily, we agree with the Court of Appeals that there are no
substantial differences between a newly hired non-regular employee
who was regularized weeks or months after his hiring and a new
employee who was absorbed from another bank as a regular employee
pursuant to a merger, for purposes of applying the Union Shop Clause.
Both employees were hired/employed only after the CBA was signed.
At the time they are being required to join the Union, they are both
already regular rank and file employees of BPI. They belong to the
same bargaining unit being represented by the Union. They both enjoy
benefits that the Union was able to secure for them under the CBA.
When they both entered the employ of BPI, the CBA and the Union
Shop Clause therein were already in effect and neither of them had the
opportunity to express their preference for unionism or not. We see no
cogent reason why the Union Shop Clause should not be applied
equally to these two types of new employees, for they are undeniably
similarly situated.18
Again, it is worthwhile to highlight that a contrary interpretation of the
Union Shop Clause would dilute its efficacy and put the certified
union that is supposedly being protected thereby at the mercy of
management. For if the former FEBTC employees had no say in the
merger of its former employer with another bank, as petitioner BPI
repeatedly decries on their behalf, the Union likewise could not
prevent BPI from proceeding with the merger which undisputedly
affected the number of employees in the bargaining unit that the Union
represents and may negatively impact on the Union’s majority status.
In this instance, we should be guided by the principle that courts must
place a practical and realistic construction upon a CBA, giving due
consideration to the context in which it is negotiated and purpose
which it is intended to serve.19
We now come to the question: Does our affirmance of our ruling that
former FEBTC employees absorbed by BPI are covered by the Union
Shop Clause violate their right to security of tenure which we
expressly upheld in this Resolution? We answer in the negative.
In Rance v. National Labor Relations Commission,20 we held that:
It is the policy of the state to assure the right of workers to "security of
tenure" (Article XIII, Sec. 3 of the New Constitution, Section 9,
Article II of the 1973 Constitution). The guarantee is an act of social
justice. When a person has no property, his job may possibly be his
only possession or means of livelihood. Therefore, he should be
protected against any arbitrary deprivation of his job. Article 280 of
the Labor Code has construed security of tenure as meaning that "the
employer shall not terminate the services of an employee except for a
just cause or when authorized by" the Code. x x x (Emphasis
supplied.)
We have also previously held that the fundamental guarantee of
security of tenure and due process dictates that no worker shall be
dismissed except for a just and authorized cause provided by law and
after due process is observed.21 Even as we now recognize the right to
continuous, unbroken employment of workers who are absorbed into a
new company pursuant to a merger, it is but logical that their
employment may be terminated for any causes provided for under the
law or in jurisprudence without violating their right to security of
tenure. As Justice Carpio discussed in his dissenting opinion, it is well-
settled that termination of employment by virtue of a union security
clause embodied in a CBA is recognized in our jurisdiction.22 In Del
Monte Philippines, Inc. v. Saldivar,23 we explained the rationale for
this policy in this wise:
Article 279 of the Labor Code ordains that "in cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by [Title I, Book
Six of the Labor Code]." Admittedly, the enforcement of a closed-shop
or union security provision in the CBA as a ground for termination
finds no extension within any of the provisions under Title I, Book Six
of the Labor Code. Yet jurisprudence has consistently recognized,
thus: "It is State policy to promote unionism to enable workers to
negotiate with management on an even playing field and with more
36 | P a g e
persuasiveness than if they were to individually and separately bargain
with the employer. For this reason, the law has allowed stipulations for
'union shop' and 'closed shop' as means of encouraging workers to join
and support the union of their choice in the protection of their rights
and interests vis-a-vis the employer."24 (Emphasis supplied.)
Although it is accepted that non-compliance with a union security
clause is a valid ground for an employee’s dismissal, jurisprudence
dictates that such a dismissal must still be done in accordance with due
process. This much we decreed in General Milling Corporation v.
Casio,25 to wit:
The Court reiterated in Malayang Samahan ng mga Manggagawa sa
M. Greenfield v. Ramos that:
While respondent company may validly dismiss the employees
expelled by the union for disloyalty under the union security clause of
the collective bargaining agreement upon the recommendation by the
union, this dismissal should not be done hastily and summarily thereby
eroding the employees' right to due process, self-organization and
security of tenure. The enforcement of union security clauses is
authorized by law provided such enforcement is not characterized by
arbitrariness, and always with due process. Even on the assumption
that the federation had valid grounds to expel the union officers, due
process requires that these union officers be accorded a separate
hearing by respondent company.
The twin requirements of notice and hearing constitute the essential
elements of procedural due process. The law requires the employer to
furnish the employee sought to be dismissed with two written notices
before termination of employment can be legally effected: (1) a written
notice apprising the employee of the particular acts or omissions for
which his dismissal is sought in order to afford him an opportunity to
be heard and to defend himself with the assistance of counsel, if he
desires, and (2) a subsequent notice informing the employee of the
employer's decision to dismiss him. This procedure is mandatory and
its absence taints the dismissal with illegality.
Irrefragably, GMC cannot dispense with the requirements of notice
and hearing before dismissing Casio, et al. even when said dismissal is
pursuant to the closed shop provision in the CBA. The rights of an
employee to be informed of the charges against him and to reasonable
opportunity to present his side in a controversy with either the
company or his own union are not wiped away by a union security
clause or a union shop clause in a collective bargaining agreement. x x
x26 (Emphases supplied.)
In light of the foregoing, we find it appropriate to state that, apart from
the fresh thirty (30)-day period from notice of finality of the Decision
given to the affected FEBTC employees to join the Union before the
latter can request petitioner to terminate the former’s employment,
petitioner must still accord said employees the twin requirements of
notice and hearing on the possibility that they may have other
justifications for not joining the Union. Similar to our August 10, 2010
Decision, we reiterate that our ruling presupposes there has been no
material change in the situation of the parties in the interim.
WHEREFORE, the Motion for Reconsideration is DENIED. The
Decision dated August 10, 2010 is AFFIRMED, subject to the
qualifications that:
(a) Petitioner is deemed to have assumed the employment contracts of
the Far East Bank and Trust Company (FEBTC) employees upon
effectivity of the merger without break in the continuity of their
employment, even without express stipulation in the Articles of
Merger; and
(b) Aside from the thirty (30) days, counted from notice of finality of
the August 10, 2010 Decision, given to former FEBTC employees to
join the respondent, said employees shall be accorded full procedural
due process before their employment may be terminated.
SO ORDERED.
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:
37 | P a g e
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:
38 | P a g e
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 (P9.00) 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 ONE PESOS (P21.00) after more than THREE (3) hours of
actual overtime work (Section 3, as amended).[7]
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.
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 its
employees and, if so, under what conditions. To see it otherwise would
amount to an impairment of its rights as an employer.
We do not think so.
The exercise of management prerogative is not unlimited. It is subject
to the limitations 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.
SO ORDERED.
39 | P a g e
G.R. No. 85073 August 24, 1993
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.
40 | P a g e
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 other
renumerations shall be excluded in computing the thirteenth month
pay.
In other words, whatever compensation an employee receives for an
eight-hour work daily or the daily wage rate in the basic salary. Any
compensation or remuneration other than the 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 regular holidays, are likewise excluded in
computing the basic salary for the purpose of determining the thirteen
month pay.
Petitioner claims that the mistake in the interpretation of "basic salary"
was caused by the opinions, orders and rulings rendered by then
Acting Labor Secretary Amado C. Inciong, 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 implementing rules, which speak only of "basis salary" as
the basis for determining the thirteenth month pay.
Moreover, whatever doubt arose in the interpretation of P.D. No. 851
was erased by the Supplementary Rules and Regulations which
clarified the definition of "basic salary."
As pointed out in San Miguel Corporation v. Inciong, (supra):
While doubt may have been created by the prior Rules and
Regulations and Implementing Presidential Decree 851 which defines
basic salary to include all remunerations or earnings paid by an
employer to an employee, this cloud is dissipated in the later and more
controlling Supplementary Rules and Regulations which categorically,
exclude from 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 now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of
the former rules to include all remunerations and earnings within the
definition of basic salary.
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 as early as January
16, 1976, barely one month after the effectivity of P.D. No. 851 and its
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 December 1981, after
promulgation of the afore-quoted San Miguel decision on February 24,
1981, when petitioner purportedly "discovered" its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously
included in the computation of its employees' thirteenth month pay, the
41 | P a g e
payments for sick, vacation and 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 indicates a unilateral and voluntary act on its
part, sufficient in itself to negate any claim of mistake.
A company practice favorable to the employees had indeed been
established and the payments made pursuant thereto, ripened into
benefits enjoyed by them. And any benefit 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
Regulations Implementing P.D. No. 851, and Article 100 of the labor
of the Philippines, which prohibit the diminution or elimination by the
employer of the employees' existing benefits (Tiangco v. Leogardo,
Jr., 122 SCRA 267, [1983]).
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 the obligor
whatever he received from the latter (Civil Code of the Philippines,
Arts. 2154 and 2155). Petitioner in the instant case, does not demand
the return of what it paid respondent ALU from 1975 until 1981; it
merely wants to "rectify" the error it made over these years by
excluding unilaterally from the thirteenth month pay in 1982 the items
subject of litigation. Solutio indebiti, therefore, is not applicable to the
instant case.
WHEREFORE, finding no grave abuse of discretion on the part of the
NLRC, the petition is hereby DISMISSED, and the questioned
decision of respondent NLRC is AFFIRMED accordingly.
Cruz, Griño-Aquino, Davide, Jr. and Bellosillo, JJ., concur.
G.R. No. 113856 September 7, 1998
SAMAHANG MANGGAGAWA SA TOP FORM
MANUFACTURING UNITED WORKERS OF THE PHILIPPINES
(SMTFM-UWP), its officers and members, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. JOSE G.
DE VERA and TOP FORM MANUFACTURING PHIL.,
INC., respondents.

ROMERO, J.:
The issue in this petition for certiorari is whether or not an employer
committed an unfair labor practice by bargaining in bad faith and
discriminating against its employees. The charge arose from the
employer's refusal to grant across-the-board increases to its employees
in implementing Wage Orders Nos. 01 and 02 of the Regional
Tripartite Wages and Productivity Board of the National Capital
Region (RTWPB-NCR). Such refusal was aggravated by the fact that
prior to the issuance of said wage orders, the employer allegedly
promised at the collective bargaining conferences to implement any
government-mandated wage increases on an across-the-board basis.
Petitioner Samahang Manggagawa sa Top Form Manufacturing —
United Workers of the Philippines (SMTFM) was the certified
collective bargaining representative of all regular rank and file
employees of private respondent Top Form Manufacturing Philippines,
Inc. At the collective bargaining negotiation held at the Milky Way
Restaurant in Makati, Metro Manila on February 27, 1990, the parties
agreed to discuss unresolved economic issues. According to the
minutes of the meeting, Article VII of the collective bargaining
agreement was discussed. The following appear in said Minutes:
Art. VII, Wages
Sect. 1. — Defer —
Sect. 2. Status quo
Sec. 3. Union proposed that any future wage increase given by the
government should be implemented by the company across-the-board
or non-conditional.
Management requested the union to retain this provision since their
sincerity was already proven when the P25.00 wage increase was
granted across-the-board. The union acknowledges management's
sincerity but they are worried that in case there is a new set of
management, they can just show their CBA. The union decided to
defer this provision. 1
In their joint affidavit dated January 30, 1992, 2 union members Salve
L. Barnes, Eulisa Mendoza, Lourdes Barbero and Concesa Ibañez
affirmed that at the subsequent collective bargaining negotiations, the
42 | P a g e
union insisted on the incorporation in the collective bargaining
agreement (CBA) of the union proposal on "automatic across-the-
board wage increase." They added that:
11. On the strength of the representation of the negotiating panel of the
company and the above undertaking/promise made by its negotiating
panel, our union agreed to drop said proposal relying on the
undertakings made by the officials of the company who negotiated
with us, namely, Mr. William Reynolds, Mr. Samuel Wong and Mrs.
Remedios Felizardo. Also, in the past years, the company has granted
to us government mandated wage increases on across-the-board basis.
On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01
granting an increase of P17.00 per day in the salary of workers. This
was followed by Wage Order No. 02 dated December 20, 1990
providing for a P12.00 daily increase in salary.
As expected, the union requested the implementation of said wage
orders. However, they demanded that the increase be on an across-the-
board basis. Private respondent refused to accede to that demand.
Instead, it implemented a scheme of increases purportedly to avoid
wage distortion. Thus, private respondent granted the P17.00 increase
under Wage Order No. 01 to workers/employees receiving salary of
P125.00 per day and below. The P12.00 increase mandated by Wage
Order No. 02 was granted to those receiving the salary of P140.00 per
day and below. For employees receiving salary higher than P125.00 or
P140.00 per day, private respondent granted an escalated increase
ranging from P6.99 to P14.30 and from P6.00 to P10.00,
respectively. 3
On October 24, 1991, the union, through its legal counsel, wrote
private respondent a letter demanding that it should "fulfill its pledge
of sincerity to the union by granting an across-the-board wage
increases (sic) to all employees under the wage orders." The union
reiterated that it had agreed to "retain the old provision of CBA" on the
strength of private respondent's "promise and assurance" of an across-
the-board salary increase should the government mandate salary
increases. 4 Several conferences between the parties notwithstanding,
private respondent adamantly maintained its position on the salary
increases it had granted that were purportedly designed to avoid wage
distortion.
Consequently, the union filed a complaint with the NCR NLRC
alleging that private respondent's act of "reneging on its
undertaking/promise clearly constitutes act of unfair labor practice
through bargaining in bad faith." It charged private respondent with
acts of unfair labor practices or violation of Article 247 of the Labor
Code, as amended, specifically "bargaining in bad faith," and prayed
that it be awarded actual, moral and exemplary damages.5 In its
position paper, the union added that it was charging private respondent
with "violation of Article 100 of the Labor Code." 6
Private respondent, on the other hand, contended that in implementing
Wage Orders Nos. 01 and 02, it had avoided "the existence of a wage
distortion" that would arise from such implementation. It emphasized
that only "after a reasonable length of time from the implementation"
of the wage orders "that the union surprisingly raised the question that
the company should have implemented said wage orders on an across-
the-board basis." It asserted that there was no agreement to the effect
that future wage increases mandated by the government should be
implemented on an across-the-board basis. Otherwise, that agreement
would have been incorporated and expressly stipulated in the CBA. It
quoted the provision of the CBA that reflects the parties' intention to
"fully set forth" therein all their agreements that had been arrived at
after negotiations that gave the parties "unlimited right and opportunity
to make demands and proposals with respect to any subject or matter
not removed by law from the area of collective bargaining." The same
CBA provided that during its effectivity, the parties "each voluntarily
and unqualifiedly waives the right, and each agrees that the other shall
not be obligated, to bargain collectively, with respect to any subject or
matter not specifically referred to or covered by this Agreement, even
though such subject or matter may not have been within the
knowledge or contemplation of either or both of the parties at the time
they negotiated or signed this Agreement." 7
On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision
dismissing the complaint for lack of merit. 8He considered two main
issues in the case: (a) whether or not respondents are guilty of unfair
labor practice, and (b) whether or not the respondents are liable to
implement Wage Orders Nos. 01 and 02 on an across-the-board basis.
43 | P a g e
Finding no basis to rule in the affirmative on both issues, he explained
as follows:
The charge of bargaining in bad faith that the complainant union
attributes to the respondents is bereft of any certitude inasmuch as
based on the complainant union's own admission, the latter vacillated
on its own proposal to adopt an across-the-board stand or future wage
increases. In fact, the union acknowledges the management's sincerity
when the latter allegedly implemented Republic Act 6727 on an
across-the-board basis. That such union proposal was not adopted in
the existing CBA was due to the fact that it was the union itself which
decided for its deferment. It is, therefore, misleading to claim that the
management undertook/promised to implement future wage increases
on an across-the-board basis when as the evidence shows it was the
union who asked for the deferment of its own proposal to that effect.
The alleged discrimination in the implementation of the subject wage
orders does not inspire belief at all where the wage orders themselves
do not allow the grant of wage increases on an across-the-board basis.
That there were employees who were granted the full extent of the
increase authorized and some others who received less and still others
who did not receive any increase at all, would not ripen into what the
complainants termed as discrimination. That the implementation of the
subject wage orders resulted into an uneven implementation of wage
increases is justified under the law to prevent any wage distortion.
What the respondents did under the circumstances in order to deter an
eventual wage distortion without any arbitral proceedings is certainly
commendable.
The alleged violation of Article 100 of the Labor Code, as amended, as
well as Article XVII, Section 7 of the existing CBA as herein earlier
quoted is likewise found by this Branch to have no basis in fact and in
law. No benefits or privileges previously enjoyed by the employees
were withdrawn as a result of the implementation of the subject orders.
Likewise, the alleged company practice of implementing wage
increases declared by the government on an across-the-board basis has
not been duly established by the complainants' evidence. The
complainants asserted that the company implemented Republic Act
No. 6727 which granted a wage increase of P25.00 effective July 1,
1989 on an across-the-board basis. Granting that the same is true, such
isolated single act that respondents adopted would definitely not ripen
into a company practice. It has been said that "a sparrow or two
returning to Capistrano does not a summer make."
Finally, on the second issue of whether or not the employees of the
respondents are entitled to an across-the-board wage increase pursuant
to Wage Orders Nos. 01 and 02, in the face of the above discussion as
well as our finding that the respondents correctly applied the law on
wage increases, this Branch rules in the negative.
Likewise, for want of factual basis and under the circumstances where
our findings above are adverse to the complainants, their prayer for
moral and exemplary damages and attorney's fees may not be granted.
Not satisfied, petitioner appealed to the NLRC that, in turn,
promulgated the assailed Resolution of April 29, 1993 9dismissing the
appeal for lack of merit. Still dissatisfied, petitioner sought
reconsideration which, however, was denied by the NLRC in the
Resolution dated January 17, 1994. Hence, the instant petition
for certiorari contending that:
-A-
THE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT
DECLARING THE PRIVATE RESPONDENTS GUILTY OF ACTS
OF UNFAIR LABOR PRACTICES WHEN, OBVIOUSLY, THE
LATTER HAS BARGAINED IN BAD FAITH WITH THE UNION
AND HAS VIOLATED THE CBA WHICH IT EXECUTED WITH
THE HEREIN PETITIONER UNION.
-B-
THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT
DECLARING THE PRIVATE RESPONDENTS GUILTY OF ACTS
OF DISCRIMINATION IN THE IMPLEMENTATION OF NCR
WAGE ORDER NOS. 01 AND 02.
-C-
THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT
FINDING THE PRIVATE RESPONDENTS GUILTY OF HAVING
VIOLATED SECTION 4, ARTICLE XVII OF THE EXISTING CBA.
-D-
THE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT
DECLARING THE PRIVATE RESPONDENTS GUILTY OF
44 | P a g e
HAVING VIOLATED ARTICLE 100 OF THE LABOR CODE OF
THE PHILIPPINES, AS AMENDED.
-E-
ASSUMING, WITHOUT ADMITTING THAT THE PUBLIC
RESPONDENTS HAVE CORRECTLY RULED THAT THE
PRIVATE RESPONDENTS ARE GUILTY OF ACTS OF UNFAIR
LABOR PRACTICES, THEY COMMITTED SERIOUS ERROR IN
NOT FINDING THAT THERE IS A SIGNIFICANT DISTORTION
IN THE WAGE STRUCTURE OF THE RESPONDENT
COMPANY.
-F-
THE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO
THE PETITIONERS HEREIN ACTUAL, MORAL, AND
EXEMPLARY DAMAGES AND ATTORNEY'S FEES.
As the Court sees it, the pivotal issues in this petition can be reduced
into two, to wit: (a) whether or not private respondent committed an
unfair labor practice in its refusal to grant across-the-board wage
increases in implementing Wage Orders Nos. 01 and 02, and (b)
whether or not there was a significant wage distortion of the wage
structure in private respondent as a result of the manner by which said
wage orders were implemented.
With respect to the first issue, petitioner union anchors its arguments
on the alleged commitment of private respondent to grant an automatic
across-the-board wage increase in the event that a statutory or
legislated wage increase is promulgated. It cites as basis therefor, the
aforequoted portion of the Minutes of the collective bargaining
negotiation on February 27, 1990 regarding wages, arguing
additionally that said Minutes forms part of the entire agreement
between the parties.
The basic premise of this argument is definitely untenable. To start
with, if there was indeed a promise or undertaking on the part of
private respondent to obligate itself to grant an automatic across-the-
board wage increase, petitioner union should have requested or
demanded that such "promise or undertaking" be incorporated in the
CBA. After all, petitioner union has the means under the law to
compel private respondent to incorporate this specific economic
proposal in the CBA. It could have invoked Article 252 of the Labor
Code defining "duty to bargain," thus, the duty includes "executing a
contract incorporating such agreements if requested by either party."
Petitioner union's assertion that it had insisted on the incorporation of
the same proposal may have a factual basis considering the allegations
in the aforementioned joint affidavit of its members. However, Article
252 also states that the duty to bargain "does not compel any party to
agree to a proposal or make any concession." Thus, petitioner union
may not validly claim that the proposal embodied in the Minutes of the
negotiation forms part of the CBA that it finally entered into with
private respondent.
The CBA is the law between the contracting parties 10 — the collective
bargaining representative and the employer-company. Compliance
with a CBA is mandated by the expressed policy to give protection to
labor. 11 In the same vein, CBA provisions should be "construed
liberally rather than narrowly and technically, and the courts must
place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose
which it is intended to serve." 12 This is founded on the dictum that a
CBA is not an ordinary contract but one impressed with public
interest. 13 It goes without saying, however, that only provisions
embodied in the CBA should be so interpreted and complied with.
Where a proposal raised by a contracting party does not find print in
the CBA, 14 it is not a part thereof and the proponent has no claim
whatsoever to its implementation.
Hence, petitioner union's contention that the Minutes of the collective
bargaining negotiation meeting forms part of the entire agreement is
pointless. The Minutes reflects the proceedings and discussions
undertaken in the process of bargaining for worker benefits in the
same way that the minutes of court proceedings show what transpired
therein. 15 At the negotiations, it is but natural for both management
and labor to adopt positions or make demands and offer proposals and
counter-proposals. However, nothing is considered final until the
parties have reached an agreement. In fact, one of management's usual
negotiation strategies is to ". . . agree tentatively as you go along with
the understanding that nothing is binding until the entire agreement is
reached." 16 If indeed private respondentpromised to continue with the
practice of granting across-the-board salary increases ordered by the
45 | P a g e
government, such promise could only be demandable in law if
incorporated in the CBA.
Moreover, by making such promise, private respondent may not be
considered in bad faith or at the very least, resorting to the scheme of
feigning to undertake the negotiation proceedings through empty
promises. As earlier stated, petitioner union had, under the law, the
right and the opportunity to insist on the foreseeable fulfillment of the
private respondent's promise by demanding its incorporation in the
CBA. Because the proposal was never embodied in the CBA, the
promise has remained just that, a promise, the implementation of
which cannot be validly demanded under the law.
Petitioner's reliance on this Court's pronouncements 17 in Kiok Loy v.
NLRC 18 is, therefore, misplaced. In that case, the employer refused to
bargain with the collective bargaining representative, ignoring all
notices for negotiations and requests for counter proposals that the
union had to resort to conciliation proceedings. In that case, the Court
opined that "(a) Company's refusal to make counter-proposal, if
considered in relation to the entire bargaining process, may indicate
bad faith and this is specially true where the Union's request for a
counter-proposal is left unanswered." Considering the facts of that
case, the Court concluded that the company was "unwilling to
negotiate and reach an agreement with the Union." 19
In the case at bench, however, petitioner union does not deny that
discussion on its proposal that all government-mandated salary
increases should be on an across-the-board basis was "deferred,"
purportedly because it relied upon the "undertaking" of the negotiating
panel of private respondent. 20 Neither does petitioner union deny the
fact that "there is no provision of the 1990 CBA containing a
stipulation that the company will grant across-the-board to its
employees the mandated wage increase." They simply assert that
private respondent committed "acts of unfair labor practices by virtue
of its contractual commitment made during the collective bargaining
process." 21 The mere fact, however, that the proposal in question was
not included in the CBA indicates that no contractual
commitmentthereon was ever made by private respondent as no
agreement had been arrived at by the parties. Thus:
Obviously the purpose of collective bargaining is the reaching of an
agreement resulting in a contract binding on the parties; but the failure
to reach an agreement after negotiations continued for a reasonable
period does not establish a lack of good faith. The statutes invite and
contemplate a collective bargaining contract, but they do not compel
one. The duty to bargain does not include the obligation to reach an
agreement. . . . 32
With the execution of the CBA, bad faith bargaining can no longer be
imputed upon any of the parties thereto. All provisions in the CBA are
supposed to have been jointly and voluntarily incorporated therein by
the parties. This is not a case where private respondent exhibited an
indifferent attitude towards collective bargaining because the
negotiations were not the unilateral activity of petitioner union. The
CBA is proof enough that private respondent exerted "reasonable
effort at good faith bargaining." 23
Indeed, the adamant insistence on a bargaining position to the point
where the negotiations reach an impasse does not establish bad faith.
Neither can bad faith be inferred from a party's insistence on the
inclusion of a particular substantive provision unless it concerns trivial
matters or is obviously intolerable. 24
The question as to what are mandatory and what are merely permissive
subjects of collective bargaining is of significance on the right of a
party to insist on his position to the point of stalemate. A party may
refuse to enter into a collective bargaining contract unless it includes a
desired provision as to a matter which is a mandatory subject of
collective bargaining; but a refusal to contract unless the agreement
covers a matter which is not a mandatory subject is in substance a
refusal to bargain about matters which are mandatory subjects of
collective bargaining, and it is no answer to the charge of refusal to
bargain in good faith that the insistence on the disputed clause was not
the sole cause of the failure to agree or that agreement was not reached
with respect to other disputed clauses. 25
On account of the importance of the economic issue proposed by
petitioner union, it could have refused to bargain and to enter into a
CBA with private respondent. On the other hand, private respondent's
firm stand against the proposal did not mean that it was bargaining in
bad faith. It had the right "to insist on (its) position to the point of
46 | P a g e
stalemate." On the part of petitioner union, the importance of its
proposal dawned on it only after the wage orders were issued after the
CBA had been entered into. Indeed, from the facts of this case, the
charge of bad faith bargaining on the part of private respondent was
nothing but a belated reaction to the implementation of the wage
orders that private respondent made in accordance with law. In other
words, petitioner union harbored the notion that its members and the
other employees could have had a better deal in terms of wage
increases had it relentlessly pursued the incorporation in the CBA of
its proposal. The inevitable conclusion is that private respondent did
not commit the unfair labor practices of bargaining in bad faith and
discriminating against its employees for implementing the wage orders
pursuant to law.
The Court likewise finds unmeritorious petitioner union's contention
that by its failure to grant across-the-board wage increases, private
respondent violated the provisions of Section 5, Article VII of the
existing CBA 26 as well as Article 100 of the Labor Code. The CBA
provision states:
Sec. 5. The COMPANY agrees to comply with all the applicable
provisions of the Labor Code of the Philippines, as amended, and all
other laws, decrees, orders, instructions, jurisprudence, rules and
regulations affecting labor.
Art. 100 of the Labor Code on prohibition against elimination or
diminution of benefits provides that "(n)othing in this Book shall be
construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this
Code."
We agree with the Labor Arbiter and the NLRC that no benefits or
privileges previously enjoyed by petitioner union and the other
employees were withdrawn as a result of the manner by which private
respondent implemented the wage orders. Granted that private
respondent had granted an across-the-board increase pursuant to
Republic Act No. 6727, that single instance may not be considered an
established company practice. Petitioner union's argument in this
regard is actually tied up with its claim that the implementation of
Wage Orders Nos. 01 and 02 by private respondent resulted in wage
distortion.
The issue of whether or not a wage distortion exists is a question of
fact 27 that is within the jurisdiction of the quasi-judicial tribunals
below. Factual findings of administrative agencies are accorded
respect and even finality in this Court if they are supported by
substantial evidence. 28 Thus, in Metropolitan Bank and Trust
Company, Inc. v. NLRC, the Court said:
The issue of whether or not a wage distortion exists as a consequence
of the grant of a wage increase to certain employees, we agree, is, by
and large, a question of fact the determination of which is the statutory
function of the NLRC. Judicial review of labor cases, we may add,
does not go beyond the evaluation of the sufficiency of the evidence
upon which the labor officials' findings rest. As such, the factual
findings of the NLRC are generally accorded not only respect but also
finality provided that its decisions are supported by substantial
evidence and devoid of any taint of unfairness or arbitrariness. When,
however, the members of the same labor tribunal are not in accord on
those aspects of a case, as in this case, this Court is well cautioned not
to be as so conscious in passing upon the sufficiency of the evidence,
let alone the conclusions derived
therefrom. 29
Unlike in above-cited case where the Decision of the NLRC was not
unanimous, the NLRC Decision in this case which was penned by the
dissenter in that case, Presiding Commissioner Edna Bonto-Perez
unanimously ruled that no wage distortions marred private
respondent's implementation of the wage orders. The NLRC said:
On the issue of wage distortion, we are satisfied that there was a
meaningful implementation of Wage Orders Nos. 01 and 02. This
debunks the claim that there was wage distortion as could be shown by
the itemized wages implementation quoted above. It should be noted
that this itemization has not been successfully traversed by the
appellants. . . . . 30
The NLRC then quoted the labor arbiter's ruling on wage distortion.
We find no reason to depart from the conclusions of both the labor
arbiter and the NLRC. It is apropos to note, moreover, that petitioner's
contention on the issue of wage distortion and the resulting allegation
of discrimination against the private respondent's employees are
anchored on its dubious position that private respondent's promise to
47 | P a g e
grant an across-the-board increase in government-mandated salary
benefits reflected in the Minutes of the negotiation is an enforceable
part of the CBA.
In the resolution of labor cases, this Court has always been guided by
the State policy enshrined in the Constitution that the rights of workers
and the promotion of their welfare shall be protected. 31 The Court is
likewise guided by the goal of attaining industrial peace by the proper
application of the law. It cannot favor one party, be it labor or
management, in arriving at a just solution to a controversy if the party
has no valid support to its claims. It is not within this Court's power to
rule beyond the ambit of the law.
WHEREFORE, the instant petition for certiorari is hereby
DISMISSED and the questioned Resolutions of the NLRC
AFFIRMED. No costs.
SO ORDERED.
[G.R. No. 155059. April 29, 2005]
AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES
UNION, petitioner, vs. AMERICAN WIRE AND CABLE CO., INC.
and THE COURT OF APPEALS, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a special civil action for certiorari, assailing the
Decision[1] of the Special Eighth Division of the Court of Appeals
dated 06 March 2002. Said Decision upheld the Decision[2] and
Order[3] of Voluntary Arbitrator Angel A. Ancheta of the National
Conciliation and Mediation Board (NCMB) dated 25 September 2001
and 05 November 2001, respectively, which declared the private
respondent herein not guilty of violating Article 100 of the Labor
Code, as amended. Assailed likewise, is the Resolution[4] of the Court
of Appeals dated 12 July 2002, which denied the motion for
reconsideration of the petitioner, for lack of merit.
THE FACTS
The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged in the
manufacture of wires and cables. There are two unions in this
company, the American Wire and Cable Monthly-Rated Employees
Union (Monthly-Rated Union) and the American Wire and Cable
Daily-Rated Employees Union (Daily-Rated Union).
On 16 February 2001, an original action was filed before the NCMB
of the Department of Labor and Employment (DOLE) by the two
unions for voluntary arbitration. They alleged that the private
respondent, without valid cause, suddenly and unilaterally withdrew
and denied certain benefits and entitlements which they have long
enjoyed. These are the following:
a. Service Award;
b. 35% premium pay of an employees basic pay for the work rendered
during Holy Monday, Holy Tuesday, Holy Wednesday, December 23,
26, 27, 28 and 29;
c. Christmas Party; and
d. Promotional Increase.
A promotional increase was asked by the petitioner for fifteen (15) of
its members who were given or assigned new job classifications.
According to petitioner, the new job classifications were in the nature
of a promotion, necessitating the grant of an increase in the salaries of
the said 15 members.
On 21 June 2001, a Submission Agreement was filed by the parties
before the Office for Voluntary Arbitration. Assigned as Voluntary
Arbitrator was Angel A. Ancheta.
On 04 July 2001, the parties simultaneously filed their respective
position papers with the Office of the Voluntary Arbitrator, NCMB,
and DOLE.
On 25 September 2001, a Decision[5] was rendered by Voluntary
Arbitrator Angel A. Ancheta in favor of the private respondent. The
dispositive portion of the said Decision is quoted hereunder:
WHEREFORE, with all the foregoing considerations, it is hereby
declared that the Company is not guilty of violating Article 100 of the
Labor Code, as amended, or specifically for withdrawing the service
award, Christmas party and 35% premium for work rendered during
Holy Week and Christmas season and for not granting any
promotional increase to the alleged fifteen (15) Daily-Rated Union
Members in the absence of a promotion. The Company however, is
directed to grant the service award to deserving employees in amounts
48 | P a g e
and extent at its discretion, in consultation with the Unions on grounds
of equity and fairness.[6]
A motion for reconsideration was filed by both unions[7] where they
alleged that the Voluntary Arbitrator manifestly erred in finding that
the company did not violate Article 100 of the Labor Code, as
amended, when it unilaterally withdrew the subject benefits, and when
no promotional increase was granted to the affected employees.
On 05 November 2001, an Order[8] was issued by Voluntary Arbitrator
Angel A. Ancheta. Part of the Order is quoted hereunder:
Considering that the issues raised in the instant case were meticulously
evaluated and length[i]ly discussed and explained based on the
pleadings and documentary evidenc[e] adduced by the contending
parties, we find no cogent reason to change, modify, or disturb said
decision.
WHEREFORE, let the instant MOTION[S] FOR
RECONSIDERATION be, as they are hereby, denied for lack of
merit. Our decision dated 25 September 2001 is affirmed en toto.[9]
An appeal under Rule 43 of the 1997 Rules on Civil Procedure was
made by the Daily-Rated Union before the Court of Appeals[10] and
docketed as CA-G.R. SP No. 68182. The petitioner averred that
Voluntary Arbitrator Angel A. Ancheta erred in finding that the
company did not violate Article 100 of the Labor Code, as amended,
when the subject benefits were unilaterally withdrawn. Further, they
assert, the Voluntary Arbitrator erred in adopting the companys
unaudited Revenues and Profitability Analysis for the years 1996-2000
in justifying the latters withdrawal of the questioned benefits.[11]
On 06 March 2002, a Decision in favor of herein respondent company
was promulgated by the Special Eighth Division of the Court of
Appeals in CA-G.R. SP No. 68182. The decretal portion of the
decision reads:
WHEREFORE, premises considered, the present petition is hereby
DENIED DUE COURSE and accordingly DISMISSED, for lack of
merit. The Decision of Voluntary Arbitrator Angel A. Ancheta dated
September 25, 2001 and his Order dated November 5, 2001 in VA
Case No. AAA-10-6-4-2001 are hereby AFFIRMED and UPHELD.[12]
A motion for reconsideration[13] was filed by the petitioner, contending
that the Court of Appeals misappreciated the facts of the case, and that
it committed serious error when it ruled that the unaudited financial
statement bears no importance in the instant case.
The Court of Appeals denied the motion in its Resolution dated 12
July 2002[14] because it did not present any new matter which had not
been considered in arriving at the decision. The dispositive portion of
the Resolution states:
WHEREFORE, the motion for reconsideration is hereby DENIED for
lack of merit.[15]
Dissatisfied with the court a quos ruling, petitioner instituted the
instant special civil action for certiorari,[16] citing grave abuse of
discretion amounting to lack of jurisdiction.
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:
I instant case to this Court through a petition for review
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
COMPANY DID NOT VIOLATE ARTICLE 100 OF THE LABOR
CODE, AS AMENDED, WHEN IT UNILATERALLY WITHDREW
THE BENEFITS OF THE MEMBERS OF PETITIONER UNION,
TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY AND
ITS INCIDENTAL BENEFITS; AND 3) SERVICE AWARD,
WHICH IN TRUTH AND IN FACT SAID
BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM SINCE
TIME IMMEMORIAL, AS A MATTER OF LONG ESTABLISHED
COMPANY PRACTICE, WITH THE FURTHER FACT THAT THE
SAME NOT BEING DEPENDENT ON PROFITS.
II
THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED
HOOK, LINE AND SINKER, THE RESPONDENT COMPANYS
SELF SERVING AND UNAUDITED REVENUES AND
PROFITABILITY ANALYSIS FOR THE YEARS 1996-2000
WHICH THEY SUBMITTED TO FALSELY JUSTIFY THEIR
UNLAWFUL ACT OF UNILATERALLY AND SUDDENLY
WITHDRAWING OR DENYING FROM THE PETITIONER THE
SUBJECT BENEFITS/ENTITLEMENTS.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
THE YEARLY SERVICE AWARD IS NOT DEPENDENT ON
49 | P a g e
PROFIT BUT ON SERVICE AND THUS, CANNOT BE
UNILATERALLY WITHDRAWN BY RESPONDENT COMPANY.
ISSUE
Synthesized, the solitary issue that must be addressed by this Court is
whether or not private respondent is guilty of violating Article 100 of
the Labor Code, as amended, when the benefits/entitlements given to
the members of petitioner union were withdrawn.
THE COURTS RULING
Before we address the sole issue presented in the instant case, it is best
to first discuss a matter which was raised by the private respondent in
its Comment. The private respondent contends that this case should
have been dismissed outright because of petitioners error in the mode
of appeal. According to it, the petitioner should have elevated the
on certiorari under Rule 45, and not through a special civil action
for certiorari under Rule 65, of the 1997 Rules on Civil Procedure.[17]
Assuming arguendo that the mode of appeal taken by the petitioner is
improper, there is no question that the Supreme Court has the
discretion to dismiss it if it is defective. However, sound policy
dictates that it is far better to dispose the case on the merits, rather than
on technicality.[18]
The Supreme Court may brush aside the procedural barrier and take
cognizance of the petition as it raises an issue of paramount
importance. The Court shall resolve the solitary issue on the merits for
future guidance of the bench and bar.[19]
With that out of the way, we shall now resolve whether or not the
respondent company is guilty of violating Article 100 of the Labor
Code, as amended.
Article 100 of the Labor Code provides:
ART. 100. PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this
Code.
The petitioner submits that the withdrawal of the private respondent of
the 35% premium pay for selected days during the Holy Week and
Christmas season, the holding of the Christmas Party and its incidental
benefits, and the giving of service awards violated Article 100 of the
Labor Code. The grant of these benefits was a customary practice that
can no longer be unilaterally withdrawn by private respondent without
the tacit consent of the petitioner. The benefits in question were given
by the respondent to the petitioner consistently, deliberately, and
unconditionally since time immemorial. The benefits/entitlements
were not given to petitioner due to an error in interpretation, or a
construction of a difficult question of law, but simply, the grant has
been a practice over a long period of time. As such, it cannot be
withdrawn from the petitioner at respondents whim and caprice, and
without the consent of the former. The benefits given by the
respondent cannot be considered as a bonus as they are not founded on
profit. Even assuming that it can be treated as a bonus, the grant of the
same, by reason of its long and regular concession, may be regarded as
part of regular compensation.[20]
With respect to the fifteen (15) employees who are members of
petitioner union that were given new job classifications, it asserts that
a promotional increase in their salaries was in order. Salary adjustment
is a must due to their promotion.[21]
On respondent companys Revenues and Profitability Analysis for the
years 1996-2000, the petitioner insists that since the former was
unaudited, it should not have justified the companys sudden
withdrawal of the benefits/entitlements. The normal and/or legal
method for establishing profit and loss of a company is through a
financial statement audited by an independent auditor.[22]
The petitioner cites our ruling in the case of Saballa v.
NLRC,[23] where we held that financial statements audited by
independent auditors constitute the normal method of proof of the
profit and loss performance of the company. Our ruling in the case
of Bogo-Medellin Sugarcane Planters Association, Inc., et al. v.
NLRC, et al.[24] was likewise invoked. In this case, we held:
The Court has previously ruled that financial statements audited by
independent external auditors constitute the normal method of proof of
the profit and loss performance of a company.
On the matter of the withdrawal of the service award, the petitioner
argues that it is the employees length of service which is taken as a
50 | P a g e
factor in the grant of this benefit, and not whether the company
acquired profit or not.[25]
In answer to all these, the respondent corporation avers that the grant
of all subject benefits has not ripened into practice that the employees
concerned can claim a demandable right over them. The grant of these
benefits was conditional based upon the financial performance of the
company and that conditions/circumstances that existed before have
indeed substantially changed thereby justifying the discontinuance of
said grants. The companys financial performance was affected by the
recent political turmoil and instability that led the entire nation to a
bleeding economy. Hence, it only necessarily follows that the
companys financial situation at present is already very much different
from where it was three or four years ago.[26]
On the subject of the unaudited financial statement presented by the
private respondent, the latter contends that the cases cited by the
petitioner indeed uniformly ruled that financial statements audited by
independent external auditors constitute the normal method of proof of
the profit and loss performance of a company. However, these cases
do not require that the only legal method to ascertain profit and loss is
through an audited financial statement. The cases only provide that an
audited financial statement is the normal method.[27]
The respondent company likewise asseverates that the 15 members of
petitioner union were not actually promoted. There was only a
realignment of positions.[28]
From the foregoing contentions, it appears that for the Court to resolve
the issue presented, it is critical that a determination must be first made
on whether the benefits/entitlements are in the nature of a bonus or
not, and assuming they are so, whether they are demandable and
enforceable obligations.
In the case of Producers Bank of the Philippines v. NLRC[29] we have
characterized what a bonus is, viz:
A bonus is an amount granted and paid to an employee for his industry
and loyalty which contributed to the success of the employers business
and made possible the realization of profits. It is an act of generosity
granted by an enlightened employer to spur the employee to greater
efforts for the success of the business and realization of bigger profits.
The granting of a bonus is a management prerogative, something given
in addition to what is ordinarily received by or strictly due the
recipient. Thus, a bonus is not a demandable and enforceable
obligation, except when it is made part of the wage, salary or
compensation of the employee.
Based on the foregoing pronouncement, it is obvious that the
benefits/entitlements subjects of the instant case are all bonuses which
were given by the private respondent out of its generosity and
munificence. The additional 35% premium pay for work done during
selected days of the Holy Week and Christmas season, the holding of
Christmas parties with raffle, and the cash incentives given together
with the service awards are all in excess of what the law requires each
employer to give its employees. Since they are above what is strictly
due to the members of petitioner-union, the granting of the same was a
management prerogative, which, whenever management sees
necessary, may be withdrawn, unless they have been made a part of
the wage or salary or compensation of the employees.
The consequential question therefore that needs to be settled is if the
subject benefits/entitlements, which are bonuses, are demandable or
not. Stated another way, can these bonuses be considered part of the
wage or salary or compensation making them enforceable obligations?
The Court does not believe so.
For a bonus to be enforceable, it must have been promised by the
employer and expressly agreed upon by the parties,[30] or it must have
had a fixed amount[31] and had been a long and regular practice on the
part of the employer.[32]
The benefits/entitlements in question were never subjects of any
express agreement between the parties. They were never incorporated
in the Collective Bargaining Agreement (CBA). As observed by the
Voluntary Arbitrator, the records reveal that these
benefits/entitlements have not been subjects of any express agreement
between the union and the company, and have not yet been
incorporated in the CBA. In fact, the petitioner has not denied having
made proposals with the private respondent for the service award and
the additional 35% premium pay to be made part of the CBA.[33]
The Christmas parties and its incidental benefits, and the giving of
cash incentive together with the service award cannot be said to have
fixed amounts. What is clear from the records is that over the years,
51 | P a g e
there had been a downtrend in the amount given as service
award.[34] There was also a downtrend with respect to the holding of
the Christmas parties in the sense that its location changed from paid
venues to one which was free of charge,[35] evidently to cut costs.
Also, the grant of these two aforementioned bonuses cannot be
considered to have been the private respondents long and regular
practice. To be considered a regular practice, the giving of the bonus
should have been done over a long period of time, and must be shown
to have been consistent and deliberate.[36] The downtrend in the grant
of these two bonuses over the years demonstrates that there is nothing
consistent about it. Further, as held by the Court of Appeals:
Anent the Christmas party and raffle of prizes, We agree with the
Voluntary Arbitrator that the same was merely sponsored by the
respondent corporation out of generosity and that the same is
dependent on the financial performance of the company for a
particular year[37]
The additional 35% premium pay for work rendered during selected
days of the Holy Week and Christmas season cannot be held to have
ripened into a company practice that the petitioner herein have a right
to demand. Aside from the general averment of the petitioner that this
benefit had been granted by the private respondent since time
immemorial, there had been no evidence adduced that it had been a
regular practice. As propitiously observed by the Court of Appeals:
. . . [N]otwithstanding that the subject 35% premium pay was
deliberately given and the same was in excess of that provided by the
law, the same however did not ripen into a company practice on
account of the fact that it was only granted for two (2) years and with
the express reservation from respondent corporations owner that it
cannot continue to rant the same in view of the companys current
financial situation.[38]
To hold that an employer should be forced to distribute bonuses which
it granted out of kindness is to penalize him for his past generosity.[39]
Having thus ruled that the additional 35% premium pay for work
rendered during selected days of the Holy Week and Christmas season,
the holding of Christmas parties with its incidental benefits, and the
grant of cash incentive together with the service award are all bonuses
which are neither demandable nor enforceable obligations of the
private respondent, it is not necessary anymore to delve into the
Revenues and Profitability Analysis for the years 1996-2000 submitted DECISION
by the private respondent.
On the alleged promotion of 15 members of the petitioner union that CALLEJO, SR., J.:
should warrant an increase in their salaries, the factual finding of the
Voluntary Arbitrator is revealing, viz: This is a Petition for Review on Certiorari of the Decision[1] of the
Considering that the Union was unable to adduce proof that a Court of Appeals (CA) in CA-G.R. SP No. 65171 ordering Pag-Asa
promotion indeed occur[ed] with respect to the 15 employees, the Steel Works, Inc. to pay the members of Pag-Asa Steel Workers Union
Daily Rated Unions claim for promotional increase likewise fall[s] (Union) the wage increase prescribed under Wage Order No. NCR-08.
there being no promotion established under the records at hand.[40] Also assailed in this petition is the CA Resolution denying the
WHEREFORE, in view of all the foregoing, the assailed Decision and corporations motion for reconsideration.
Resolution of the Court of Appeals dated 06 March 2002 and 12 July
2002, respectively, which affirmed and upheld the decision of the Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized
Voluntary Arbitrator, are hereby AFFIRMED. No pronouncement as and existing under Philippine laws and is engaged in the manufacture
to costs. of steel bars and wire rods. Pag-Asa Steel Workers Union is the duly
SO ORDERED. authorized bargaining agent of the rank-and-file employees of
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, petitioner.
JJ., concur.
On January 8, 1998, the Regional Tripartite Wages and Productivity
PAG-ASA STEEL WORKS, INC., G.R. No. 166647 Board (Wage Board) of the National Capital Region (NCR) issued
Petitioner, Wage Order No. NCR-06.[2] It provided for an increase of P13.00 per
day in the salaries of employees receiving the minimum wage, and a
Present: consequent increase in the minimum wage rate to P198.00 per day.
- versus - PANGANIBAN, C.J., Petitioner and the Union negotiated on how to go about the wage
Chairperson, adjustments. Petitioner forwarded a letter[3] dated March 10, 1998 to
YNARES-SANTIAGO, the Union with the list of the salary adjustments of the rank-and-file
AUSTRIA-MARTINEZ. employees after the implementation of Wage Order No. NCR-06, and
CALLEJO, SR., and the notation that said adjustments [were] in accordance with the
COURT OF APPEALS, FORMER CHICO-NAZARIO, JJ. formula [they] have discussed and [were] designed so as no distortion
SIXTH DIVISION and PAG-ASA shall result from the implementation of Wage Order No. NCR-06.
STEEL WORKERS UNION (PSWU), Promulgated:
Respondent. DATE PRESE ADJUS NEW
March 31, 2006 NT T
NAME REGUL RATE EFF 2/6 RATE
x------------------------------------------------------------------------------------ AR /98
-----x 1. PEPINO 08.01.97 191.00 13.00 204.0
EMMANUEL 0
52 | P a g e
 2. SEVANDRA 01.17.98 192.00 13.00 205.0 FONDADOR 0
RODOLFO 0 22. RODA GEORGE 10.11.95 246.00 10.00 256.0
3. BERNABE 10.24.97 200.00 13.00 213.0 0
ALFREDO 0 23. RIOJA JOSEPH 12.28.95 246.00 10.00 256.0
4. UMBAL ADOLFO 08.18.97 215.00 12.00 227.0 0
0 24. RAYMUNDO 06.05.96 246.00 10.00 256.0
5. AQUINO JONAS 08.25.97 215.00 12.00 227.0 ANTONIO 0
0 25. BUGTAI 04.10.96 246.00 10.00 256.0
6. AGCAOILI JAIME 01.08.98 220.00 11.00 231.0 ROBERTO 0
0 26. RELATO 07.07.96 265.00 10.00 275.0
7. BERMEJO JIMMY 04.01.97 221.00 11.00 232.0 RAMON 0
JR. 0 27. REGACHUELO 11.30.95 265.00 10.00 275.0
8. EDRADAN 04.17.97 221.00 11.00 232.0 DENNIS 0
ELDEMAR P. 0 28. ORNOPIA 08.09.94 268.00 10.00 278.0
9. REBOTON 05.14.97 221.00 11.00 232.0 REYNALDO 0
RONILO 0 29. PULPULAAN 01.18.96 275.00 10.00 285.0
10. TABAOG 04.10.97 221.00 11.00 232.0 JAIME 0
ALBERT 0 30. PANLAAN 01.18.96 275.00 10.00 285.0
11. SALEN 02.10.97 221.00 11.00 232.0 FERDINAND 0
EDILBERTO 0 31.BAGASBAS 01.18.96 275.00 10.00 285.0
13. PAEZ 02.27.97 235.00 11.00 246.0 EULOGIO JR. 0
REYNALDO . 0 32. ALEJANDRO 12.03.95 275.00 10.00 285.0
14. HERNANDEZ 03.23.96 246.00 10.00 256.0 OLIVER 0
ALFREDO 0 33. PRIELA DANILO 11.30.95 280.00 10.00 290.0
15. BANIA LUIS JR. 12.08.95 246.00 10.00 256.0 0
0 34. NOBELJAS 07.10.95 283.00 10.00 293.0
16. MAGBOO 05.25.96 246.00 10.00 256.0 EDGAR 0
VICTOR 0 35. SAJOT RONNIE 10.02.93 288.00 10.00 298.0
17. NINORA 03.22.96 246.00 10.00 256.0 0
BONIFACIO 0 36. WHITING JOEL 09.30.93 288.00 10.00 298.0
18. ALANCADO 11.10.95 246.00 10.00 256.0 0
RODERICK 0 37. SURINGA 12.19.93 288.00 10.00 298.0
19. PUTONG 06.23.96 246.00 10.00 256.0 FRANKLIN 0
PASCUAL 0 38. SIBOL 12.11.93 288.00 10.00 298.0
20. PAR EULOGIO 08.16.95 246.00 10.00 256.0 MICHAEL 0
JR. 0 39. SOLO JOSE 02.20.94 288.00 10.00 298.0
21. SALON 11.16.95 246.00 10.00 256.0 0
53 | P a g e
 40. TIZON JOEL 12.23.93 288.00 10.00 298.0 58. DOROL ERWIN 09.16.93 288.00 10.00 298.0
0 0
41. SABATIN 04.19.94 288.00 10.00 298.0 59. CURAMBAO 09.23.93 288.00 10.00 298.0
GILBERT 0 TIRSO 0
42. REYES 04.14.94 288.00 10.00 298.0 60. VENTURA FERD 09.20.94 292.00 10.00 302.0
RONALDO 0 INAND 0
43. AMANIA 01.06.94 288.00 10.00 298.0 61. ALBANO JESUS 01.06.94 297.00 10.00 307.0
WILFREDO 0 0
44. QUIDATO 12.12.93 288.00 10.00 298.0 62. CALLEJA 05.10.93 303.00 10.00 313.0
ARISTON 0 JOSEPH 0
45. LAROGA 10.13.93 288.00 10.00 298.0 63. PEREZ DANILO 03.01.93 303.00 10.00 313.0
CLAUDIO JR. 0 0
46. MORALES LUIS 09.30.93 288.00 10.00 298.0 64. BATOY ERNIE 06.15.93 305.00 10.00 315.0
0 0
47. ANTOLO 12.26.93 288.00 10.00 298.0 65. SAMPAGA 06.07.93 307.00 10.00 317.0
DANILO 0 EDGARDO 0
48. EXMUNDO 05.13.94 288.00 10.00 298.0 66. SOLON 05.10.94 315.00 10.00 325.0
HERCULES 0 ROBINSON 0
49. AMPER 08.02.93 288.00 10.00 298.0 67. ELEDA 06.07.93 322.00 10.00 332.0
VALENTINO 0 FULGENIO 0
50. BAYO-ANG 07.14.93 288.00 10.00 298.0 68. CASCARA 06.07.93 322.00 10.00 332.0
ALDEN JR. 0 RODRIGO 0
51. BASCONES 02.26.94 288.00 10.00 298.0 69. ROMANOS 06.07.93 322.00 10.00 332.0
NELSON 0 ARNULFO 0
52. DECENA 09.18.93 288.00 10.00 298.0 70. LUMANSOC 06.07.93 322.00 10.00 332.0
LAURO 0 MARIANO 0
53. CHUA 10.20.93 288.00 10.00 298.0 71. RAMOS 06.07.93 322.00 10.00 332.0
MARLONITO 0 GRACIANO 0
54. CATACUTAN 03.02.94 288.00 10.00 298.0 72. MAZON 07.24.90 330.00 10.00 340.0
JUNE 0 NESTOR 0
55.DE 12.23.93 288.00 10.00 298.0 73. BRIN LUCENIO 07.26.90 330.00 10.00 340.0
LOS SANTOS REYN 0 0
ALDO 74. SE FREDIE 03.25.90 340.00 10.00 350.0
56. REYES EFREN 10.23.93 288.00 10.00 298.0 0
0 75. RONCALES 04.30.90 340.00 10.00 350.0
57. CAGOMOC 01.13.94 288.00 10.00 298.0 DIOSDADO 0
DANILO 0 76. DISCAYA 09.06.89 340.00 10.00 350.0
54 | P a g e
 EDILBERTO 0 95. FULGUERAS 01.25.87 362.00 10.00 372.0
77. SUAREZ 06.10.92 347.00 10.00 357.0 DOMINGO 0
LUISTO 0 96. ZIPAGAN 02.07.84 370.00 10.00 380.0
78. CASTRO PEDRO 10.30.92 348.00 10.00 358.0 NELSON 0
0 97. LAURIO JESUS 06.01.82 371.00 10.00 381.0
79. CLAVECILLA 09.09.88 351.00 10.00 361.0 0
AMBROSIO 0 98. ACASIO PEDRO 11.21.79 372.00 10.00 382.0
80. YSON ROMEO 09.11.88 351.00 10.00 361.0 0
0 99. MACALISANG 02.01.88 372.00 10.00 382.0
81. JUMAWAN 12.20.87 354.00 10.00 364.0 EPIFANIO 0
URBANO JR. 0 100. OFILAN 03.12.79 374.50 10.00 384.5
82. MARASIGAN 05.20.88 354.00 10.00 364.0 ANTONIO 0
GRACIANO 0 101. SEVANDRA 05.02.69 374.50 10.00 384.5
83. MAGLENTE 09.03.87 354.00 10.00 364.0 ALFREDO 0
ROLANDO 0 102. VILLAMER 11.04.81 374.50 10.00 384.5
84. NEBRIA CALIX 02.25.88 354.00 10.00 364.0 JOEY 0
0 103. GRIPON GIL 01.17.76 374.75 10.00 384.7
85. BARBIN 09.03.87 354.00 10.00 364.0 5
DANIEL 0 104. CARLON 04.17.87 375.00 10.00 385.0
86. CAMAING 12.22.87 354.00 10.00 364.0 HERMINIGILDO, 0
CARLITO 0 JR.
87. BUBAN 10.22.87 354.00 10.00 364.0 105. MANLABAO 04.14.81 375.00 10.00 385.0
JONATHAN 0 HEROHITO 0
88. GUEVARRA 10.04.87 354.00 10.00 364.0 106. VILLANUEVA 12.01.77 375.50 10.00 385.5
ARNOLD 0 DOMINGO 0
89. MALAPO 08.04.87 354.00 10.00 364.0 107. APITAN 09.04.79 376.00 10.00 386.0
MARCOS JR. 0 NAZARIO 0
90. ZUNIEGA 02.19.88 354.00 10.00 364.0 108. SALAMEDA 02.13.79 377.00 10.00 387.0
CARLOS 0 EDUARDO 0
91. SABORNIDO 12.20.87 354.00 10.00 364.0 109. ARNALDO 05.02.69 378.50 10.00 388.5
JULITO 0 LOPE 0
92. DALUYO 04.02.88 354.00 10.00 364.0 110. SURIGAO 12.29.79 379.00 10.00 389.0
LOTERIO 0 HERNANDO 0
93. AGUILLON 05.27.87 359.00 10.00 369.0 111. DE LA CRUZ 07.14.76 379.00 10.00 389.0
GRACIANO 0 CHARLIE 0
94. CRISTY 04.06.87 359.50 10.00 369.5 112. ROSAURO 07.15.76 379.50 10.00 389.5
EMETERIO 0 JUAN 0
55 | P a g e
 113 HILOTIN 10.10.77 383.00 10.00 393.0 NAME WAGE NAME WAGE
ARLEN 0[4] 1. Pedro Acasio P427.00 53. Nestor P385.00
Mazon
On September 23, 1999, petitioner and the Union entered into a 2. Roderick Alancado 301.00 54. Luis 343.00
Collective Bargaining Agreement (CBA), effective July 1, Morales
1999 until July 1, 2004. Section 1, Article VI (Salaries and Wage) of 3. Jesus Albano 352.00 55. Calix 409.00
said CBA provides: Nebria
4. Oliver Alejandro 330.00 56. Bonifacio 301.00
Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant Ninora Jr.
all the workers, who are already regular and covered by 5. Welfredo Amania 343.00 57. Edgar 338.00
this AGREEMENT at the effectivity of this AGREEMENT, a general Noblejas
wage increase as follows: 6. Valentino Amper 343.00 58. Antonio 429.50
Ofilan
July 1, 1999 . . . . . . . . . . . P15.00 per day per employee 7. Danilo Antolo 343.00 59. Reynaldo 323.00
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee Ornopia
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee 8. Nazario Apitan 431.00 60. Reynaldo 291.00
Paez
The aforesaid wage increase shall be implemented across the board. 9. Jonas Aquino 272.00 61. Ferdinand 330.00
Any Wage Order to be implemented by the Regional Tripartite Wage Panlaan
and Productivity Board shall be in addition to the wage increase 10. Eulogio Bagasbas, 330.00 62. Eulogio 301.00
adverted to above. However, if no wage increase is given by the Wage Jr. Par Jr.
Board within six (6) months from the signing of this AGREEMENT, 11. Luis Bania, Jr. 301.00 63. Marvin 223.00
the Management is willing to give the following increases, to wit: Peco
12. Daniel Barbin 409.00 64. Emmanuel 249.00
July 1, 1999 . . . . . . . . . . . P20.00 per day per employee Pepino
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee 13. Nelson Bascones 343.00 65. Danilo 358.00
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee Perez
14. Alden Bayo-ang, 343.00 66. Jaime 330.00
The difference of the first year adjustment to retroact to July 1, 1999. Jr. Pulpulaan
15. Jimmy Bermejo 277.00 67. Ariston 343.00
th th
The across-the-board wage increase for the 4 and 5 year of Quidato
this AGREEMENT shall be subject for a re-opening or renegotiation 16. Alfredo Bernabe 258.00 68. Graciano 377.00
as provided for by Republic Act No. 6715.[5] Ramos Jr.
17. Lucenio Brin 385.00 69. Antonio 301.00
For the first year of the CBAs effectivity, the salaries of Union Raymundo
members were increased as follows: 18. Jonathan Buban 409.00 70. Ronilo 277.00
Reboton
56 | P a g e
 19. Roberto Bugtai 301.00 71. Ramon 320.00 38. Domingo 417.00 90. Hernando 434.00
Relato Fulgueras Surigao
20. Danilo Cagomoc 343.00 72. Efren 343.00 39. Federico Garcia 277.00 91. Franklin 343.00
Reyes Suringa
21. Joseph Calleja 358.00 73. Ronaldo 343.00 40. Gil Gripon 429.75 92. Albert 277.00
Reyes Tabaog
22. Carlito Camaing 409.00 74. Joseph 301.00 41. Arnold Guevarra 409.00 93. Joel Tizon 343.00
Rioja 42. Arlen Hilotin 438.00 94. Alfredo 272.00
23. Hermenigildo 430.00 75. George 301.00 Umbal
Carlon, Jr. Roda 43. Urbano Jumawan, 409.00 95. Ferdinand 347.00
24. June Catacutan 343.00 76. Diosdado 395.00 Jr. Ventura
Roncales 44. Ronilo Lacandoze 265.00 96. Joey 429.50
25. Marlonito Chua 343.00 77. Gilbert 343.00 Villamer
Sabatin 45. Claudio Laroga, 343.00 97.Domingo 430.50
26. Ambrocio 406.00 78. Julito 409.00 Jr. Villanueva
Clavecilla Sabornido 46. Jesus Laurio 426.00 98. Joel 343.00
27. Emeterio Cristy 414.50 79. Ronnie 343.00 Whiting
Sajot 47. Mariano 377.00 99. Romeo 406.00
28. Tirso Curambao 343.00 80. Eduardo 432.00 Lumansoc Yson
Salameda 48. Victor Magboo 301.00 100. Carlos 409.00
29. Loterio Daluyo 409.00 81. Edilberto 277.00 Zuniega
Salen 49. Rolando Maglente 409.00 101. Nelson 425.00
30. Lauro Decena 343.00 82. Fundador 301.00 Zipagan
Salon 50. Marcos Malapo 409.00 102. Michael 343.00
31. Charlie dela Cruz 434.00 83. Edgar 362.00 Jr. Sibol
Sampaga 51. Herohito 430.00 103. Renante 223.00
32. Raynaldo 343.00 84. Fredie Se 395.00 Manlabao Tangian
delos Santos 52. Graciano 409.00 104. Rodrigo 377.00[6]
33. Edilberto Discaya 395.00 85. Rodolfo 250.00 Marasigan Cascara
Sevandra
34. Erwin Dorol 343.00 86. Jose Solo 343.00 On October 14, 1999, Wage Order No. NCR-07[7] was issued, and
35. Eldemar Edradan 277.00 87. Robinson 370.00 on October 26, 1999, its Implementing Rules and Regulations. It
Solon provided for a P25.50 per day increase in the salary of employees
36. Fulgencio Eleda 377.00 88. Luisito 402.00 receiving the minimum wage and increased the minimum wage
Suarez to P223.50 per day. Petitioner paid the P25.50 per day increase to all
37. Hercules 343.00 89. Jeriel 223.00 of its rank-and-file employees.
Exmundo Suico
57 | P a g e
On July 1, 2000, the rank-and-file employees were granted the second
year increase provided in the CBA in the amount of P25.00 per day.[8]
On November 1, 2000, Wage Order No. NCR-08[9] took effect.
Section 1 thereof provides:
Section 1. Upon the effectivity of this Wage Order, private sector
workers and employees in the National Capital Region receiving the
prescribed daily minimum wage rate of P223.50 shall receive an
increase of TWENTY SIX PESOS and FIFTY CENTAVOS
(P26.50) per day, thereby setting the new minimum wage rate in the
National Capital Region at TWO HUNDRED FIFTY PESOS
(P250.00) per day.[10]
Then Union president Lucenio Brin requested petitioner to implement
the increase under Wage Order No. NCR-08 in favor of the companys
rank-and-file employees. Petitioner rejected the request, claiming that
since none of the employees were receiving a daily salary rate lower
than P250.00 and there was no wage distortion, it was not obliged to
grant the wage increase.
The Union elevated the matter to the National Conciliation and
Mediation Board. When the parties failed to settle, they agreed to refer
the case to voluntary arbitration. In the Submission Agreement, the
parties agreed that the sole issue is [w]hether or not the management is
obliged to grant wage increase under Wage Order No. NCR #8 as a
matter of practice,[11] and that the award of the Voluntary Arbitrator
(VA) shall be final and binding.[12]
In its Position Paper, the Union alleged that it has been the companys
practice to grant a wage increase under a government-issued wage
order, aside from the yearly wage increases in the CBA. It averred that
petitioner paid the salary increases provided under the previous wage
orders in full (aside from the yearly CBA increases), regardless of
whether there was a resulting wage distortion, or whether Union
members salaries were above the minimum wage rate. Wage Order
58 | P a g e
No. NCR-06, where rank-and-file employees were given different
wage increases ranging from P10.00 to P13.00, was an exception since
the adjustments were the result of the formula agreed upon by
the Union and the employer after negotiations. The Union averred that
all of their CBAs with petitioner had a collateral agreement where
petitioner was mandated to pay the equivalent of the wage orders
across-the-board, or at least to negotiate how much will be paid. It
pointed out that an established practice cannot be discontinued without
running afoul of Article 100 of the Labor Code on non-diminution of
benefits.[13]
For its part, petitioner alleged that there is no such company practice
and that it complied with the previous wage orders (Wage Order Nos.
NCR-01-05) because some of its employees were receiving wages
below the minimum prescribed under said orders. As for Wage Order
No. NCR-07, petitioner alleged that its compliance was in accordance
with its verbal commitment to the Union during the CBA negotiations
that it would implement any wage order issued in 1999. Petitioner
further averred that it applied the wage distortion formula prescribed
under Wage Order Nos. NCR-06 and NCR-07 because an actual
distortion occurred as a result of their implementation. It asserted that
at present, all its employees enjoy regular status and that none receives
a daily wage lower than the P250.00 minimum wage rate prescribed
under Wage Order No. NCR-08.[14]
In reply to the Unions position paper, petitioner contended that the full
implementation of the previous wage orders did not give rise to a
company practice as it was not given to the workers within the
bargaining unit on a silver platter, but only per request of
the Union and after a series of negotiations. In fact, during CBA
negotiations, it steadfastly rejected the following proposal of
the Unions counsel, Atty. Florente Yambot, to include an across-the-
board implementation of the wage orders:[15]
x x x To supplement the above wage increases, the parties agree that
additional wage increases equal to the wage orders shall be paid
across-the-board whenever the Regional Tripartite Wage and
Productivity Board issues wage orders. It is understood that these
additional wage increases will be paid not as wage orders but as agreed
additional salary increases using the wage orders merely as a device to
fix or determine how much the additional wage increases shall be
paid.[16]
The Union, however, insisted that there was such a company practice.
It pointed out that despite the fact that all the employees were already
receiving salaries above the minimum wage, the CBA still provided
for the payment of a wage increase using wage orders as the
yardstick. It claimed that the parties intended that petitioner-employer
would pay the additional increases apart from those in the
CBA.[17]The Union further asserted that the CBA did not include all
the agreements of the parties; hence, to determine the true intention of
the parties, parol evidence should be resorted to. Thus, Atty. Yambots
version of the wage adjustment provision should be considered.[18]
On June 6, 2001, the VA rendered judgment in favor of the company
and ordered the case dismissed.[19] It held that there was no company
practice of granting a wage order increase to employees across-the-
board, and that there is no provision in the CBA that would oblige
petitioner to grant the wage increase under Wage Order No. NCR08
across-the-board.[20]
The Union filed a petition for review with the CA under Rule 43 of the
Rules of Court. It defined the issue for resolution as follows:
The principal issue in the present petition is whether or not the wage
increase of P26.50 under Wage Order No. NCR-08 must be paid to the
union members as a matter of practice and whether or not parol
evidence can be resorted to in proving or explaining or elucidating the
existence of a collateral agreement/company practice for the payment
of the wage increase under the wage order despite that the employees
were already receiving wages way above the minimum wage
59 | P a g e
of P250.00/day as prescribed by Wage Order No. NCR-08 and
irrespective of whether wage distortion exists.[21]
On September 23, 2004, the CA rendered judgment in favor of
the Union and reversed that of the VA. The fallo of the decision reads:
WHEREFORE, the assailed Decision dated June 6, 2001 of public
respondent Voluntary Arbitrator is REVERSED and SET ASIDE.
Private respondent Pag-Asa Steel Works, Inc. is ordered to pay the
members of the petitioner union the P26.50 daily wage by applying the
wage increase prescribed under Wage Order No. NCR-08. Costs
against private respondent.
SO ORDERED.[22]
The CA stressed that the CBA constitutes the law between the
employer and the Union. It held that the CBA is plain and clear, and
leaves no doubt as to the intention of the parties, that is, to grant a
wage increase that may be ordered by the Wage Board in addition to
the CBA-mandated salary increases regardless of whether the
employees are already receiving wages way above the minimum wage.
The appellate court further held that
the employer has no valid reason not to implement the wage increase
mandated by Wage Order No. NCR-08 because prior thereto, it had
been paying the wage increase provided for in the CBA even though
the employees concerned were already receiving wages way above the
applicable minimum wage.[23] Petitioner filed a motion for
reconsideration which the CA denied for lack of merit on January 11,
2005.[24]
Petitioner then filed the instant petition in which it raises the following
issues:
I. WHETHER THE HONORABLE COURT OF APPEALS
COMMITTED A GRAVE REVERSIBLE ERROR IN NOT
FINDING THAT THE INCREASES PROVIDED FOR UNDER
WAGE ORDER NO. 8 CANNOT BE DEMANDED AS A MATTER
OF RIGHT BY THE RESPONDENT UNDER THE 1999 CBA, in
that:
a) Issue not averred in the complaint nor raised during the trial
cannot be raised for the first time on appeal; and
b) The Rules of Statutory Construction, in relation to Article 1370
and 1374 of the New Civil Code, as well as Section 11 of the Rules of
Court, requires that contract must be read in its entirety and the various
stipulations in a contract must be read together to give effect to all.
II. WHETHER THE HONORABLE COURT OF APPEALS
COMMITTED A GRAVE REVERSIBLE ERROR IN NOT
FINDING THAT THE INCREASES PROVIDED FOR UNDER
WAGE ORDER NO. 8 CANNOT BE DEMANDED BY THE
RESPONDENT UNION AS A MATTER OF PRACTICE.[25]
Petitioner points out that the only issue agreed upon during the
voluntary arbitration proceedings was whether or not the company was
obliged to grant the wage increase under Wage Order No. NCR-08 as
a matter of practice. It posits that the respondent did not anchor its
claim for such wage increase on the CBA but on an alleged company
practice of granting the increase pursuant to a wage order. According
to petitioner, respondent Union changed its theory on appeal when it
claimed before the CA that the CBA is ambiguous.[26] Petitioner
contends that respondent Union was precluded from raising this issue
as it was not raised during the voluntary arbitration. It insists that an
issue cannot be raised for the first time on appeal.[27]
Petitioner further argues that there is no ambiguity in the CBA. It avers
that Section 1, Article VI of the CBA should be read in its
entirety.[28] From the said provision, it is clear that the CBA
contemplated only the implementation of a wage order issued within
six months from the execution of the CBA, and not every wage order
issued during its effectivity. Hence, petitioner complied with Wage
Order No. NCR-07 which was issued 28 days from the execution of
the CBA. Petitioner emphasizes that this was implemented not because
60 | P a g e
it was a matter of practice but because it was agreed upon in the
CBA.[29] It alleges that respondent Union in fact realized that it could
not invoke the provisions of the CBA to enforce Wage Order No.
NCR-08, which is why it agreed to limit the issue for voluntary
arbitration to whether respondent Union is entitled to the wage
increase as a matter of practice. The fact that the Yambot proposals
were left out in the final document simply means that the parties never
agreed to them.[30]
In any case, petitioner avers that respondent Union is not entitled to
the wage increase provided under Wage Order No. NCR-08 as a
matter of practice. There is no company practice of granting a wage-
order-mandated increase in addition to the CBA-mandated wage
increase. It points out that, as admitted by respondent Union, the
previous wage orders were not automatically implemented and were
made applicable only after negotiations. Petitioner argues that the
previous wage orders were implemented because at that time, some
employees were receiving salaries below the minimum wage and the
resulting wage distortion had to be remedied.[31]
For its part, respondent Union avers that the provision [a]ny Wage
Order to be implemented by the Regional Tripartite Wage and
Productivity Board shall be in addition to the wage increase adverted
to above referred to a company practice of paying a wage increase
whenever the government issues a wage order even if the employees
salaries were above the minimum wage and there is no resulting wage
distortion. According to respondent, the CBA contemplated all the
salary increases that may be mandated by wage orders to be issued in
the future. Since the wage order was only a device to determine
exactly how much and when the increase would be given, these
increases are, in effect, CBA-mandated and not wage order
increases. [32] Respondent further avers that the ambiguity in the wage
adjustment provision of the CBA can be clarified by resorting to parol
evidence, that is, Atty. Yambots version of said provision.[33]
The petition is meritorious. We rule that petitioner is not obliged to
grant the wage increase under Wage Order No. NCR-08 either by
virtue of the CBA, or as a matter of company practice.
On the procedural issue, well-settled is the rule, also applicable in
labor cases, that issues not raised below cannot be raised for the first
time on appeal.[34] Points of law, theories, issues and arguments not
brought to the attention of the lower court need not be, and ordinarily
will not be, considered by the reviewing court, as they cannot be raised
for the first time at that late stage. Basic considerations of due process
impel this rule.[35]
We agree with petitioners contention that the issue on the ambiguity of
the CBA and its failure to express the true intention of the parties has
not been expressly raised before the voluntary arbitration
proceedings. The parties specifically confined the issue for resolution
by the VA to whether or not the petitioner is obliged to grant an
increase to its employees as a matter of practice. Respondent did not
anchor its claim for an across-the-board wage increase under Wage
Order No. NCR-08 on the CBA. However, we note that it raised
before the CA two issues, namely:
x x x whether or not the wage increase of P26.50 under Wage Order
No. NCR-08 must be paid to the union members as a matter of practice
and whether or not parol evidence can be resorted to in proving or
explaining or elucidating the existence of a collateral
agreement/company practice for the payment of the wage increase
under the wage order despite that the employees were already
receiving wages way above the minimum wage of P250.00/day as
prescribed by Wage Order No. NCR-08 and irrespective of whether
wage distortion exists.[36]
Petitioner, in its Comment on the petition, delved into these issues and
elaborated on its contentions. By so doing, it thereby agreed for the
CA to take cognizance of such issues as defined by respondent
(petitioner therein). Moreover, a perusal of the records shows that the
issue of whether or not the CBA is ambiguous and does not reflect the
61 | P a g e
true agreement of the parties was, in fact, raised before the voluntary
arbitration proceedings. Despite the submission agreement confining
the issue to whether petitioner was obliged to grant an increase
pursuant to Wage Order No. NCR-08 as a matter of practice,
respondent Union nevertheless raised the same issues in its
pleadings. In its Position Paper, it asserted that the CBA consistently
contained a collateral agreement to pay the equivalent of the wage
orders across-the-board; in its Reply, it claimed that such provision
clearly provided that petitioner would pay the additional increases
apart from the CBA and that the wage order serves only as a measure
of said increase. These assertions indicate that respondent Union also
relied on the CBA to support its claim for the wage increase.
Central to the substantial issue is Article VI, Section I, of the CBA of
the parties, dated September 23, 1999, viz:
SALARIES AND WAGE
Section 1. WAGE ADJUSTMENT The COMPANY agrees to grant to
all workers who are already regular and covered by this
AGREEMENT at the effectivity of this AGREEMENT a general wage
increase as follows:
July 1, 1999 . P15.00 per day per employee
July 1, 2000 . P25.00 per day per employee
July 1, 2001 . P 30.00 per day per employee
The aforesaid wage increase shall be implemented across the
board. Any Wage Order to be implemented by the Regional Tripartite
Wage and Productivity Board shall be in addition to the wage increase
adverted to above.However, if no wage increase is given by the Wage
Board within six (6) months from the signing of this AGREEMENT,
the Management is willing to give the following increases, to wit:
July 1, 1999 . P 20.00 per day per employee
July 1, 2000 . P 25.00 per day per employee
July 1, 2001 P 30.00 per day per employee
The difference of the first year adjustment to retroact to July 1, 1999.
The across-the-board wage increase for the 4th and 5th year of this
AGREEMENT shall be subject for a reopening or renegotiation as
provided for by Republic Act No. 6715.[37]
On the other hand, Wage Order No. NCR-08 specifically provides that
only those in the private sector in the NCR receiving the prescribed
daily minimum wage rate of P223.00 per day would receive an
increase of P26.50 a day, thereby setting the new minimum wage rate
in said region to P250.00 per day. There is no dispute that, when the
order was issued, the lowest paid employee of petitioner was receiving
a wage higher than P250.00 a day. As such, its employees had no right
to demand for an increase under said order. As correctly ruled by the
VA:
We now come to the core of this case. Is [petitioner] under an
obligation to grant wage increase to its workers under W.O. No. NCR-
08 as a matter of practice? It is submitted that employers (unless
exempt) in Metro Manila (including the [petitioner]) are mandated to
implement the said wage order but limited to those entitled thereto.
There is no legal basis to implement the same across-the-board. A
perusal of the record shows that the lowest paid employee before the
implementation of Wage Order #8 is P250.00/day and none was
receiving below P223.50 minimum. This could only mean that the
union can no longer demand for any wage distortion adjustment.
Neither could they insist for an adjustment of P26.50 increase under
Wage Order #8. The provision of wage order #8 and its implementing
rules are very clear as to who are entitled to the P26.50/day increase,
i.e., private sector workers and employees in the National Capital
Region receiving the prescribed daily minimum wage rate of P223.50
shall receive an increase of Twenty-Six Pesos and Fifty Centavos
(P26.50) per day, and since the lowest paid is P250.00/day the
company is not obliged to adjust the wages of the workers.
62 | P a g e
With the above narration of facts and with the union not having
effectively controverted the same, we find no merit to the
complainants assertion of such a company practice in the grant of
wage order increase applied across-the-board. The fact that it was
shown the increases granted under the Wage Orders were obtained
thru request and negotiations because of the existence of wage
distortion and not as company practice as what the union would want.
Neither do we find merit in the argument that under the CBA, such
increase should be implemented across-the-board. The provision in the
CBA that Any Wage Order to be implemented by the Regional
Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted above cannot be interpreted in support of an
across-the-board increase. If such were the intentions of this provision,
then the company could have simply accepted the original demand of
the union for such across-the-board implementation, as set forth in
their original proposal (Annex 2 union[]s counsel proposal). The fact
that the company rejected this proposal can only mean that it was
never its intention to agree, to such across-the-board
implementation. Thus, the union will have to be contented with the
increase of P30.00 under the CBA which is due on July 31,
2001 barely a month from now.[38]
The error of the CA lies in its considering only the CBA in interpreting
the wage adjustment provision, without taking into account Wage
Order No. NCR-08, and the fact that the members of
respondent Union were already receiving salaries higher than P250.00
a day when it was issued. The CBA cannot be considered
independently of the wage order which respondent Union relied on for
its claim.
Wage Order No. NCR-08 clearly states that only those employees
receiving salaries below the prescribed minimum wage are entitled to
the wage increase provided therein, and not all employees across-the-
board as respondent Union would want petitioner to do. Considering
therefore that none of the members of respondent Union are receiving
salaries below the P250.00 minimum wage, petitioner is not obliged to
grant the wage increase to them.

[39]
The ruling of the Court in Capitol Wireless, Inc. v. Bate is
instructive on how to construe a CBA vis--vis a wage order. In that
case,
the company and the Union signed a CBA with a similar provision:
[s]hould there be any government mandated wage increases and/or
allowances, the same shall be over and above the benefits herein
granted.[40] Thereafter, the Wage Board of the NCR issued several
wage orders providing for an across-the-board increase in the
minimum wage of all employees in the private sector. The company
implemented the wage increases only to those employees covered by
the wage orders - those receiving not more than the minimum wage.
The Union protested, contending that, pursuant to said provision, any
and all government-mandated increases in salaries and allowance
should be granted to all employees across-the-board. The Court held as
follows:
x x x The wage orders did not grant across-the-board increases to all
employees in the National Capital Region but limited such increases
only to those already receiving wage rates not more than P125.00 per
day under Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per
day under Wage Order No. NCR-02. Since the wage orders specified
who among the employees are entitled to the statutory wage increases,
then the increases applied only to those mentioned therein. The
provisions of the CBA should be read in harmony with the wage
orders, whose benefits should be given only to those employees
covered thereby. (Emphasis added)[41]
In this case, as gleaned from the pleadings of the parties,
respondent Union relied on a collateral agreement between it and
petitioner, an agreement extrinsic of the CBA based on an alleged
established practice of the latter as employer. The VA rejected this
claim:
Complainant Pag-Asa Steel Workers Union additionally advances the
arguments that there exist a collateral agreement to pay the equivalent
of wage orders across the board or at least to negotiate how much will
63 | P a g e
be paid and that parol evidence is now applicable to show or explain
what the unclean provisions of the CBA means regarding wage
adjustment. The respondent cites Article XXVII of the CBA in effect,
as follows:
The parties acknowledged that during the negotiation which resulted in
this AGREEMENT, each had the unlimited right & opportunity to
make demands, claims and proposals of every kind and nature with
respect to any subject or matter not removed by law from the
Collective Bargaining and the understanding and agreements arrived at
by the parties after the exercise of that right & opportunity are set forth
in this AGREEMENT. Therefore, the COMPANY and the UNION,
for the life of this AGREEMENT, agrees that neither party shall not be
obligated to bargain collectively with respect to any subject matter not
specifically referred to or covered in this AGREEMENT, and
furthermore, that each party voluntarily & unqualifiedly waives such
right even though such subject may not have been within the
knowledge or contemplation of either or both of the parties at the time
they signed this AGREEMENT.
From the said CBA provision and upon an appreciation of the entire
CBA, we find it to have more than amply covered all aspects of the
collective bargaining. To allow alleged collateral agreements or
parol/oral agreements would be violative of the CBA provision afore-
quoted.[42]
We agree with petitioners contention that the rule excluding parol
evidence to vary or contradict a written agreement, does not extend so
far as to preclude the admission of extrinsic evidence, to show prior or
contemporaneous collateral parol agreements between the
parties. Such evidence may be received regardless of whether or not
the written agreement contains reference to such collateral
agreement.[43]As the Court ruled in United Kimberly-Clark
Employees Union, et al. v. Kimberly-Clark Philippines, Inc.:[44]
A CBA is more than a contract; it is a generalized code to govern a
myriad of cases which the draftsmen cannot wholly anticipate. It
covers the whole employment relationship and prescribes the rights
and duties of the parties. It is a system of industrial self-government
with the grievance machinery at the very heart of the system. The
parties solve their problems by molding a system of private law for all
the problems which may arise and to provide for their solution in a
way which will generally accord with the variant needs and desires of
the parties.
If the terms of a CBA are clear and have no doubt upon the intention
of the contracting parties, the literal meaning of its stipulation shall
prevail. However, if, in a CBA, the parties stipulate that the hirees
must be presumed of employment qualification standards but fail to
state such qualification standards in said CBA, the VA may resort to
evidence extrinsic of the CBA to determine the full agreement
intended by the parties. When a CBA may be expected to speak on a
matter, but does not, its sentence imports ambiguity on that
subject. The VA is not merely to rely on the cold and cryptic words on
the face of the CBA but is mandated to discover the intention of the
parties.Recognizing the inability of the parties to anticipate or address
all future problems, gaps may be left to be filled in by reference to the
practices of the industry, and the step which is equally a part of the
CBA although not expressed in it. In order to ascertain the intention of
the contracting parties, their contemporaneous and subsequent acts
shall be principally considered. The VA may also consider and rely
upon negotiating and contractual history of the parties, evidence of
past practices interpreting ambiguous provisions. The VA has to
examine such practices to determine the scope of their agreement, as
where the provision of the CBA has been loosely
formulated.Moreover, the CBA must be construed liberally rather than
narrowly and technically and the Court must place a practical and
realistic construction upon it.[45]
However, just like any other fact, habits, customs, usage or patterns of
conduct must be proved. Thus was the ruling of the Court in Bank of
Commerce v. Manalo, et al.:[46]
64 | P a g e
Habit, custom, usage or pattern of conduct must be proved like any
other facts. Courts must contend with the caveat that, before they
admit evidence of usage, of habit or pattern of conduct, the offering
party must establish the degree of specificity and frequency of uniform
response that ensures more than a mere tendency to act in a given
manner but rather, conduct that is semi-automatic in nature. The
offering party must allege and prove specific, repetitive conduct that
might constitute evidence of habit. The examples offered in evidence
to prove habit, or pattern of evidence must be numerous enough to
base on inference of systematic conduct. Mere similarity of contracts
does not present the kind of sufficiently similar circumstances to
outweigh the danger of prejudice and confusion.
In determining whether the examples are numerous enough, and
sufficiently regular, the key criteria are adequacy of sampling and
uniformity of response. After all, habit means a course of behavior of a
person regularly represented in like circumstances. It is only when
examples offered to establish pattern of conduct or habit are numerous
enough to lose an inference of systematic conduct that examples are
admissible. The key criteria are adequacy of sampling and uniformity
of response or ratio of reaction to situations.
We have reviewed the records meticulously and find no evidence to
prove that the grant of a wage-order-mandated increase to all the
employees regardless of their salary rates on an agreement collateral to
the CBA had ripened into company practice before the effectivity of
Wage Order No. NCR-08. Respondent Union failed to adduce proof
on the salaries of the employees prior to the issuance of each wage
order to establish its allegation that, even if the employees were
receiving salaries above the minimum wage and there was no wage
distortion, they were still granted salary increase. Only the following
lists of salaries of respondent Unions members were presented in
evidence: (1) before Wage Order No. NCR-06 was issued; (2) after
Wage Order No. NCR-06 was implemented; (3) after the grant of the
first year increase under the CBA; (4) after Wage Order No. NCR-07
was implemented; and (5) after the second year increase in the CBA Wage Order No. NCR-07 on its belief that it was obliged to do so
was implemented. under the CBA.

The list of the employees salaries before Wage Order No. NCR-06 was WHEREFORE, premises considered, the petition is GRANTED. The
implemented belie respondent Unions claim that the wage-order- Decision of the Court of Appeals in CA-G.R. SP No. 65171 and
mandated increases were given to employees despite the fact that they Resolution dated January 11, 2005 are REVERSED and SET ASIDE.
were receiving salaries above the minimum wage. This list proves that The Decision of the Voluntary Arbitrator is REINSTATED. No costs.
some employees were in fact receiving salaries below the P198.00
minimum wage rate prescribed by the wage order two rank-and-file SO ORDERED.
employees in particular. As petitioner explains, a wage distortion
occurred as a result of granting the increase to those employees who CHINA BANKING CORPORATION, G.R. No. 156515
were receiving salaries below the prescribed minimum wage. The Petitioner,
wage distortion necessitated the upward adjustment of the salaries of Present:
the other employees and not because it was a matter of company PUNO, J., Chairman,
practice or usage. The situation of the employees before Wage Order AUSTRIA-MARTINEZ,
No. NCR-08, however, was different. Not one of the members of - versus - CALLEJO, SR.,
respondent Union was then receiving less than P250.00 per day, the TINGA, and
minimum wage requirement in said wage order. CHICO-NAZARIO, JJ.*

The only instance when petitioner admittedly implemented a wage Promulgated:

order despite the fact that the employees were not receiving salaries
below the minimum wage was under Wage Order No. NCR-07.
Petitioner, however, explains that it did so because it was agreed upon
in the CBA that should a wage increase be ordered within six months
from its signing, petitioner would give the increase to the employees in
addition to the CBA-mandated increases. Respondents isolated act
could hardly be classified as a company practice or company usage
that may be considered an enforceable obligation.
Moreover, to ripen into a company practice that is demandable as a
matter of right, the giving of the increase should not be by reason of a
strict legal or contractual obligation, but by reason of an act of
liberality on the part of the employer. Hence, even if the company
continuously grants a wage increase as mandated by a wage order or
pursuant to a CBA, the same would not automatically ripen into a
company practice. In this case, petitioner granted the increase under
65 | P a g e
MARIANO M. BORROMEO,
Respondent. October 19, 2004
x------------------------------------------------
--x
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by China
Banking Corporation seeking the reversal of the Decision[1] dated July
19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365,
remanding to the Labor Arbiter for further hearings the complaint for
payment of separation pay, mid-year bonus, profit share and damages
filed by respondent Mariano M. Borromeo against the petitioner
Bank. Likewise, sought to be reversed is the appellate courts
Resolution dated January 6, 2003, denying the petitioner Banks motion
for reconsideration.
The factual antecedents of the case are as follows:
Respondent Mariano M. Borromeo joined the petitioner Bank on June
1, 1989 as Manager assigned at the latters Regional Office in Cebu
City. He then had the rank of Manager Level I. Subsequently, the
respondent was laterally transferred to Cagayan de Oro City as Branch
Manager of the petitioner Banks branch thereat.
For the years 1989 and 1990, the respondent received a highly
satisfactory performance rating and was given the corresponding profit
sharing/performance bonus. From 1991 up to 1995, he consistently
received a very good performance rating for each of the said years and
again received the corresponding profit sharing/performance
bonus. Moreover, in 1992, he was promoted from Manager Level I to
Manager Level II. In 1994, he was promoted to Senior Manager Level
I. Then again, in 1995, he was promoted to Senior Manager Level
II. Finally, in 1996, with a highly satisfactory performance rating, the
respondent was promoted to the position of Assistant Vice-President,
Branch Banking Group for the Mindanao area effective October 16,
1996. Each promotion had the corresponding increase in the
respondents salary as well as in the benefits he received from the
petitioner Bank.
However, prior to his last promotion and then unknown to the
petitioner Bank, the respondent, without authority from the Executive
Committee or Board of Directors, approved several DAUD/BP
accommodations amounting to P2,441,375 in favor of Joel Maniwan,
with Edmundo Ramos as surety. DAUD/BP is the acronym for checks
Drawn Against Uncollected Deposits/Bills Purchased. Such checks,
which are not sufficiently funded by cash, are generally not honored
by banks. Further, a DAUD/BP accommodation is a credit
accommodation granted to a few and select bank clients through the
withdrawal of uncollected or uncleared check deposits from their
current account. Under the petitioner Banks standard operating
66 | P a g e
procedures, DAUD/BP accommodations may be granted only by a
bank officer upon express authority from its Executive Committee or
Board of Directors.
As a result of the DAUD/BP accommodations in favor of Maniwan, a
total of ten out-of-town checks (7 PCIB checks and 3 UCPB checks)
of various dates amounting to P2,441,375 were returned unpaid from
September 20, 1996 to October 17, 1996. Each of the returned checks
was stamped with the notation Payment Stopped/Account Closed.
On October 8, 1996, the respondent wrote a Memorandum to the
petitioner Banks senior management requesting for the grant of a P2.4
million loan to Maniwan. The memorandum stated that the loan was to
regularize/liquidate subjects (referring to Maniwan) DAUD
availments. It was only then that the petitioner Bank came to know of
the DAUD/BP accommodations in favor of Maniwan. The petitioner
Bank further learned that these DAUD/BP accommodations exceeded
the limit granted to clients, were granted without proper prior approval
and already past due. Acting on this information, Samuel L. Chiong,
the petitioner Banks First Vice- President and Head-Visayas Mindanao
Division, in his Memorandum dated November 19, 1996 for the
respondent, sought clarification from the latter on the following
matters:
1) When DAUD/BP accommodations were allowed, what
efforts, if any, were made to establish the identity and/or legitimacy of
the alleged broker or drawers of the checks accommodated?
2) Did the branch follow and comply with operating
procedure which require that all checks accommodated for DAUD/BP
should be previously verified with the drawee bank and history if not
outright balances determined if enough to cover the checks?
3) How did the accommodations reach P2,441,375.00 when
our records indicate that the borrowers B/P-DAUD line is only
for P500,000.00? When did the accommodations start exceeding the
limit of P500,000.00 and under whose authority?

4) When did the accommodated checks start bouncing?
5) What is the status of these checks now and what has the
branch done so far to protect/ensure collectibility of the returned
checks?
6) What about client Joel Maniwan and surety Edmund
Ramos, what steps have they done to pay the checks returned?[2]
In reply thereto, the respondent, in his Letter dated December 5, 1996,
answered the foregoing queries in seriatim and explained, thus:
1. None
2. No
3. The accommodations reach P2.4 million upon the request
of Mr. Edmund Ramos, surety, and this request was subsequently
approved by undersigned. The excess accommodations started in July
96 without higher management approval.
4. Checks started bouncing on September 20, 1996.
5. Checks have remained unpaid. The branch sent demand
letters to Messrs. Maniwan and Ramos and referred the matter to our
Legal Dept. for filing of appropriate legal action.
6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has
signified their intention to settle by Feb. 1997.
Justification for lapses committed (Item nos. 1 to 3).
The account was personally endorsed and referred to us by Mr.
Edmund Ramos, Branch Manager of Metrobank, Divisoria Br.,
Cagayan de Oro City. In fact, the CASA account was opened jointly as
67 | P a g e
&/or (Maniwan &/or Ramos).Mr. Ramos gave us his full assurance
that the checks that we intend to purchase are the same drawee that
Metrobank has been purchasing for the past one (1) year already. He
even disclosed that these checks were verified by his own branch
accountant and that Mr. Maniwans loan account was being co-maked
by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin of CIFC. To
show his sincerity, Mr. Ramos signed as surety for Mr. Maniwan
for P2.5MM.Corollary to this, Mr. Ramos applied for a loan with us
mortgaging his house, lot and duplex with an estimated market value
of P4.508MM. The branch, therefore, is not totally negligent as officer
to officer bank checking was done. In fact, it is also for the very same
reason that other banks granted DAUD to subject account and,
likewise, the checks returned unpaid, namely:
Solidbank P1.8 Million
Allied Bank .8
Far East Bank 2.0
MBTC 5.0
The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for
itself. Further to this, undersigned conferred with the acting BOH
VSYap if these checks are legitimate 3rd party checks.
On the other hand, Atty. Musni continues to insist that Mr. Maniwan
was gypped by a broker in the total amount of P10.00 Million.
Undersigned accepts full responsibility for committing an error in
judgment, lapses in control and abuse of discretion by relying solely
on the word, assurance, surety and REM of Mr. Edmund Ramos, a
friend and a co-bank officer. I am now ready to face the consequence
of my action.[3]
In another Letter dated April 8, 1997, the respondent notified Chiong
of his intention to resign from the petitioner Bank and apologized for
all the trouble I have caused because of the Maniwan case.[4]The
respondent, however, vehemently denied benefiting therefrom. In his
Letter dated April 30, 1997, the respondent formally tendered his
irrevocable resignation effective May 31, 1997.[5]
In the Memorandum dated May 23, 1997 addressed to the respondent,
Nancy D. Yang, the petitioner Banks Senior Vice-President and Head-
Branch Banking Group, informed the former that his approval of the
DAUD/BP accommodations in favor of Maniwan without authority
and/or approval of higher management violated the petitioner Banks
Code of Ethics. As such, he was directed to restitute the amount
of P1,507,736.79 representing 90% of the total loss of P1,675,263.10
incurred by the petitioner Bank. However, in view of his resignation
and considering the years of service in the petitioner Bank, the
management earmarked only P836,637.08 from the respondents total
separation benefits or pay. The memorandum addressed to the
respondent stated:
After a careful review and evaluation of the facts surrounding the
above case, the following have been conclusively established:
1. The branch granted various BP/DAUD accommodations
to clients Joel Maniwan/Edmundo Ramos in excess of approved lines
through the following out-of-town checks which were returned for the
reason Payment Stopped/Account Closed:
1. PCIB Cebu Check No. 86256 P251,816.00
2. PCIB Cebu Check No. 86261 235,880.00
3. PCIB Cebu Check No. 8215 241,443.00
4. UCPB Tagbilaran Check No. 277,630.00
5. PCIB Bogo, Cebu Check No. 6117 267,418.00
6. UCPB Tagbilaran Check No. 216070 197,467.00
7. UCPB Tagbilaran Check No. 216073 263,920.00
8. PCIB Bogo, Cebu Check No. 6129 253,528.00
9. PCIB Bogo, Cebu Check No. 6122 198,615.00
10. PCIB Bogo, Cebu Check No. 6134 253,658.00
2. The foregoing checks were accommodated through your
approval which was in excess of your authority.
68 | P a g e
3. The branch failed to follow the fundamental and basic
procedures in handling BP/DAUD accommodations which made the
accommodations basically flawed.
4. The accommodations were attended by lapses in control
consisting of failure to report the exception and failure to cover the
account of Joel Maniwan with the required Credit Line Agreement.
Since the foregoing were established by your own admissions in your
letter explanation dated 5 December 1996, and the Audit Report and
findings of the Region Head, Management finds your actions in
violation of the Banks Code of Ethics:
Table 6.2., no. 1: Compliance with Standard Operating Procedures
- Infraction of Bank procedures in handling any bank transactions or
work assignment which results in a loss or probable loss.
Table 6.3., no. 6: Proper Conduct and Behavior -
Willful misconduct in the performance of duty whether or not the bank
suffers a loss, and/or
Table 6.5., no. 1: Work Responsibilities -
Dereliction of duty whether or not the Bank suffers a loss, and/or
Table 6.6., no. 2: Authority and Subordination -
Failure to carry out lawful orders or instructions of superiors.
Your approval of the accommodations in excess of your authority
without prior authority and/or approval from higher management is a
violation of the above cited Rules.
In view of these, you are directed to restitute the amount
of P1,507,736.79 representing 90% of the total loss of P1,675,263.10
incurred by the Bank as your proportionate share. However, in light of
your voluntary separation from the Bank effective May 31, 1997, in
view of the years of service you have given to the Bank, management
shall earmark and segregate only the amount of P836,637.08 from
your total separation benefits/pay. The Bank further directs you to
fully assist in the effort to collect from Joel Maniwan and Edmundo
Ramos the sums due to the Bank.[6]
In the Letter dated May 26, 1997 addressed to the respondent,
Remedios Cruz, petitioner Banks Vice-President of the Human
Resources Division, again informed him that the management would
withhold the sum of P836,637.08 from his separation pay, mid-year
bonus and profit sharing. The amount withheld represented his
proportionate share in the accountability vis--vis the DAUD/BP
accommodations in favor of Maniwan. The said amount would be
released upon recovery of the sums demanded from Maniwan in Civil
Case No. 97174 filed against him by the petitioner Bank with the
Regional Trial Court in Cagayan de Oro City.
Consequently, the respondent, through counsel, made a demand on the
petitioner Bank for the payment of his separation pay and other
benefits. The petitioner Bank maintained its position to withhold the
sum of P836,637.08. Thus, the respondent filed with the National
Labor Relations Commission (NLRC), Regional Arbitration Branch
No. 10, in Cagayan de Oro City, the complaint for payment of
separation pay, mid-year bonus, profit share and damages against the
petitioner Bank.
The parties submitted their respective position papers to the Labor
Arbiter. Thereafter, the respondent filed a motion to set case for trial or
hearing. Acting thereon, the Labor Arbiter, in the Order dated January
29, 1999, denied the same stating that:
... This Branch views that if complainant finds the necessity to
controvert the allegations in the respondents pleadings, then he may
file a supplemental position paper and adduce thereto evidence and
additional supporting documents, the soonest possible time. All the
evidence will be evaluated by the Branch to determine whether or not
a clarificatory hearing shall be conducted.[7]
69 | P a g e
On February 26, 1999, the Labor Arbiter issued another Order
submitting the case for resolution upon finding that he could
judiciously pass on the merits without the necessity of further hearing.
On even date, the Labor Arbiter promulgated the
Decision[8] dismissing the respondents complaint. According to the
Labor Arbiter, the respondent, an officer of the petitioner Bank, had
committed a serious infraction when, in blatant violation of the banks
standard operating procedures and policies, he approved the
DAUD/BP accommodations in favor of Maniwan without
authorization by senior management. Even the respondent himself had
admitted this breach in the letters that he wrote to the senior officers of
the petitioner Bank.
The Labor Arbiter, likewise, made the finding that the respondent
offered to assign or convey a property that he owned to the petitioner
Bank as well as proposed the withholding of the benefits due him to
answer for the losses that the petitioner Bank incurred on account of
unauthorized DAUD/BP accommodations. But even if the respondent
had not given his consent, the Labor Arbiter held that the petitioner
Banks act of withholding the benefits due the respondent was justified
under its Code of Ethics. The respondent, as an officer of the petitioner
Bank, was bound by the provisions of the said Code.
Aggrieved, the respondent appealed to the National Labor Relations
Commission. After the parties had filed their respective memoranda,
the NLRC, in the Decision dated October 20, 1999, dismissed the
appeal as it affirmed in toto the findings and conclusions of the Labor
Arbiter. The NLRC preliminarily ruled that the Labor Arbiter
committed no grave abuse of discretion when he decided the case on
the basis of the position papers submitted by the parties. On the merits,
the NLRC, like the Labor Arbiter, gave credence to the petitioner
Banks allegation that the respondent offered to pledge his property to
the bank and proposed the withholding of his benefits in
acknowledgment of the serious infraction he committed against the
bank. Further, the NLRC concurred with the Labor Arbiter that the
petitioner Bank was justified in withholding the benefits due the
respondent. Being a responsible bank officer, the respondent ought to
know that, based on the petitioner Banks Code of Ethics, restitution
may be imposed on erring employees apart from any other penalty for
acts resulting in loss or damage to the bank. The decretal portion of the
NLRC decision reads:
WHEREFORE, the decision of the Labor Arbiter is Affirmed. The
appeal is Dismissed for lack of merit.
SO ORDERED.[9]
The respondent moved for a reconsideration of the said decision but
the NLRC, in the Resolution of December 20, 1999, denied his
motion.
The respondent then filed a petition for certiorari with the Court of
Appeals alleging that the NLRC committed grave abuse of discretion
when it affirmed the findings and conclusions of the Labor Arbiter. He
vehemently denied having offered to pledge his property to the bank or
proposed the withholding of his separation pay and other
benefits. Further, he argued that the petitioner Bank deprived him of
his right to due process because it unilaterally imposed the penalty of
restitution on him. The DAUD/BP accommodations in favor of
Maniwan allegedly could not be considered as a loss to the bank as the
amounts may still be recovered. The respondent, likewise, maintained
that the Labor Arbiter should not have decided the case on the basis of
the parties position papers but should have conducted a full-blown
hearing thereon.
On July 19, 2002, the CA rendered the Decision[10] now being assailed
by the petitioner Bank. The CA found merit in the respondents
contention that he was deprived of his right to due process by the
petitioner Bank as no administrative investigation was conducted by it
prior to its act of withholding the respondents separation pay and other
benefits. The respondent was not informed of any charge against him
in connection with the Maniwan DAUD/BP accommodations nor
afforded the right to a hearing or to defend himself before the penalty
70 | P a g e
of restitution was imposed on him. This, according to the appellate
court, was contrary not only to the fundamental principle of due
process but to the petitioner Banks Code of Ethics as well.
The CA further held that the Labor Arbiter, likewise, failed to afford
the respondent due process when it denied his motion to set case for
trial or hearing. While the authority of the Labor Arbiter to decide a
case based on the parties position papers and documents is indubitable,
the CA opined that factual issues attendant to the case, including
whether or not the respondent proposed the withholding of his benefits
or pledged the same to the petitioner Bank, necessitated the conduct of
a full-blown trial. The appellate court explained that:
Procedural due process, as must be remembered, has two main
concerns, the prevention of unjustified or mistaken deprivation and the
promotion of participation and dialogue by affected individuals in the
decision-making process. Truly, the magnitude of the case and the
withholding of Borromeos property as well as the willingness of the
parties to conciliate, make a hearing imperative. As manifested by the
bank, it did not contest Borromeos motion for hearing or trial
inasmuch as the bank itself wanted to fully ventilate its side.[11]
Accordingly, the CA set aside the decision of the NLRC and ordered
that the records of the case be remanded to the Labor Arbiter for
further hearings on the factual issues involved.
The petitioner Bank filed a motion for reconsideration of the said
decision but the CA, in the assailed Resolution of January 6, 2003,
denied the same as it found no compelling ground to warrant
reconsideration.[12] Hence, its recourse to this Court alleging that the
assailed CA decision is contrary to law and jurisprudence in that:
I.
THE FACTUAL FINDINGS OF THE LABOR ARBITER AS
AFFIRMED BY THE NATIONAL LABOR RELATIONS
COMMISSION ARE SUPPORTED BY SUBSTANTIAL
EVIDENCE AND SHOULD HAVE BEEN ACCORDED RESPECT
AND FINALITY BY THE COURT OF APPEALS IN
ACCORDANCE WITH GOVERNING JURISPRUDENCE.

II.
AT ALL TIMES, THE LABOR ARBITER ACTED IN
ACCORDANCE WITH THE REQUIREMENTS OF DUE PROCESS
IN THE PROCEEDINGS A QUO.
III.
THERE WAS NO VIOLATION BY PETITIONER BANK OF
RESPONDENTS RIGHT TO DUE PROCESS AS NO
ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE
CONDUCTED ON HIS ADMITTED MISCONDUCT.[13]
The petitioner Bank posits that the sole factual issue that remained in
dispute was whether the respondent pledged his benefits as guarantee
for the losses the bank incurred resulting from the unauthorized
DAUD/BP accommodations in favor of Maniwan. On this issue, both
the Labor Arbiter and the NLRC found that the respondent had indeed
pledged his benefits to
the bank. According to the petitioner Bank, this factual finding should
have been accorded respect by the CA as the same is supported by the
evidence on record. By ordering the remand of the case to the Labor
Arbiter, the CA allegedly unjustifiably analyzed and weighed all over
again the evidence presented.
The petitioner Bank insists that the Labor Arbiter acted within his
authority when he denied the respondents motion to set case for
hearing or trial and instead decided the case on the basis of the
position papers and evidence submitted by the parties. Due process
simply demands an opportunity to be heard and the respondent was not
denied of this as he was even given the opportunity to file a
supplemental position paper and other supporting documents, but he
did not do so.
The petitioner Bank takes exception to the findings of the appellate
court that the respondent was not afforded the right to a hearing or to
defend himself by the petitioner Bank as it did not conduct an
administrative investigation. The petitioner Bank points out that it was
71 | P a g e
poised to conduct one but was preempted by the respondents
resignation. In any case, respondent himself in his Letter dated
December 5, 1996, in reply to the clarificatory queries of Chiong,
admitted that the DAUD/BP accommodations were granted without
higher management approval and that he (the respondent) accepts full
responsibility for committing an error of judgment, lapses in control
and abuse of discretion ... Given the respondents admission, the
holding of a formal investigation was no longer necessary.
For his part, the respondent, in his Comment, maintains that the
DAUD/BP accommodations in favor of Maniwan were approved,
albeit not expressly, by the senior management of the petitioner
Bank. He cites the regular reports he made to Chiong, his superior,
regarding the DAUD/BP transactions made by the branch, including
that of Maniwan, and Chiong never called his attention thereto nor
stopped or reprimanded him therefor. These reports further showed
that he did not conceal these transactions to the management.
The respondent vehemently denies having offered the withholding of
his benefits or pledged the same to the petitioner Bank. The findings of
the Labor Arbiter and the NLRC that what he did are allegedly not
supported by the evidence on record.
The respondent is of the view that restitution is not proper because the
petitioner Bank has not, as yet, incurred any actual loss as the amount
owed by Maniwan may still be recovered from him. In fact, the
petitioner Bank had already instituted a civil case against Maniwan for
the recovery of the sum and the RTC rendered judgment in the
petitioner Banks favor. The case is still pending appeal. In any case,
the respondent argues that the petitioner Bank could not properly
impose the accessory penalty of restitution on him without imposing
the principal penalty of Written Reprimand/Suspension as provided
under its Code of Ethics. He, likewise, vigorously avers that, in
contravention of its own Code of Ethics, he was denied due process by
the petitioner Bank as it did not conduct any administrative
investigation relative to the unauthorized DAUD/BP
accommodations. He was not informed in writing of any charge
against him nor was he given the opportunity to defend himself.
The petition is meritorious.
The Court shall first resolve the procedural issue raised in the
petition, i.e., whether the CA erred in remanding the case to the Labor
Arbiter. The Court rules in the affirmative. It is settled that
administrative bodies like the NLRC, including the Labor Arbiter, are
not bound by the technical niceties of the law and procedure and the
rules obtaining in courts of law.[14] Rules of evidence are not strictly
observed in proceedings before administrative bodies like the NLRC,
where decisions may be reached on the basis of position papers.[15] The
holding of a formal hearing or trial is discretionary with the Labor
Arbiter and is something that the parties cannot demand as a matter of
right.[16] As a corollary, trial-type hearings are not even required as the
cases may be decided based on verified position papers, with
supporting documents and their affidavits.[17]
Hence, the Labor Arbiter acted well within his authority when he
issued the Order dated February 26, 1999 submitting the case for
resolution upon finding that he could judiciously pass on the merits
without the necessity of further hearing. On the other hand, the
assailed CA decisions directive requiring him to conduct further
hearings constitutes undue interference with the Labor Arbiters
discretion.Moreover, to require the conduct of hearings would be to
negate the rationale and purpose of the summary nature of the
proceedings mandated by the Rules and to make mandatory the
application of the technical rules of evidence.[18] The appellate court,
therefore, committed reversible error in ordering the remand of the
case to the Labor Arbiter for further hearings.
Before delving on the merits of the case, it is well to remember that
factual findings of the NLRC affirming those of the Labor Arbiter,
both bodies being deemed to have acquired expertise in matters within
their jurisdiction, when sufficiently supported by evidence on record,
are accorded respect, if not finality, and are considered binding on this
Court.[19] As long as their decisions are devoid of any arbitrariness in
the process of their deduction from the evidence proffered by the
parties, all that is left is for the Court to stamp its affirmation.[20]
72 | P a g e
In this case, the factual findings of the Labor Arbiter and those of the
NLRC concur on the following material points: the respondent was a
responsible officer of the petitioner Bank; by his own admission, he
granted DAUD/BP accommodations in excess of the authority given to
him and in violation of the banks standard operating procedures; the
petitioner Banks Code of Ethics provides that restitution/forfeiture of
benefits may be imposed on the employees for, inter alia, infraction of
the banks standard operating procedures; and, the respondent resigned
from the petitioner Bank on May 31, 1998. These factual findings are
amply supported by the evidence on record.
Indeed, it had been indubitably shown that the respondent admitted
that he violated the petitioner Banks standard operating procedures in
granting the DAUD/BP accommodations in favor of Maniwan without
higher management approval. The respondents replies to the
clarificatory questions propounded to him by way of the Memorandum
dated November 19, 1996 were particularly significant. When the
respondent was asked whether efforts were made to establish the
identity and/or legitimacy of the drawers of the checks before the
DAUD/BP accommodations were allowed,[21] he replied in the
negative.[22]To the query did the branch follow and comply with
operating procedure which require that all checks accommodated for
DAUD/BP should be previously verified with the drawee bank and
history, if not outright balances, determined if enough to cover the
checks?[23] again, the respondent answered no.[24] When asked under
whose authority the excess DAUD/BP accommodations were
granted,[25] the respondent expressly stated that they were approved by
undersigned (referring to himself) and that the excess accommodation
was granted without higher management approval.[26] More telling,
however, is the respondents statement that he accepts full
responsibility for committing an error in judgment, lapses in control
and abuse of discretion by relying solely on the word, assurance,
surety and REM of Mr. Edmundo Ramos.[27] The respondent added
that he was ready to face the consequence of [his] action.[28]
The foregoing sufficiently establish that the respondent, by his own Forfeiture of benefits/privileges may also be effected in cases where
admissions, had violated the petitioner Banks standard operating infractions or violations were incurred in connection with or arising
procedures. Among others, the petitioner Banks Code of Ethics from the application/availment thereof.
provides:

Table 6.2 COMPLIANCE WITH STANDARD OPERATING It is well recognized that company policies and regulations are, unless
PROCEDURES shown to be grossly oppressive or contrary to law, generally binding
and
VIOLATIONS PENALTIES valid on the parties and must be complied with until finally revised or
1ST 2ND 3RD 4TH amended unilaterally or preferably through negotiation or by
1. Infraction of Written Suspension/ Dismissal* competent authority.[29] Moreover, management has the prerogative to
Bank procedures Reprimand/ Dismissal* discipline its employees and to impose appropriate penalties on erring
in handling any Suspension* workers pursuant to company rules and regulations.[30] With more
Bank transaction reason should these truisms apply to the respondent, who, by reason of
or work his position, was required to act judiciously and to exercise his
assignment which authority in harmony with company policies.[31]
results in a loss or
probable loss Contrary to the respondents contention that the petitioner Bank could
not properly impose the accessory penalty of restitution on him
* With restitution, if warranted. without imposing the principal penalty of Written
Reprimand/Suspension, the latters Code of Ethics expressly sanctions
the imposition of restitution/forfeiture of benefits apart from or
Further, the said Code states that: independent of the other penalties. Obviously, in view of his voluntary
separation from the petitioner Bank, the imposition of the penalty of
7.2.5. Restitution/Forfeiture of Benefits reprimand or suspension would be futile. The petitioner Bank was left
with no other recourse but to impose the ancillary penalty of
Restitution may be imposed independently or together with any other restitution. It was certainly within the petitioner Banks prerogative to
penalty in case of loss or damage to the property of the Bank, its impose on the respondent what it considered the appropriate penalty
employees, clients or other parties doing business with the Bank. The under the circumstances pursuant to its company rules and regulations.
Bank may recover the amount involved by means of salary deduction
or whatever legal means that will prompt offenders to pay the amount Anent the issue that the respondents right to due process was violated
involved. But restitution shall in no way mitigate the penalties attached by the petitioner Bank since no administrative investigation was
to the violation or infraction. conducted prior to the withholding of his separation benefits, the Court
rules that, under the circumstances obtaining in this case, no formal
administrative investigation was necessary. Due process simply
demands an opportunity to be heard and this opportunity was not
denied the respondent.[32]
73 | P a g e

Prior to the respondents resignation, he was furnished with the
Memorandum[33] dated November 19, 1996 in which several
clarificatory questions were propounded to him regarding the
DAUD/BP accommodations in favor of Maniwan. Among others, the
respondent was asked whether the banks standard operating
procedures were complied with and under whose authority the
accommodations were granted. From the tenor thereof, it could be
reasonably gleaned that the said memorandum constituted notice of the
charge against the respondent.
Replying to the queries, the respondent, in his Letter[34] dated
December 5, 1996, admitted, inter alia, that he approved the
DAUD/BP accommodations in favor of Maniwan and the amount in
excess of the credit limit of P500,000 was approved by him without
higher management approval. The respondent, likewise, admitted non-
compliance with the banks standard operating procedures, specifically,
that which required that all checks accommodated for DAUD/BP be
previously verified with the drawee bank and history, if not outright
balances determined if enough to cover the checks. In the same letter,
the respondent expressed that he
accepts full responsibility for committing an error in judgment, lapses
in control and abuse of discretion and that he is ready to face the
consequence of his action.
Contrary to his protestations, the respondent was given the opportunity
to be heard and considering his admissions, it became unnecessary to
hold any formal investigation.[35] More particularly, it became
unnecessary for the petitioner Bank to conduct an investigation on
whether the respondent had committed an [I]nfraction of Bank
procedures in handling any Bank transaction or work assignment
which results in a loss or probable loss because the respondent already
admitted the same. All that was needed was to inform him of the
findings of the management[36] and this was done by way of the
Memorandum[37]dated May 23, 1997 addressed to the respondent. His
claim of denial of due process must perforce fail.
74 | P a g e
Significantly, the respondent is not wholly deprived of his separation
benefits. As the Labor Arbiter stressed in his decision, the separation
benefits due the complainant (the respondent herein) were merely
withheld.[38] The NLRC made the same conclusion and was even more
explicit as it opined that the respondent is entitled to the benefits he
claimed in pursuance to the Collective Bargaining Agreement but, in
the meantime, such benefits shall be deposited with the bank by way
of pledge.[39] Even
the petitioner Bank itself gives the assurance that as soon as the Bank
has satisfied a judgment in Civil Case No. 97174, the earmarked
portion of his benefits will be released without delay.[40]
It bears stressing that the respondent was not just a rank and file
employee. At the time of his resignation, he was the Assistant Vice-
President, Branch Banking Group for the Mindanao area of the
petitioner Bank. His position carried authority for the exercise of
independent judgment and discretion, characteristic of sensitive posts
in corporate hierarchy.[41] As such, he was, as earlier intimated,
required to act judiciously and to exercise his authority in harmony
with company policies.[42]
On the other hand, the petitioner Banks business is essentially imbued
with public interest and owes great fidelity to the public it deals
with.[43] It is expected to exercise the highest degree of diligence in the
selection and supervision of their employees.[44] As a corollary, and
like all other business enterprises, its prerogative to discipline its
employees and to impose appropriate penalties on erring workers
pursuant to company rules and regulations must be respected.[45] The
law, in protecting the rights of labor, authorized neither oppression nor
self-destruction of an employer company which itself is possessed of
rights that must be entitled to recognition and respect.[46]
WHEREFORE, the petition is GRANTED. The Decision dated July
19, 2002 of the Court of Appeals and its Resolution dated January 6,
2003 in CA-G.R. SP No. 57365 are REVERSED AND SET
ASIDE. The Resolution dated October 20, 1999 of the NLRC,
affirming the Decision dated February 26, 1999 of the Labor Arbiter,
is REINSTATED.
SO ORDERED.
G.R. No. L-58639 August 12, 1987
CEBU ROYAL PLANT (SAN MIGUEL
CORPORATION), petitioner,
vs.
THE HONORABLE DEPUTY MINISTER OF LABOR and
RAMON PILONES, respondents.
CRUZ, J.:
The private respondent was removed by the petitioner and complained
to the Ministry of Labor. His complaint was dismissed by the regional
director, who was, however, reversed by the public respondent.
Required to reinstate the separated employee and pay him back wages,
the petitioner has come to us, faulting the Deputy Minister with grave
abuse of discretion. We have issued in the meantime a temporary
restraining order. 1
The public respondent held that Ramon Pilones, the private
respondent, was already a permanent employee at the time of his
dismissal and so was entitled to security of tenure. The alleged ground
for his removal, to wit, "pulmonary tuberculosis minimal," was not
certified as incurable within six months as to justify his
separation. 2 Additionally, the private respondent insists that the
petitioner should have first obtained a clearance, as required by the
regulations then in force, for the termination of his employment.
The petitioner for its part claims that the private respondent was still
on probation at the time of his dismissal and so had no security of
tenure. His dismissal was not only in conformity with company policy
but also necessary for the protection of the public health, as he was
handling ingredients in the processing of soft drinks which were being
sold to the public. It is also argued that the findings of the regional
director, who had direct access to the facts, should not have been
75 | P a g e
disturbed on appeal. For these same reasons, it contends, the
employee's reinstatement as ordered by the public respondent should
not be allowed.
The original findings were contained in a one-page order 3 reciting
simply that "complainant was employed on a probationary period of
employment for six (6) months. After said period, he underwent
medical examination for qualification as regular employee but the
results showed that he is suffering from PTB minimal. Consequently,
he was informed of the termination of his employment by respondent."
The order then concluded that the termination was "justified." That
was all.
As there is no mention of the basis of the above order, we may assume
it was the temporary payroll authority 4submitted by the petitioner
showing that the private respondent was employed on probation on
February 16, 1978. Even supposing that it is not self- serving, we find
nevertheless that it is self-defeating. The six-month period of probation
started from the said date of appointment and so ended on August 17,
1978, but it is not shown that the private respondent's employment also
ended then; on the contrary, he continued working as usual. Under
Article 282 of the Labor Code, "an employee who is allowed to work
after a probationary period shall be considered a regular employee."
Hence, Pilones was already on permanent status when he was
dismissed on August 21, 1978, or four days after he ceased to be a
probationer.
The petitioner claims it could not have dismissed the private
respondent earlier because the x-ray examination was made only on
August 17, 1978, and the results were not immediately available. That
excuse is untenable. We note that when the petitioner had all of six
months during which to conduct such examination, it chose to wait
until exactly the last day of the probation period. In the light of such
delay, its protestations now that reinstatement of Pilones would
prejudice public health cannot but sound hollow and hypocritical. By
its own implied admission, the petitioner had exposed its customers to
the employee's disease because of its failure to examine him before
entrusting him with the functions of a "syrup man." Its belated concern
for the consuming public is hardly persuasive, if not clearly insincere
and self-righteous.
There is proof in fact that the private respondent was first hired not on
February 16, 1978, but earlier in 1977. This is the 1977 withholding
tax statement 5 issued for him by the petitioner itself which it does not
and cannot deny. The petitioner stresses that this is the only evidence
of the private respondent's earlier service and notes that he has not
presented any co-worker to substantiate his claim. This is perfectly
understandable. Given the natural reluctance of many workers to
antagonize their employers, we need not wonder why none of them
testified against the petitioner.
We are satisfied that whether his employment began on February 16,
1978, or even earlier as he claims, the private respondent was already a
regular employee when he was dismissed on August 21, 1978. As
such, he could validly claim the security of tenure guaranteed to him
by the Constitution and the Labor Code.
The applicable rule on the ground for dismissal invoked against him is
Section 8, Rule I, Book VI, of the Rules and Regulations
Implementing the Labor Code reading as follows:
Sec. 8. Disease as a ground for dismissal. — Where the employee
suffers from a disease and his continued employment is prohibited by
law or prejudicial to his health or to the health of his co-employees, the
employer shall not terminate his employment unless there is a
certification by a competent public health authority that the disease is
of such nature or at such a stage that it cannot be cured within a period
of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not
terminate the employee but shall ask the employee to take a leave. The
employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
The record does not contain the certification required by the above
rule. The medical certificate offered by the petitioner came from its
own physician, who was not a "competent public health authority,"
and merely stated the employee's disease, without more. We may
surmise that if the required certification was not presented, it was
because the disease was not of such a nature or seriousness that it
could not be cured within a period of six months even with proper
medical treatment. If so, dismissal was unquestionably a severe and
unlawful sanction.
76 | P a g e
It is also worth noting that the petitioner's application for clearance to
terminate the employment of the private respondent was filed with the
Ministry of Labor only on August 28, 1978, or seven days after his
dismissal. 6 As the NLRC has repeatedly and correctly said, the prior
clearance rule (which was in force at that time) was not a "trivial
technicality." It required "not just the mere filing of a petition or the
mere attempt to procure a clearance" but that "the said clearance be
obtained prior to the operative act of termination. 7
We agree that there was here an attempt to circumvent the law by
separating the employee after five months' service to prevent him from
becoming a regular employee, and then rehiring him on probation,
again without security of tenure. We cannot permit this subterfuge if
we are to be true to the spirit and mandate of social justice. On the
other hand, we have also the health of the public and of the dismissed
employee himself to consider. Hence, although we must rule in favor
of his reinstatement, this must be conditioned on his fitness to resume
his work, as certified by competent authority.
We take this opportunity to reaffirm our concern for the lowly worker
who, often at the mercy of his employers, must look up to the law for
his protection. Fittingly, that law regards him with tenderness and even
favor and always with faith and hope in his capacity to help in shaping
the nation's future. It is error to take him for granted. He deserves our
abiding respect. How society treats him will determine whether the
knife in his hands shall be a caring tool for beauty and progress or an
angry weapon of defiance and revenge. The choice is obvious, of
course. If we cherish him as we should, we must resolve to lighten "the
weight of centuries" of exploitation and disdain that bends his back but
does not bow his head.
WHEREFORE, the petition is DISMISSED and the temporary
restraining order of November 18, 1981, is LIFTED. The Order of the
public respondent dated July 14, 1981, is AFFIRMED, but with the
modification that the backwages shall be limited to three years only
and the private respondent shall be reinstated only upon certification
by a competent public health authority that he is fit to return to work.
Costs against the petitioner.
SO ORDERED.
[G.R. No. 112139. January 31, 2000]
LAPANDAY AGRICULTURAL DEVELOPMENT
CORPORATION, petitioner, vs. THE HONORABLE COURT OF
APPEALS (Former Eighth Division) and COMMANDO
SECURITY SERVICE AGENCY, INC., respondents.
DECISION
GONZAGA-REYES, J.:
Before us is a Petition for Review on Certiorari of the decision[1] of
the Court of Appeals[2] in CA-G.R. CV No. 33893 entitled
COMMANDO SECURITY SERVICE AGENCY, INCORPORATED
vs. LAPANDAY AGRICULTURAL DEVELOPMENT
CORPORATION which affirmed the decision[3] of the Regional Trial
Court, 11th Judicial Region, Branch 9, Davao City in Civil Case No.
19203-88.
The pertinent facts as found by the Court of Appeals are as follows:
"The evidence shows that in June 1986, plaintiff Commando Security
Service Agency, Inc., and defendant Lapanday Agricultural
Development Corporation entered into a Guard Service Contract.
Plaintiff provided security guards in defendants banana plantation. The
contract called for the payment to a guard of P754.28 on a daily 8-hour
basis and an additional P565.72 for a four hour overtime while the
shift-in-charge was to be paid P811.40 on a daily 8-hour basis and
P808.60 for the 4-hour overtime.
Wage Orders increasing the minimum wage in 1983 were complied
with by the defendant. On June 16, 1984, Wage Order No. 5 was
promulgated directing an increase of P3.00 per day on the minimum
wage of workers in the private sector and a P5.00 increase on the
ECOLA. This was followed on November 1, 1984 by Wage Order No.
6 which further increased said minimum wage by P3.00 on the
ECOLA. Both Wage Orders contain the following provision:
"In the case of contract for construction projects and for security,
janitorial and similar services, the increase in the minimum wage and
allowances rates of the workers shall be borne by the principal or
client of the construction/service contractor and the contracts shall be
deemed amended accordingly, subject to the provisions of Sec. 3 (b) of
this order" (Sec. 6 and Sec. 9, Wage Orders No. 5 and 6,
respectively)."
77 | P a g e
Plaintiff demanded that its Guard Service Contract with defendant be
upgraded in compliance with Wage Order Nos. 5 and 6. Defendant
refused. Their Contract expired on June 6, 1986 without the rate
adjustment called for Wage Order Nos. 5 and 6 being implemented.
By the time of the filing of plaintiffs Complaint, the rate adjustment
payable by defendant amounted to P462,346.25. Defendant opposed
the Complaint by raising the following defenses: (1) the rate
adjustment is the obligation of the plaintiff as employer of the security
guards; (2) assuming its liability, the sum it should pay is less in
amount; and (3) the Wage Orders violate the impairment clause of the
Constitution.
The trial court decided in favor of the plaintiff. It held:
xxx
"However, in order for the security agency to pay the security guards,
the Wage Orders made specific provisions to amend existing contracts
for security services by allowing the adjustment of the consideration
paid by the principal to the security agency concerned. (Eagle Security
Agency, Inc. vs. NLRC, Phil. Tuberculosis Society, Inc. vs. NLRC, et
al., May 18, 1989).
The Wage Orders require the amendment of the contract as to the
consideration to cover the service contractors payment of the increases
mandated. However, in the case at bar, the contract for security
services had earlier been terminated without the corresponding
amendment. Plaintiff now demands adjustment in the contract price as
the same was deemed amended by Wage Order Nos. 5 and 6.
Before the plaintiff could pay the minimum wage as mandated by law,
adjustments must be paid by the principal to the security agency
concerned.
"Given these circumstances, if PTS pays the security guards, it cannot
claim reimbursements from Eagle. But if its Eagle that pays them, the
latter can claim reimbursement from PTS in lieu of an adjustment,
considering that the contract had expired and had not been renewed.
(Eagle Security Agency vs. NLRC and Phil. Tuberculosis Society, Inc.
vs. NLRC, et al., 18 May 1989).
"As to the issue that Wage Orders Nos. 5 and 6 constitute impairments
of contracts in violation of constitutional guarantees, the High Court
ruled" The Supreme Court has rejected the impairment of contract
argument in sustaining the validity and constitutionality of labor and
social legislation like the Blue Sunday Law, compulsory coverage of
private sector employees in the Social Security System, and the
abolition of share tenancy enacted pursuant to the police power of the
state (Eagle Security Agency, Inc. vs. National Labor Relation
Commission and Phil. Tuberculosis Society, Inc. vs. NLRC, et al.,
May 18, 1989)."
Petitioners motion for reconsideration was denied;[4] hence this
petition where petitioner cites the following grounds to support the
instant petition for review:
"1. THE WAGE INCREASES PROVIDED FOR IN THE WAGE
ORDERS WERE DUE TO THE GUARDS AND NOT THE
SECURITY AGENCY;
2. A SECURITY AGENCY WHO DID NOT PAY WAGE
INCREASE TO ITS GUARDS IT HAD ALREADY TERMINATED
AND WITHOUT THEIR AUTHORIZATION CANNOT
INSTITUTE AN ACTION TO RECOVER SAID WAGE INCREASE
FOR ITS BENEFIT;
3. IN THE ABSENCE OF BAD FAITH AND WITHOUT THE
TRIAL COURT CORRECTLY ESTABLISHING THE BASIS FOR
ATTORNEYS FEES, THE SAME MAY NOT BE AWARDED.
4. THE NATIONAL LABOR RELATIONS (SIC) IS THE
PROPER FORUM THAT HAS THE JURISDICTION TO
RESOLVE THE ISSUE OF WHETHER OR NOT THE
PETITIONER IS LIABLE TO PAY THE PRIVATE
RESPONDENT THE WAGE AND ALLOWANCE INCREASES
MANDATED UNDER WAGE ORDER NOS. 5 AND 6."[5]
Reiterating its position below, petitioner asserts that private respondent
has no factual and legal basis to collect the benefits under subject
Wage Order Nos. 5 and 6 intended for the security guards without the
authorization of the security guards concerned. Inasmuch as the
services of the forty-two (42) security guards were already terminated
at the time the complaint was filed on August 15, 1988, private
respondents complaint partakes of the nature of an action for recovery
of what was supposedly due the guards under said Wage Orders,
amounts that they claim were never paid by private respondent and
therefore not collectible by the latter from the petitioner. Petitioner
78 | P a g e
also assails the award of attorneys fees in the amount of P115,585.31
or 25% of the total adjustment claim of P462,341.25 for lack of basis
and for being unconscionable.
Moreover, petitioner submits that it is the National Labor Relations
Commission (NLRC) and not the civil courts that has jurisdiction to
resolve the issue involved in this case for it refers to the enforcement
of wage adjustment and other benefits due to private respondents
security guards mandated under Wage Order Nos. 5 and 6.
Considering that the RTC has no jurisdiction, its decision is without
force and effect.[6]
On the other hand, private respondent contends that the basis of its
action against petitioner-appellant is the enforcement of the Guard
Service Contract entered into by them, which is deemed amended by
Section 6 of Wage Order No. 5 and Section 9 of Wage Order No. 6;
that pursuant to their amended Guard Service Contract, the
increases/adjustments in wages and ECOLA are due to private
respondent and not to the security guards who are not parties to the
said contract. It is therefore immaterial whether or not private
respondent paid its security guards their wages as adjusted by said
Wage Orders and that since the forty-two (42) security guards are not
parties to the Guard Service Contract, there is no need for them to
authorize the filing of, or be joined in, this suit.
As regards the award to private respondent of the amount
of P115,585.31 as attorneys fees, private respondent maintains that
there is enough evidence and/or basis for the grant thereof, considering
that the adamant attitude of the petitioner (in implementing the
questioned Wage Orders) compelled the herein private respondent, to
litigate in court. Furthermore, since the legal fee payable by private
respondent to its counsel is essentially on contingent basis, the amount
of P115,583.31 granted by the trial court which is 25% of the total
claim is not unconscionable.
As regards the jurisdiction of the RTC, private respondent alleges that
the suit filed before the trial court is for the purpose of securing the
upgrading of the Guard Service Contract entered into by herein
petitioner and private respondent in June 1983. The enforcement of
this written contract does not fall under the jurisdiction of the NLRC
because the money claims involved therein did not arise from
employer-employee relations between the parties and is intrinsically a
civil dispute. Thus, jurisdiction lies with the regular courts. Private
respondent further contends that petitioner is estopped or barred from
raising the question of jurisdiction for the first time before the
Supreme Court after having voluntarily submitted to the jurisdiction of
the regular courts below and having lost its case therein.[7]
We resolve to grant the petition.
We resolve first the issue of jurisdiction. We agree with the respondent
that the RTC has jurisdiction over the subject matter of the present
case. It is well settled in law and jurisprudence that where no
employer-employee relationship exists between the parties and no
issue is involved which may be resolved by reference to the Labor
Code, other labor statutes or any collective bargaining agreement, it is
the Regional Trial Court that has jurisdiction.[8] In its complaint,
private respondent is not seeking any relief under the Labor Code but
seeks payment of a sum of money and damages on account of
petitioners alleged breach of its obligation under their Guard Service
Contract. The action is within the realm of civil law hence jurisdiction
over the case belongs to the regular courts.[9] While the resolution of
the issue involves the application of labor laws, reference to the labor
code was only for the determination of the solidary liability of the
petitioner to the respondent where no employer-employee relation
exists. Article 217 of the Labor Code as amended vests upon the labor
arbiters exclusive original jurisdiction only over the following:
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;
4. Claims for actual, moral exemplary and other forms of damages
arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand
79 | P a g e
pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
In all these cases, an employer-employee relationship is an
indispensable jurisdictional requisite;[10] and there is none in this case.
On the merits, the core issue involved in the present petition is whether
or not petitioner is liable to the private respondent for the wage
adjustments provided under Wage Order Nos. 5 and 6 and for
attorneys fees.
Private respondent admits that there is no employer-employee
relationship between it and the petitioner. The private respondent is an
independent/job contractor[11] who assigned security guards at the
petitioners premises for a stipulated amount per guard per month. The
Contract of Security Services expressly stipulated that the security
guards are employees of the Agency and not of the
petitioner.[12] Articles 106 and 107 of the Labor Code provides the rule
governing the payment of wages of employees in the event that the
contractor fails to pay such wages as follows:
"Art. 106. Contractor or subcontractor. Whenever an employer enters
into a contract with another person for the performance of the formers
work, the employees of the contractor and of the latters subcontractor,
if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly
employed by him.
xxx
ART. 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts
with an independent contractor for the performance of any work, task,
job or project."
It will be seen from the above provisions that the principal (petitioner)
and the contractor (respondent) are jointly and severally liable to the
employees for their wages. This Court held in Eagle Security, Inc. vs.
NLRC[13] and Spartan Security and Detective Agency, Inc. vs.
NLRC[14] that the joint and several liability of the contractor and the
principal is mandated by the Labor Code to assure compliance with the
provisions therein including the minimum wage. The contractor is
made liable by virtue of his status as direct employer. The principal, on
the other hand, is made the indirect employer of the contractors
employees to secure payment of their wages should the contractor be
unable to pay them.[15] Even in the absence of an employer-employee
relationship, the law itself establishes one between the principal and
the employees of the agency for a limited purpose i.e. in order to
ensure that the employees are paid the wages due them. In the above-
mentioned cases, the solidary liability of the principal and contractor
was held to apply to the aforementioned Wage Order Nos. 5 and
6.[16] In ruling that under the Wage Orders, existing security guard
services contracts are amended to allow adjustment of the
consideration in order to cover payment of mandated increases, and
that the principal is ultimately liable for the said increases, this Court
stated:
"The Wage Orders are explicit that payment of the increases are to be
borne by the principal or client. To be borne, however, does not mean
that the principal, PTSI in this case, would directly pay the security
guards the wage and allowance increases because there is no privity of
contract between them. The security guards contractual relationship is
with their immediate employer, EAGLE. As an employer, EAGLE is
tasked, among others, with the payment of their wages [See Article
VII Sec. 3 of the Contract for Security Services, supra and Bautista vs.
Inciong, G. R. No. 52824, March 16, 1988, 158 SCRA 665].
On the other hand, there existed a contractual agreement between PTSI
and EAGLE wherein the former availed of the security services
provided by the latter. In return, the security agency collects from its
client payment for its security services. This payment covers the wages
for the security guards and also expenses for their supervision and
training, the guards bonds, firearms with ammunitions, uniforms and
other equipments, accessories, tools, materials and supplies necessary
for the maintenance of a security force.
Premises considered, the security guards immediate recourse for the
payment of the increases is with their direct employer, EAGLE.
However, in order for the security agency to comply with the new
80 | P a g e
wage and allowance rates it has to pay the security guards, the Wage
Orders made specific provision to amend existing contracts for
security services by allowing the adjustment of the consideration paid
by the principal to the security agency concerned. What the Wage
Orders require, therefore, is the amendment of the contracts as to the
consideration to cover the service contractors payment of the increases
mandated. In the end, therefore, ultimate liability for the payment of
the increases rests with the principal.
In view of the foregoing, the security guards should claim the amount
of the increases from EAGLE. Under the Labor Code, in case the
agency fails to pay them the amounts claimed, PTSI should be held
solidarily liable with EAGLE [Articles 106, 107 and 109]. Should
EAGLE pay, it can claim an adjustment from PTSI for an increase in
consideration to cover the increases payable to the security guards."[17]
It is clear also from the foregoing that it is only when contractor pays
the increases mandated that it can claim an adjustment from the
principal to cover the increases payable to the security guards. The
conclusion that the right of the contractor (as principal debtor) to
recover from the principal as solidary co-debtor) arises only if he has
paid the amounts for which both of them are jointly and severally
liable is in line with Article 1217 of the Civil Code which provides:
"Art. 1217. Payment made by one of the solidary debtors extinguishes
the obligation. If two or more solidary debtors offer to pay, the creditor
may choose which offer to accept.
He who made payment may claim from his codebtors only the share
which corresponds to each, with interest for the payment already
made. If the payment is made before the debt is due, no interest for the
intervening period may be demanded. xxx"
Pursuant to the above provision, the right of reimbursement from a co-
debtor is recognized in favor of the one who paid.
It will be seen that the liability of the petitioner to reimburse the
respondent only arises if and when respondent actually pays its
employees the increases granted by Wage Order Nos. 5 and 6.
Payment, which means not only the delivery of money but also the
performance, in any other manner, of the obligation,[18] is the operative
fact which will entitle either of the solidary debtors to seek
reimbursement for the share which corresponds to each of the debtors.
The records show that judgment was rendered by Labor Arbiter
Newton R. Sancho holding both petitioner and private respondent
jointly and solidarily liable to the security guards in a
Decision[19] dated October 17, 1986 (NLRC Case No. 2849-MC-XI-
86).[20] However, it is not disputed that the private respondent has not
actually paid the security guards the wage increases granted under the
Wage Orders in question. Neither is it alleged that there is an extant
claim for such wage adjustments from the security guards concerned,
whose services have already been terminated by the contractor.
Accordingly, private respondent has no cause of action against
petitioner to recover the wage increases. Needless to stress, the
increases in wages are intended for the benefit of the laborers and the
contractor may not assert a claim against the principal for salary wage
adjustments that it has not actually paid. Otherwise, as correctly put by
the respondent, the contractor would be unduly enriching itself by
recovering wage increases, for its own benefit.
Finally, considering that the private respondent has no cause of action
against the petitioner, private respondent is not entitled to attorneys
fees.
WHEREFORE, the petition is GRANTED. The decision of the Court
of Appeals dated May 24, 1993 is REVERSED and SET ASIDE. The
complaint of private respondent COMMANDO SECURITY
SERVICE AGENCY, INC. is hereby DISMISSED.
SO ORDERED.
OSCAR VILLAMARIA, JR. G.R. No. 165881
Petitioner,
Present:
PANGANIBAN, C.J.,
Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ.
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
COURT OF APPEALS and Promulgated:
JERRY V. BUSTAMANTE,
81 | P a g e
Respondents. April 19, 2006
x------------------------------------------------------------------------------------
-----x
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the
Revised Rules of Court assailing the Decision[1] and Resolution[2] of
the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside
the Resolution[3] of the National Labor Relations Commission (NLRC)
in NCR-30-08-03247-00, which in turn affirmed the Decision[4] of the
Labor Arbiter dismissing the complaint filed by respondent Jerry V.
Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a
sole proprietorship engaged in assembling passenger jeepneys with a
public utility franchise to operate along the Baclaran-Sucat route. By
1995, Villamaria stopped assembling jeepneys and retained only nine,
four of which he operated by employing drivers on a boundary
basis. One of those drivers was respondent Bustamante who drove the
jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day
to Villamaria as boundary and kept the residue of his daily earnings as
compensation for driving the vehicle. In August 1997, Villamaria
verbally agreed to sell the jeepney to Bustamante under the boundary-
hulog scheme, where Bustamante would remit to Villarama P550.00 a
day for a period of four years; Bustamante would then become the
owner of the vehicle and continue to drive the same under Villamarias
franchise. It was also agreed that Bustamante would make a
downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled Kasunduan
ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog[5] over
the passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-
38168-C and Motor No. SL-26647. The parties agreed that if
Bustamante failed to pay the boundary-hulog for three days,
Villamaria Motors would hold on to the vehicle until Bustamante paid
his arrears, including a penalty of P50.00 a day; in case Bustamante
failed to remit the daily boundary-hulog for a period of one week,
the Kasunduan would cease to have legal effect and Bustamante would
have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the
vehicle without prior authority from Villamaria Motors. Thus,
Bustamante was authorized to operate the vehicle to transport
passengers only and not for other purposes. He was also required to
display an identification card in front of the windshield of the vehicle;
in case of failure to do so, any fine that may be imposed by
government authorities would be charged against his
account. Bustamante further obliged himself to pay for the cost of
replacing any parts of the vehicle that would be lost or damaged due to
his negligence. In case the vehicle sustained serious damage,
Bustamante was obliged to notify Villamaria Motors before
commencing repairs. Bustamante was not allowed to wear slippers,
short pants or undershirts while driving. He was required to be polite
and respectful towards the passengers. He was also obliged to notify
Villamaria Motors in case the vehicle was leased for two or more days
and was required to attend any meetings which may be called from
time to time. Aside from the boundary-hulog, Bustamante was also
obliged to pay for the annual registration fees of the vehicle and the
premium for the vehicles comprehensive insurance. Bustamante
promised to strictly comply with the rules and regulations imposed by
Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and
control of Villamaria. As agreed upon, he made daily remittances
of P550.00 in payment of the purchase price of the
82 | P a g e
vehicle. Bustamante failed to pay for the annual registration fees of the
vehicle, but Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same
arrangement with Villamaria Motors failed to pay their respective
boundary-hulog. This prompted Villamaria to serve
a Paalala,[6]reminding them that under the Kasunduan, failure to pay
the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He warned
the drivers that the Kasunduan would henceforth be strictly enforced
and urged them to comply with their obligation to avoid litigation.
On July 24, 2000, Villamaria took back the jeepney driven by
Bustamante and barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint[7] for Illegal
Dismissal against Villamaria and his wife Teresita. In his Position
Paper,[8] Bustamante alleged that he was employed by Villamaria in
July 1996 under the boundary system, where he was required to
remit P450.00 a day. After one year of continuously working for them,
the spouses Villamaria presented the Kasunduan for his signature, with
the assurance that he (Bustamante) would own the jeepney by March
2001 after paying P550.00 in daily installments and that he would
thereafter continue driving the vehicle along the same route under the
same franchise. He further narrated that in July 2000, he informed the
Villamaria spouses that the surplus engine of the jeepney needed to be
replaced, and was assured that it would be done. However, he was
later arrested and his drivers license was confiscated because
apparently, the replacement engine that was installed was taken from a
stolen vehicle. Due to negotiations with the apprehending authorities,
the jeepney was not impounded. The Villamaria spouses took the
jeepney from him on July 24, 2000, and he was no longer allowed to
drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully
prayed that judgment be rendered ordering the respondents, jointly and
severally, the following:
1. Reinstate complainant to his former position without loss of
seniority rights and execute a Deed of Sale in favor of the complainant
relative to the PUJ with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the amount
of P400.00 a day and other benefits computed from July 24, 2000 up
to the time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00
and P180,000.00 for the expenses incurred by the complainant in the
repair and maintenance of the subject jeep;
4. Ordering the respondents to refund the amount of One Hundred
(P100.00) Pesos per day counted from August 7, 1997 up to June 2000
or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorneys fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being
prayed for.[9]
In their Position Paper,[10] the spouses Villamaria admitted the
existence of the Kasunduan, but alleged that Bustamante failed to pay
the P10,000.00 downpayment and the vehicles annual registration
fees.They further alleged that Bustamante eventually failed to remit
the requisite boundary-hulog of P550.00 a day, which prompted them
to issue the Paalaala. Instead of complying with his obligations,
Bustamante stopped making his remittances despite his daily trips and
even brought the jeepney to the province without permission. Worse,
the jeepney figured in an accident and its license plate was
confiscated; Bustamante even abandoned the vehicle in a gasoline
83 | P a g e
station in Sucat, Paraaque City for two weeks. When the security
guard at the gasoline station requested that the vehicle be retrieved and
Teresita Villamaria asked Bustamante for the keys, Bustamante told
her: Di kunin ninyo. When the vehicle was finally retrieved, the tires
were worn, the alternator was gone, and the battery was no longer
working.
Citing the cases of Cathedral School of Technology v.
NLRC[11] and Canlubang Security Agency Corporation v. NLRC,[12] the
spouses Villamaria argued that Bustamante was not illegally dismissed
since the Kasunduan executed on August 7, 1997 transformed the
employer-employee relationship into that of vendor-vendee. Hence,
the spouses concluded, there was no legal basis to hold them liable for
illegal dismissal. They prayed that the case be dismissed for lack of
jurisdiction and patent lack of merit.
In his Reply,[13] Bustamante claimed that Villamaria exercised control
and supervision over the conduct of his employment. He maintained
that the rulings of the Court in National Labor Union v.
Dinglasan,[14] Magboo v. Bernardo,[15] and Citizen's League of Free
Workers v. Abbas[16] are germane to the issue as they define the nature
of the owner/operator-driver relationship under the boundary
system. He further reiterated that it was the Villamaria spouses who
presented the Kasunduan to him and that he conformed thereto only
upon their representation that he would own the vehicle after four
years.Moreover, it appeared that the Paalala was duly received by
him, as he, together with other drivers, was made to affix his signature
on a blank piece of paper purporting to be an attendance sheet.
On March 15, 2002, the Labor Arbiter rendered judgment[17] in favor
of the spouses Villamaria and ordered the complaint dismissed on the
following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as
the PAALALA, to prove their claim that complainant violated the terms
of their contract and afterwards abandoned the vehicle assigned to
him. As against the foregoing, [the] complaints (sic) mere allegations
to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to
damages and attorney's fees.[18]
Bustamante appealed the decision to the NLRC,[19] insisting that
the Kasunduan did not extinguish the employer-employee relationship
between him and Villamaria. While he did not receive fixed wages, he
kept only the excess of the boundary-hulog which he was required to
remit daily to Villamaria under the agreement. Bustamante maintained
that he remained an employee because he was engaged to perform
activities which were necessary or desirable to Villamarias trade or
business.
The NLRC rendered judgment[20] dismissing the appeal for lack of
merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby
DISMISSED for reasons not stated in the Labor Arbiter's decision but
mainly on a jurisdictional issue, there being none over the subject
matter of the controversy.[21]
The NLRC ruled that under the Kasunduan, the juridical relationship
between Bustamante and Villamaria was that of vendor and vendee,
hence, the Labor Arbiter had no jurisdiction over the
complaint.Bustamante filed a Motion for Reconsideration, which the
NLRC resolved to deny on May 30, 2003.[22]
Bustamante elevated the matter to the CA via Petition for Certiorari,
alleging that the NLRC erred
I that the apparently restrictive conditions in the Kasunduan did not
IN DISMISSING PETITIONERS APPEAL FOR REASON NOT
STATED IN THE LABOR ARBITERS DECISION, BUT MAINLY
ON JURISDICTIONAL ISSUE;
II
84 | P a g e
IN DISREGARDING THE LAW AND PREVAILING
JURISPRUDENCE WHEN IT DECLARED THAT THE
RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS
DEFINITELY A MATTER WHICH IS BEYOND THE
PROTECTIVE MANTLE OF OUR LABOR LAWS.[23]
Bustamante insisted that despite the Kasunduan, the relationship
between him and Villamaria continued to be that of employer-
employee and as such, the Labor Arbiter had jurisdiction over his
complaint. He further alleged that it is common knowledge that
operators of passenger jeepneys (including taxis) pay their drivers not
on a regular monthly basis but on commission or boundary basis, or
even the boundary-hulog system. Bustamante asserted that he was
dismissed from employment without any lawful or just cause and
without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof
of their employer-employee relationship. He further pointed out that
the Dinglasan case pertains to the boundary system and not the
boundary-hulog system, hence inapplicable in the instant case. He
argued that upon the execution of the Kasunduan, the juridical tie
between him and Bustamante was transformed into a vendor-vendee
relationship. Noting that he was engaged in the manufacture and sale
of jeepneys and not in the business of transporting passengers for
consideration, Villamaria contended that the daily fees which
Bustmante paid were actually periodic installments for the the vehicle
and were not the same fees as understood in the boundary system. He
added that the boundary-hulog plan was basically a scheme to help the
driver-buyer earn money and eventually pay for the unit in full, and for
the owner to profit not from the daily earnings of the driver-buyer but
from the purchase price of the unit sold. Villamaria further asserted
mean that the means and method of driver-buyers conduct was
controlled, but were mere ways to preserve the vehicle for the benefit
of both parties: Villamaria would be able to collect the agreed
purchase price, while Bustamante would be assured that the vehicle
would still be in good running condition even after four
years. Moreover, the right of vendor to impose certain conditions on
the buyer should be respected until full ownership of the property is
vested on the latter. Villamaria insisted that the parallel circumstances
obtaining in Singer Sewing Machine Company v. Drilon[24] has
analogous application to the instant issue.
In its Decision[25] dated August 30, 2004, the CA reversed and set
aside the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the
impugned resolutions of the NLRC must be, as they are hereby
are, REVERSED AND SET ASIDE, and judgment entered in favor
of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner
Jerry Bustamante separation pay computed from the time of his
employment up to the time of termination based on the prevailing
minimum wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to pay
petitioner Jerry Bustamante back wages computed from the time of his
dismissal up to March 2001 based on the prevailing minimum wage at
the time of his dismissal.
Without Costs.
SO ORDERED.[26]
The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamantes complaint. Under the Kasunduan, the relationship
between him and Villamaria was dual: that of vendor-vendee and
employer-employee. The CA ratiocinated that Villamarias exercise of
control over Bustamantes conduct in operating the jeepney is
inconsistent with the formers claim that he was not engaged in the
85 | P a g e
transportation business. There was no evidence that petitioner was
allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not
mentioned in the Kasunduan, it did not mean that Villamaria could not
exercise it. It explained that the existence of an employment
relationship did not depend on how the worker was paid but on the
presence or absence of control over the means and method of the
employees work. In this case, Villamarias directives (to drive
carefully, wear an identification card, don decent attire, park the
vehicle in his garage, and to inform him about provincial trips, etc.)
was a means to control the way in which Bustamante was to go about
his work. In view of Villamarias supervision and control as employer,
the fact that the boundary represented installment payments of the
purchase price on the jeepney did not remove the parties employer-
employee relationship.
While the appellate court recognized that a weeks default in paying the
boundary-hulog constituted an additional cause for terminating
Bustamantes employment, it held that the latter was illegally
dismissed. According to the CA, assuming that Bustamante failed to
make the required payments as claimed by Villamaria, the latter
nevertheless failed to take steps to recover the unit and waited for
Bustamante to abandon it. It also pointed out that Villamaria neither
submitted any police report to support his claim that the vehicle
figured in a mishap nor presented the affidavit of the gas station guard
to substantiate the claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and
filed, on September 17, 2004, a motion for reconsideration
thereof. The CA denied the motion in a Resolution[27] dated November
2, 2004, and Villamaria received a copy thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for
review on certiorari under Rule 65 of the Rules of Court, alleging that
the CA committed grave abuse of its discretion amounting to excess or
lack of jurisdiction in reversing the decision of the Labor Arbiter and
the NLRC. He claims that the CA erred in ruling that the juridical
relationship between him and respondent under the Kasunduan was a
combination of employer-employee and vendor-vendee
relationships. The terms and conditions of the Kasunduan clearly state
that he and respondent Bustamante had entered into a conditional deed
of sale over the jeepney; as such, their employer-employee relationship
had been transformed into that of vendor-vendee. Petitioner insists that
he had the right to reserve his title on the jeepney until after the
purchase price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate
remedy of petitioner was an appeal via a petition for review
on certiorari under Rule 45 of the Rules of Court and not a special
civil action of certiorari under Rule 65. He argues that petitioner failed
to establish that the CA committed grave abuse of its discretion
amounting to excess or lack of jurisdiction in its decision, as the said
ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by
petitioner which provides for a boundary-hulog scheme was a devious
circumvention of the Labor Code of the Philippines. Respondent
insists that his juridical relationship with petitioner is that of employer-
employee because he was engaged to perform activities which were
necessary or desirable in the usual business of petitioner, his employer.
In his Reply, petitioner avers that the Rules of Procedure should be
liberally construed in his favor; hence, it behooves the Court to resolve
the merits of his petition.
We agree with respondents contention that the remedy of petitioner
from the CA decision was to file a petition for review
on certiorari under Rule 45 of the Rules of Court and not the
independent action of certiorari under Rule 65. Petitioner had 15 days
from receipt of the CA resolution denying his motion for the
reconsideration within which to file the petition under Rule 45.[28] But
instead of doing so, he filed a petition for certiorari under Rule
65 on November 22, 2004, which did not, however, suspend the
86 | P a g e
running of the 15-day reglementary period; consequently, the CA
decision became final and executory upon the lapse of the
reglementary period for appeal. Thus, on this procedural lapse, the
instant petition stands to be dismissed.[29]
It must be stressed that the recourse to a special civil action under Rule
65 of the Rules of Court is proscribed by the remedy of appeal under
Rule 45. As the Court elaborated in Tomas Claudio Memorial College,
Inc. v. Court of Appeals:[30]
We agree that the remedy of the aggrieved party from a decision or
final resolution of the CA is to file a petition for review
on certiorari under Rule 45 of the Rules of Court, as amended, on
questions of facts or issues of law within fifteen days from notice of
the said resolution. Otherwise, the decision of the CA shall become
final and executory. The remedy under Rule 45 of the Rules of Court
is a mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review
is not a matter of right but is a matter of judicial discretion. The
aggrieved party may, however, assail the decision of the CA via a
petition for certiorari under Rule 65 of the Rules of Court within sixty
days from notice of the decision of the CA or its resolution denying
the motion for reconsideration of the same. This is based on the
premise that in issuing the assailed decision and resolution, the CA
acted with grave abuse of discretion, amounting to excess or lack of
jurisdiction and there is no plain, speedy and adequate remedy in the
ordinary course of law. A remedy is considered plain, speedy and
adequate if it will promptly relieve the petitioner from the injurious
effect of the judgment and the acts of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if
appeal is available, for the remedies of appeal and certiorari are
mutually exclusive and not alternative or successive. The aggrieved
party is, likewise, barred from filing a petition for certiorari if the
remedy of appeal is lost through his negligence. A petition
for certiorari is an original action and does not interrupt the course of
the principal case unless a temporary restraining order or a writ of
preliminary injunction has been issued against the public respondent
from further proceeding. A petition for certiorari must be based on
jurisdictional grounds because, as long as the respondent court acted
within its jurisdiction, any error committed by it will amount to
nothing more than an error of judgment which may be corrected or
reviewed only by appeal.[31]
However, we have also ruled that a petition for certiorari under Rule
65 may be considered as filed under Rule 45, conformably with the
principle that rules of procedure are to be construed liberally, provided
that the petition is filed within the reglementary period under Section
2, Rule 45 of the Rules of Court, and where valid and compelling
circumstances warrant that the petition be resolved on its merits.[32] In
this case, the petition was filed within the reglementary period and
petitioner has raised an issue of substance: whether the existence of a
boundary-hulog agreement negates the employer-employee
relationship between the vendor and vendee, and, as a corollary,
whether the Labor Arbiter has jurisdiction over a complaint for illegal
dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof,
as well as, which court or agency of the government has jurisdiction
over the same, are determined by the material allegations of the
complaint in relation to the law involved and the character of the
reliefs prayed for, whether or not the complainant/plaintiff is entitled
to any or all of such reliefs.[33] A prayer or demand for relief is not part
of the petition of the cause of action; nor does it enlarge the cause of
action stated or change the legal effect of what is alleged.[34] In
determining which body has jurisdiction over a case, the better policy
is to consider not only the status or relationship of the parties but also
the nature of the action that is the subject of their controversy.[35]
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:
87 | P a g e
x x x (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence
of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wage, rates of pay, hours of work, and
other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relationship, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over
all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements, and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements.
In the foregoing cases, an employer-employee relationship is an
indispensable jurisdictional requisite.[36] The jurisdiction of Labor
Arbiters and the NLRC under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes
or their collective bargaining agreement.[37] Not every dispute between
an employer and employee involves matters that only the Labor
Arbiter and the NLRC can resolve in the exercise of their adjudicatory
or quasi-judicial powers. Actions between employers and employees
where the employer-employee relationship is merely incidental is
within the exclusive original jurisdiction of the regular
courts.[38] When the principal relief is to be granted under labor
legislation or a collective bargaining agreement, the case falls within
the exclusive jurisdiction of the Labor Arbiter and the NLRC even
though a claim for damages might be asserted as an incident to such
claim.[39]
We agree with the ruling of the CA that, under the boundary-
hulog scheme incorporated in the Kasunduan, a dual juridical
relationship was created between petitioner and respondent: that of
employer-employee and vendor-vendee. The Kasunduan did not
extinguish the employer-employee relationship of the parties extant
before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v.
Dinglasan[40] that the jeepney owner/operator-driver relationship under
the boundary system is that of employer-employee and not lessor-
lessee. This doctrine was affirmed, under similar factual settings,
in Magboo v. Bernardo[41] and Lantaco, Sr. v. Llamas,[42] and was
analogously applied to govern the relationships between auto-
calesa owner/operator and driver,[43] bus owner/operator and
conductor,[44] and taxi owner/operator and driver.[45]
The boundary system is a scheme by an owner/operator engaged in
transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latters daily earnings are
remitted to the owner/operator less the excess of the boundary which
represents the drivers compensation. Under this system, the
88 | P a g e
owner/operator exercises control and supervision over the driver. It is
unlike in lease of chattels where the lessor loses complete control over
the chattel leased but the lessee is still ultimately responsible for the
consequences of its use. The management of the business is still in the
hands of the owner/operator, who, being the holder of the certificate of
public convenience, must see to it that the driver follows the route
prescribed by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations. The fact that the
driver does not receive fixed wages but only the excess of the
boundary given to the owner/operator is not sufficient to change the
relationship between them. Indubitably, the driver performs activities
which are usually necessary or desirable in the usual business or trade
of the owner/operator.[46]
Under the Kasunduan, respondent was required to remit P550.00 daily
to petitioner, an amount which represented the boundary of petitioner
as well as respondents partial payment (hulog) of the purchase price of
the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his
daily wage. Thus, the daily remittances also had a dual purpose: that of
petitioners boundary and respondents partial payment (hulog) for the
vehicle. This dual purpose was expressly stated in the Kasunduan. The
well-settled rule is that an obligation is not novated by an instrument
that expressly recognizes the old one, changes only the terms of
payment, and adds other obligations not incompatible with the old
provisions or where the new contract merely supplements the previous
one. [47] The two obligations of the respondent to remit to petitioner the
boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine
the contract itself, keeping in mind that when the terms of the
agreement are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations shall
prevail.[48] The intention of the contracting parties should be
ascertained by looking at the words used to project their intention, that
is, all the words, not just a particular word or two or more words
standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly.[49] The parts and clauses
must be interpreted in relation to one another to give effect to the
whole. The legal effect of a contract is to be determined from the
whole read together.[50]
Under the Kasunduan, petitioner retained supervision and control over
the conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng
boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG
PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG
UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG
IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o
pangangalakal sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG
IKALAWANG PANIG sa mga bagay na makapagdudulot ng
kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng
UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang
maglagay ng ID Card sa harap ng windshield upang sa pamamagitan
nito ay madaliang malaman kung ang nagmamaneho ay awtorisado
ng VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga
ng] multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit
ang ID card sa wastong lugar o anuman kasalanan o kapabayaan.
89 | P a g e
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang
materyales o piyesa na papalitan ng nasira o nawala ito dahil sa
kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang
hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang
nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang
ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG
IKALAWANG PANIG ay obligadong itawag ito muna sa
VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na
awtorisado ng VILLAMARIA MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa
panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas,
naka short pants at nakasando lamang. Dapat ang nagmamaneho ay
laging nasa maayos ang kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado
niyang driver ay magpapakita ng magandang asal sa mga pasaheros
at hindi dapat magsasalita ng masama kung sakali man may
pasaherong pilosopo upang maiwasan ang anumang kaguluhan na
maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG
ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw
ay ang opisina ng VILLAMARIA MOTORS ang may karapatang
mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng
responsibilidad. Ang halagang dapat bayaran sa opisina ay may
karagdagang multa ng P50.00 sa araw-araw na ito ay nasa
pangangasiwa ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang
ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa
rehistro, comprehensive insurance taon-taon at kahit anong uri ng
aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG
PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo
sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa
tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang
anumang mungkahi sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat
ng mga patakaran na magkakaroon ng pagbabago o karagdagan sa
mga darating na panahon at hindi magiging hadlang sa lahat ng mga
balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at
ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging
buwaya sa pasahero upang hindi kainisan ng kapwa driver at
maiwasan ang pagkakasangkot sa anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang
kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi
naman ay sisikapin mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin
ng dalawa o higit pang araw sa lalawigan ay dapat lamang na
ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan
ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang
pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang
aksidente.
90 | P a g e
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon
sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay
iparating agad ito sa kinauukulan at iwasan na iparating ito kung
[kani-kanino] lamang upang maiwasan ang anumang usapin.
Magsadya agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso
kong sinasang-ayunan at buong sikap na pangangalagaan ng
TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at
gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa.[51]
The parties expressly agreed that petitioner, as vendor, and respondent,
as vendee, entered into a contract to sell the jeepney on a daily
installment basis of P550.00 payable in four years and that petitioner
would thereafter become its owner. A contract is one of conditional
sale, oftentimes referred to as contract to sell, if the ownership or title
over the
property sold is retained by the vendor, and is not passed to the vendee
unless and until there is full payment of the purchase price and/or upon
faithful compliance with the other terms and conditions that may
lawfully be stipulated.[52] Such payment or satisfaction of other
preconditions, as the case may be, is a positive suspensive condition,
the failure of which is not a breach of contract, casual or serious, but
simply an event that would prevent the obligation of the vendor to
convey title from acquiring binding force.[53] Stated differently, the
efficacy or obligatory force of the vendor's obligation to transfer title is
subordinated to the happening of a future and uncertain event so that if
the suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed.[54] The vendor may
extrajudicially terminate the operation of the contract, refuse
conveyance, and retain the sums or installments already received,
where such rights are expressly provided for.[55]
Under the boundary-hulog scheme, petitioner retained ownership of
the jeepney although its material possession was vested in respondent
as its driver. In case respondent failed to make his P550.00 daily
installment payment for a week, the agreement would be of no force
and effect and respondent would have to return the jeepney to
petitioner; the employer-employee relationship would likewise be
terminated unless petitioner would allow respondent to continue
driving the jeepney on a boundary basis of P550.00 daily despite the
termination of their vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner
and respondent was not negated by the foregoing stipulation in
the Kasunduan, considering that petitioner retained control of
respondents conduct as driver of the vehicle. As correctly ruled by the
CA:
The exercise of control by private respondent over petitioners conduct
in operating the jeepney he was driving is inconsistent with private
respondents claim that he is, or was, not engaged in the transportation
business; that, even if petitioner was allowed to let some other person
drive the unit, it was not shown that he did so; that the existence of an
employment relation is not dependent on how the worker is paid but
on the presence or absence of control over the means and method of
the work; that the amount earned in excess of the boundary hulog is
equivalent to wages; and that the fact that the power of dismissal was
not mentioned in the Kasunduan did not mean that private respondent
never exercised such power, or could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or
to wear an identification card, or to don a decent attire, or to park the
vehicle in Villamaria Motors garage, or to inform Villamaria Motors
about the fact that the unit would be going out to the province for
two days of more, or to drive the unit carefully, etc. necessarily related
to control over the means by which the petitioner was to go about his
work; that the ruling applicable here is not Singer Sewing
Machine but National Labor Union since the latter case involved
jeepney owners/operators and jeepney drivers, and that the fact that the
boundary here represented installment payment of the purchase price
on the jeepney did not withdraw the relationship from that of
employer-employee, in view of the overt presence of supervision and
control by the employer.[56]
91 | P a g e
Neither is such juridical relationship negated by petitioners claim that
the terms and conditions in the Kasunduan relative to respondents
behavior and deportment as driver was for his and respondents benefit:
to insure that respondent would be able to pay the requisite daily
installment of P550.00, and that the vehicle would still be in good
condition despite the lapse of four years. What is primordial is that
petitioner retained control over the conduct of the respondent as driver
of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the
franchise, is entitled to exercise supervision and control over the
respondent, by seeing to it that the route provided in his franchise, and
the rules and regulations of the Land Transportation Regulatory Board
are duly complied with. Moreover, in a business establishment, an
identification card is usually provided not just as a security measure
but to mainly identify the holder thereof as a bona fide employee of
the firm who issues it.[57]
As respondents employer, it was the burden of petitioner to prove that
respondents termination from employment was for a lawful or just
cause, or, at the very least, that respondent failed to make his daily
remittances of P550.00 as boundary. However, petitioner failed to do
so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected
in accordance with law. The just and authorized causes for termination
of employment are enumerated under Articles 282, 283 and 284 of the
Labor Code.
Parenthetically, given the peculiarity of the situation of the parties
here, the default in the remittance of the boundary hulog for one week
or longer may be considered an additional cause for termination of
employment. The reason is because the Kasunduan would be of no
force and effect in the event that the purchaser failed to remit the
boundary hulog for one week. The Kasunduan in this case pertinently
stipulates:

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol
pa.
Moreover, well-settled is the rule that, the employer has the burden of
proving that the dismissal of an employee is for a just cause. The
failure of the employer to discharge this burden means that the
dismissal is not justified and that the employee is entitled to
reinstatement and back wages.
In the case at bench, private respondent in his position paper before the
Labor Arbiter, alleged that petitioner failed to pay the miscellaneous
fee of P10,000.00 and the yearly registration of the unit; that petitioner
also stopped remitting the boundary hulog, prompting him (private
respondent) to issue a Paalala, which petitioner however ignored; that
petitioner even brought the unit to his (petitioners) province without
informing him (private respondent) about it; and that petitioner
eventually abandoned the vehicle at a gasoline station after figuring in
an accident. But private respondent failed to substantiate these
allegations with solid, sufficient proof. Notably, private respondents
allegation viz, that he retrieved the vehicle from the gas station, where
petitioner abandoned it, contradicted his statement in the Paalala that
he would enforce the provision (in the Kasunduan) to the effect that
default in the remittance of the boundary hulog for one week would
result in the forfeiture of the unit. The Paalala reads as follows:
Sa lahat ng mga kumukuha ng sasakyan
Sa pamamagitan ng BOUNDARY HULOG
Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan
particular na ang paragrapo 13 na nagsasaad na kung hindi kayo
makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa
92 | P a g e
ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng
wala ng paghahabol pa.
Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin
na pong ipatutupad ang nasabing Kasunduan kayat aking pinaaalala
sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang
maiwasan natin ito.
Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang
hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli
ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo
pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan
ang naging dahilan ng pagsampa ng kaso.
Sumasainyo
Attendance: 8/27/99
(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR.
If it were true that petitioner did not remit the boundary hulog for one
week or more, why did private respondent not forthwith take steps to
recover the unit, and why did he have to wait for petitioner to abandon
it?
On another point, private respondent did not submit any police report
to support his claim that petitioner really figured in a vehicular mishap.
Neither did he present the affidavit of the guard from the gas station to
substantiate his claim that petitioner abandoned the unit there.[58]
Petitioners claim that he opted not to terminate the employment of
respondent because of magnanimity is negated by his (petitioners) own
evidence that he took the jeepney from the respondent only on July 24,
2000.
IN LIGHT OF ALL THE FOREGOING, the petition
is DENIED. The decision of the Court of Appeals in CA-G.R. SP No.
78720 is AFFIRMED. Costs against petitioner.
SO ORDERED.
BONIFACIO ANINO, RICARDO NAVARRO, HENRY
FILOTEO, DAVID DAUGDAUG, EDGARDO CEREDON and
ALAN BALADYA, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, HINATUAN MINING
CORPORATION and FEDERICO B. GANIGAN, respondents.
DECISION
PANGANIBAN, J.:
Were petitioners validly retrenched? In answering this question in the
negative, the Court adheres to the doctrine laid down in Lopez Sugar
Corporation vs. Federation of Free Workers[1] and reiterated very
recently in Somerville Stainless Steel Corporation vs. NLRC,[2] listing
the basic requisites that employers must prove with substantial
evidence to justify the retrenchment of their employees.
The Case
This is a petition for review under Rule 65 of the Rules of Court
seeking to set aside the August 22, 1995 Decision[3] and October 27,
1995 Resolution[4] of the National Labor Relations Commission[5] in
NLRC CA No. M-002292-95. The dispositive portion of the
challenged Decision reads:[6]
WHEREFORE, the assailed decision is [m]odified in that the finding
of illegal dismissal is [v]acated and [s]et [a]side. Complainants Motion
for [R]einstatement is [d]enied for lack of merit.
The assailed Resolution denied petitioners motion for reconsideration.
The Facts
Adopted by the NLRC were these factual antecedents related by the
labor arbiter:
Complainants allege that they are employees of respondent Hinatuan
Mining Corporation (HMC) holding supervisory positions. Sometime
in September 1993, complainants planned the formation of a
93 | P a g e
supervisors union with HMC. The plan was received enthusiastically
by practically all employees with supervisory rank, and shortly
thereafter the HINATUAN MINING SUPERVISORY UNION
(HIMSU) was formally organized and registered with the DOLE
Region X under Registration No. 1000-9320-43. Complainants Anino,
Navarro, Daug-daug and Filoteo were elected as President, Vice
President, PIO and Director, respectively. Complainants Baladja [sic]
and Ceredon though not elected officers of the union were nevertheless
active members of the union.
On or about 03 November 1993, HIMSU formally notified the
company of its legal existence through a letter addressed to
SALVADOR B. ZAMORA III, President of respondent HMC. It
formally informed the company of its desire for a collective bargaining
agreement and submitted its proposals therefor under letter dated 16
November 1993, which again was addressed to the companys
President, Hon. Salvador B. Zamora III, Attention: Messrs. Federico
B. Ganigan, Vice President-Operation and Jose T. Nacorda, Jr., Vice
President-Finance.
The company, complainant claims, completely ignored the unions
proposals and did not answer HIMSU about it, which constrained the
union to file an unfair labor practice case against HMC on 13 May
1994. In order to weaken and if possible destroy the union,
respondents, in the guise of retrenchment, dismissed the complainants
who are the active leaders of the union under letter dated 16 June
1994. Complainants aver that their dismissal was done with malicious
intent to cause them and the union damage for their legitimate exercise
of the right to self-organization, in open defiance of Art. 248 of the
Labor Code.
Because of their dismissal, complainants state that they were deprived
of their salaries, and suffered moral damages for mental anguish,
serious anxiety, social humiliation, besmirched reputation and other
similar hurt which may be assessed at not less than P100,000.00
each. And in order to protect their rights and obtain redress for the
damage they sustained, complainants were compelled to engage the
services of counsel to file and prosecute this case, incurring thereby
expenses of litigation and attorneys fee in the sum of not less
than P50,000.00.
Complainants then pray that respondents: (a) be declared guilty of
unfair labor practices; (b) be ordered to reinstate complainants to their
former positions with backwages and to pay complainants jointly and
severally the amount of P150,000.00, as moral damages and litigation
and attorneys fees, respectively.
Respondents, in a MOTION TO DISMISS dated 31 August 1994,
allege, among other things, the following:
1. On August 1, 1994, complainants filed the instant complaint for
Unfair Labor Practice, Illegal Dismissal and Damages after
respondents implemented a retrenchment in line with the streamlining
or organizational structure in order to prevent further losses;
2. The retrenchment measures affected both the rank-and-file as well
as the supervisors and managerial staffs;
3. Moreover, the retrenchment is admitted by complainants (see
ANNEXES F to F-6 of their instant complaint), was done on June 16,
1994 with due notice to take effect thirty (30) days from receipt
thereof;
4. Above all, complainants had ACCEPTED/RECEIVED separation
pay equivalent to one (1) month pay for every year of service (more
superior than the law) plus other monetary benefits, and in
consideration of said separation pay and other benefits, complainants
executed a WAIVER and QUITCLAIM for value received and
evidenced by ANNEXES A to A-5 hereof;
5. The instant complaint was filed (on August 1, 1994) only after the
respondent had filed a Petition for Certification Election on June 16,
1994 with DOLE, Regional Office No. 10, Cagayan de Oro City, as
evidenced by the attached Petition received on June 16, 1994 at 1:55
PM, copy of said Petition is hereto attached as ANNEX B hereof, and
only after the initial hearing on July 21, 1994 of said Petition for
Certification Election. Counsel for complainants even
manifested/declared in open court that they were still filing a new
complaint for Unfair Labor Practice (this case) which manifestly
shows this is an after-thought in order to give semblance of credence
to their position/opposition to conduct a certification election;
6. That herein respondents replead and incorporate by reference all
pertinent arguments/pleadings as well as documents filed with this
94 | P a g e
Honorable Arbiter in relation with the earlier complaint for unfair
labor practice docketed as NLRC-SRAB Case No. 10-05-00081-94.
Respondents then MOVED and prayed that the instant complaint as
well as the reliefs sought therein filed as an afterthought be
DISMISSED for lack of merit.[7]
The Labor Arbiters Ruling
Finding no evidence substantiating private respondents theory of
retrenchment, Labor Arbiter Rogelio P. Legaspi held that the services
of petitioners were illegally terminated and thus ordered
their reinstatement and the grant of back wages. On the other hand,
neither was there any positive showing that petitioners were retrenched
purposely to weaken or destroy their union; hence, their claim of
unfair labor practice was dismissed.Likewise, their claim for damages
was denied by the arbiter, who reasoned that no fraud or bad faith was
committed by private respondents in dismissing them. The dispositive
portion of his Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring complainants dismissal illegal;
2. Ordering respondents to reinstate complainants to their former
positions without loss of seniority rights with full backwages and to
pay complainants attorneys fees equivalent to 10% of the total
monetary award.
Since complainants already received their separation benefits, the
same shall be deducted from their monetary award herein granted and
if the said award is not sufficient, from the salaries of herein
complainants.
For purposes of appeal, the bond is hereby fixed at P20,000.00.
Complainants other claims are dismissed for lack of merit.[8]
The NLRCs Decision
We quote in full the simplistic and abbreviated justification given by
the NLRC to its reversal of the labor arbiters ruling:
Records show that it was only after a period of two (2) months that six
(6) complainants/supervisors out of those retrenched challenged their
separation, and despite their having accepted and received
retrenchment pay, equivalent to the one (1) month pay for every year
of service plus other monetary benefits (Vol. 2, p. 3, supra). A
question is therefore raised on complainants actuations.
As regards the alleged financial difficulties encountered by
respondent, We take judicial notice that in one area of Mindanao, the
mining industry suffered economic difficulties. If small mining
cooperatives experienced the same fate, what more with those highly
mechanized establishments?[9]
With the foregoing dubious arguments, the NLRC rejected all claims
of the dismissed employees. Petitioners motion for reconsideration
was also denied. Thus, this petition.[10]
Issues
The following issues are raised by petitioners:
I the retrenchment was not an issue in the complaint filed by petitioners
Whether or not the National Labor Relations Commission committed
grave abuse of discretion amounting to lack or excess of its
jurisdiction when it absolved respondents from its [sic] duty to prove
losses as a just ground for retrenchment
II
Whether or not the National Labor Relations Commission likewise
exceeded its jurisdiction in recognizing the waivers/quitclaims
executed by petitioners as an effective bar to this complaint
III
Whether or not the National Labor Relations Commission abused its
discretion when it ordered the dismissal of the instant complaint and
totally disregarded the labor arbiters findings of facts and petitioners
motion for execution[11]
We shall initially take up the third issue and then revert to the first and
second, which are the crucial questions.
Also, the Court notes the solicitor generals Manifestation and Motion
in lieu of Comment,[12] supporting the contention of petitioners, who
argued inter alia:
Respondent Corporation cannot merely rely on the myopic inference
that since Republic Act No. 7729 reduced mining taxes from five
percent (5%) to one percent (1%) on a graduated basis, the mining
industry is in economic distress, hence it can facilely retrench its
employees. The enactment does not operate as a blanket authority for
any employer to dismiss its workers without observing the
requirements of the Labor Code, nay the 1987 Constitution. For
nothing in the words and provisions of R.A. 7729, entitled An Act
95 | P a g e
Reducing the Excise Tax Rate on Metallic and Non-Metallic Minerals
and Quarry Resources, Amending for the Purpose Section 151 (a) of
the National Internal Revenue Code, as amended, would show and
indicate the supposition advanced by respondent Corporation.
In its own Comment[13] dated July 20, 1997, Public Respondent NLRC
simplistically submits that this Court, not being a trier of facts, should
dismiss the petition, since it presents only factual questions, and thus
uphold the assailed Decision which is allegedly supported by
substantial evidence.
For its part, private respondent corporation avers[14] that the validity of
before the labor arbiter; that it merely exercised its management
prerogative when it resorted to retrenchment as a means of preventing
losses, a measure fully explained to all its employees; and that the
waivers/quitclaims freely and voluntarily executed by petitioners
constituted valid contracts, since they awarded benefits far greater than
those provided by law.
The Courts Ruling
The petition is impressed with merit. This case is an exception to the
general rule that findings of fact of the NLRC are to be accorded
respect and finality on appeal.[15] It is equally well-settled that this
Court will not uphold erroneous conclusions of the NLRC when it
reverses decisions of the labor arbiters or when the findings of facts,
from which its conclusions were based, are not supported by
substantial evidence.[16]
The Court finds occasion to remind courts and quasi-judicial bodies
that [a] decision should faithfully comply with Section 14, Article VIII
of the Constitution which provides that no decision shall be rendered
by any court [or quasi-judicial body] without expressing therein
clearly and distinctly the facts of the case and the law on which it is
based. x x x It is a requirement of due process and fair play that the
parties to a litigation be informed of how it was decided, with an
explanation of the factual and legal reasons that led to the conclusions
of the court [or quasi-judicial body]. A decision that does not clearly
and distinctly state the facts and the law on which it is based leaves the
parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible
errors of the court [or quasi-judicial body] for review by a higher
tribunal.[17]
In the present case, the NLRC was definitely wanting in the
observance of the aforesaid constitutional requirement. Its assailed
five-page Decision consisted of about three pages of quotation from
the labor arbiters decision, including the dispositive portion, and
barely a page (two short paragraphs of two sentences each) of its own
discussion of its reasons for reversing the arbiters findings. It merely
raised a doubt on the motive of the complaining employees and took
judicial notice that in one area of Mindanao, the mining industry
suffered economic difficulties. In affirming peremptorily the validity
of private respondents retrenchment program, it surmised that [i]f
small mining cooperatives experienced the same fate, what more with
those highly mechanized establishments.
Jurisprudence prescribes the minimum standards necessary to prove
the validity of a retrenchment.[18] Because, in the instant case, the
factual and legal bases of public respondents conclusions were bereft
of substantial evidence -- the quantum of proof in labor cases[19] -- its
disposition is manifestly a violation of the constitutional mandate and
an exercise of grave abuse of discretion. Such decision is a nullity.
First Issue:
Company Must Prove Imminent Losses to Justify Retrenchment
Retrenchment is resorted to by an employer because of losses in the
operation of a business occasioned by lack of work and considerable
reduction in the volume of business. It is a management prerogative
consistently recognized and affirmed by this Court,[20] subject only to
faithful compliance with the substantive and procedural requirements
laid down by law and jurisprudence.[21] The pertinent provision of the
Labor Code reads:
Art. 283. Closure of establishment and reduction of personnel. -- The
employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice
on the workers and the [Department] of Labor and Employment at
least one (1) month before the intended date thereof. In case of
96 | P a g e
termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to separation
pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year. (Italics supplied.)
To justify retrenchment, the following requisites must be complied
with: (a) the losses expected should be substantial and not merely de
minimis in extent; (b) the substantial losses apprehended must be
reasonably imminent; (c) the retrenchment must be reasonably
necessary and likely to effectively prevent the expected losses; and (d)
the alleged losses, if already incurred, and the expected imminent
losses sought to be forestalled must be proved by sufficient and
convincing evidence.[22]
In termination cases, the burden of proving that the dismissal was for a
valid or authorized cause rests upon the employer.[23] In the case at bar,
respondent corporation did not submit an iota of evidence to show
losses in its business operations and the economic havoc it would
sustain imminently. It merely claimed that retrenchment was
undertaken as a measure of self-preservation to prevent losses brought
about by the continuing decline of nickel prices and export volume in
the mining industry. Additionally, it alleged that the reduction of
excise taxes on mining from 5% to 1% on a graduated basis, as
provided under Republic Act No. 7729, was a clear recognition by the
government itself of the industrys worsening economic difficulties.
These bare statements of private respondents miserably fall short of
the requirements to show the validity of a retrenchment. For not every
loss incurred or expected justifies retrenchment.[24] In Central
Azucarera de la Carlota vs. NLRC,[25] for instance, the employer more
than merely cited the economic setback suffered by the sugar industry
as a whole to justify its retrenchment program; yet, the Court --
emphasizing the necessity of submitting adequate, credible and
persuasive evidence -- rebuffed the employers unsubstantiated claims
in the following manner:
A litany of woes, from a labor strike way back in 1982 to the various
crises endured by the sugar industry, droughts, the 1983 assassination
of former Senator Benigno Aquino, Jr., high crop loan interests,
spiralling prices of fertilizers and spare parts, the depression of sugar
prices in the world market, cutback in the U.S. sugar quota,
abandonment of productive areas because of the insurgency problem
and the absence of fair and consistent government policies may have
contributed to the unprecedented decline in sugar production in the
country, but there is no solid evidence that they translated
into specific and substantial losses that would necessitate
retrenchment. Just exactly what negative effects were borne by
petitioner as a result, petitioner failed to underscore.[26]
In Somerville vs. NLRC, we also stressed that not only should losses be
substantial but that retrenchment be reasonably necessary to avert such
losses. The employer must further prove that it expected no abatement
of such losses in the coming years. Thus:
In a nutshell, the law recognizes a companys right to retrench
employees when made necessary or compelled by economic factors
that would otherwise endanger its stability or existence. Unarguably,
retrenchment is only a measure of last resort when other less drastic
means have been tried and found to be inadequate.[27]
Furthermore, the passage of RA 7729 alone is certainly not a definite
and sufficient indication of respondent corporations actual and specific
financial standing. A tax rate reduction may simply be meant to
provide an incentive to the intended beneficiary. But in no
way is it an explicit and conclusive declaration of the financial
situation in every company engaged in such industry; much less does it
translate into a license to retrench personnel recklessly.
Even if, arguendo, the contentions of respondent corporation are
accepted at face value, they still fail to satisfy the jurisprudential
requirements that further or expected losses must be substantial and
reasonably imminent; and the dismissal of employees, reasonably
necessary and likely to be effective in preventing the expected
losses. Respondent corporation has not even shown any trend or
circumstance beyond its control that is likely to result in continued or
97 | P a g e
future losses.[28] As cited by petitioners, the general standards by
which the acts of the employer must be appraised were laid down
in Lopez Sugar Corporation, thus:
Firstly, the losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be forestalled by
retrenchment is clearly shown to be insubstantial and inconsequential
in character, the bonafide nature of the retrenchment would appear to
be seriously in question. Secondly, the substantial loss apprehended
must be reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer. There should, in other
words, be a certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for the livelihood
of the employees retired or otherwise laid-off. Because of the
consequential nature of retrenchment, it must, thirdly, be reasonably
necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other costs than labor
costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and
perquisites or so-called golden parachutes, can scarcely claim to be
retrenching in good faith to avoid losses. To impart operational
meaning to the constitutional policy of providing full protection to
labor, the employers prerogative to bring down labor costs by
retrenching must be exercised essentially as a measure of last resort,
after less drastic means -- e.g., reduction of both management and
rank-and-file bonuses and salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing and advertising
costs, etc. -- have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing evidence: any less
exacting standard of proof would render too easy the abuse of this
ground for termination of services of employees.[29]
Ineluctably, with the private respondents manifest failure to present
sufficient, convincing and competent evidence, no valid retrenchment
may be allowed.
Second Issue:
Quitclaims Not a Bar to a Complaint for Illegal Dismissal
Private respondents also insist that petitioners acceptance of
separation benefits and execution of waivers and quitclaims negate
their claim of illegal dismissal. The waivers and quitclaims allegedly
constitute valid and binding contracts between petitioners and
respondent corporation.
The recognized and accepted doctrine is that a dismissed employee
who has accepted separation pay is not necessarily estopped from
challenging the validity of his or her dismissal.[30] Neither does it
relieve the employer of legal obligations.[31]
Waivers and quitclaims, on the other hand, are generally looked upon
with disfavor. In Agoy vs. NLRC,[32] the Court explained that the
employees acknowledgment of his notice of termination without any
outright objection does not altogether mean voluntariness on his
part. Neither do the execution of a final settlement and the receipt of
amounts agreed upon foreclose his right to pursue a claim for
illegal dismissal or unfair laborpractice. The reasons for such policy
were laid down in AFP Mutual Benefit Association, Inc. vs. AFP-
MBAI-EU[33] as follows:
In labor jurisprudence, it is well established that quitclaims and/or
complete releases executed by the employees do not estop them from
pursuing their claims arising from the unfair labor practice of the
employer. The basic reason for this is that such quitclaims and/or
complete releases are against public policy and, therefore, null and
void. The acceptance of termination pay does not divest a laborer of
the right to prosecute his employer for unfair labor practice
acts. (Cario vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 163;
Philippine Sugar Institute vs. CIR, L-13475, September 29, 1960, 109
Phil. 452; Mercury Drug Co. vs. CIR, L-23357, April 30, 1974, 56
SCRA 694, 704)
In the Cario case, supra, the Supreme Court, speaking thru Justice
Sanchez, said:
Acceptance of those benefits would not amount to estoppel. The
reason is plain. Employer and employee, obviously, do not stand on
the same footing. The employer drove the employee to the wall. The
latter must have to get hold of money. Because, out of job, he had to
face the harsh necessities of life. He thus found himself in no position
98 | P a g e
to resist money proffered. His, then, is a case of adherence, not of
choice. One thing sure, however, is that petitioners did not relent their
claim. They pressed it. They are deemed not to have waived any of
their rights. Renuntiatio non praesumitur. (Italics supplied)
Private respondents further claim and petitioners do not dispute that
the reinstatement of petitioners to their previous positions is not
possible anymore, because those positions no longer
exist. If reinstatement to a former
position, or one substantially equivalent thereto, is not feasible
anymore, the employees are entitled to the grant of separation pay and
full back wages.[34] Separation pay shall be equivalent to at least one
month salary or one month salary for every year of service, whichever
is higher, a fraction of six months being considered as one whole
year.[35] It shall be computed from the date the petitioners were
employed by private respondent until this Decision becomes final and
executory.
Finally, we note that Private Respondent Federico B. Ganigan was
impleaded in his capacity as vice president of respondent
corporation. While the president of the erring company may be held
jointly and severally liable for the obligations of the latter to its
dismissed employees,[36] such solidary liability does not extend to the
vice president of the company.[37] Absent any proof of the extent of the
participation of Respondent Ganigan in the formulation and the
implementation of management policies and programs, he cannot be
held financially liable for the illegal dismissal of petitioners.
WHEREFORE, the petition is hereby GRANTED and the challenged
NLRC Decision is SET ASIDE. The Decision of Labor Arbiter
Rogelio P. Legaspi in NLRC Case No. SRAB-10-08-00130-94 is
REINSTATED, except that Respondent Federico B. Ganigan shall not
be liable for petitioners monetary claims. In lieu of reinstating
petitioners, Respondent Hinatuan Mining Corporation shall PAY them
separation benefits, computed from the time each of the petitioners
was employed until this Decision becomes final and executory. No
pronouncement as to costs.
SO ORDERED.
OSCAR VILLAMARIA, JR. G.R. No. 165881
Petitioner,
Present: jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day
to Villamaria as boundary and kept the residue of his daily earnings as
PANGANIBAN, C.J., compensation for driving the vehicle. In August 1997, Villamaria
Chairperson, verbally agreed to sell the jeepney to Bustamante under the boundary-
- versus - YNARES-SANTIAGO, hulog scheme, where Bustamante would remit to Villarama P550.00 a
AUSTRIA-MARTINEZ. day for a period of four years; Bustamante would then become the
CALLEJO, SR., and owner of the vehicle and continue to drive the same under Villamarias
CHICO-NAZARIO, JJ. franchise. It was also agreed that Bustamante would make a
downpayment of P10,000.00.
COURT OF APPEALS and Promulgated:
JERRY V. BUSTAMANTE, On August 7, 1997, Villamaria executed a contract entitled Kasunduan
Respondents. April 19, 2006 ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog[5] over
the passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-
x------------------------------------------------------------------------------------ 38168-C and Motor No. SL-26647. The parties agreed that if
-----x Bustamante failed to pay the boundary-hulog for three days,
Villamaria Motors would hold on to the vehicle until Bustamante paid
DECISION his arrears, including a penalty of P50.00 a day; in case Bustamante
failed to remit the daily boundary-hulog for a period of one week,
the Kasunduan would cease to have legal effect and Bustamante would
CALLEJO, SR., J.: have to return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the

Before us is a Petition for Review on Certiorari under Rule 65 of the
Revised Rules of Court assailing the Decision[1] and Resolution[2] of
the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside
the Resolution[3] of the National Labor Relations Commission (NLRC)
in NCR-30-08-03247-00, which in turn affirmed the Decision[4] of the
Labor Arbiter dismissing the complaint filed by respondent Jerry V.
Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a
sole proprietorship engaged in assembling passenger jeepneys with a
public utility franchise to operate along the Baclaran-Sucat route. By
1995, Villamaria stopped assembling jeepneys and retained only nine,
four of which he operated by employing drivers on a boundary
basis. One of those drivers was respondent Bustamante who drove the
99 | P a g e
vehicle without prior authority from Villamaria Motors. Thus,
Bustamante was authorized to operate the vehicle to transport
passengers only and not for other purposes. He was also required to
display an identification card in front of the windshield of the vehicle;
in case of failure to do so, any fine that may be imposed by
government authorities would be charged against his
account. Bustamante further obliged himself to pay for the cost of
replacing any parts of the vehicle that would be lost or damaged due to
his negligence. In case the vehicle sustained serious damage,
Bustamante was obliged to notify Villamaria Motors before
commencing repairs. Bustamante was not allowed to wear slippers,
short pants or undershirts while driving. He was required to be polite
and respectful towards the passengers. He was also obliged to notify
Villamaria Motors in case the vehicle was leased for two or more days
and was required to attend any meetings which may be called from
time to time. Aside from the boundary-hulog, Bustamante was also
obliged to pay for the annual registration fees of the vehicle and the
premium for the vehicles comprehensive insurance. Bustamante
promised to strictly comply with the rules and regulations imposed by
Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and
control of Villamaria. As agreed upon, he made daily remittances
of P550.00 in payment of the purchase price of the
vehicle. Bustamante failed to pay for the annual registration fees of the
vehicle, but Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same
arrangement with Villamaria Motors failed to pay their respective
boundary-hulog. This prompted Villamaria to serve
a Paalala,[6]reminding them that under the Kasunduan, failure to pay
the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He warned
the drivers that the Kasunduan would henceforth be strictly enforced
and urged them to comply with their obligation to avoid litigation.
On July 24, 2000, Villamaria took back the jeepney driven by
Bustamante and barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint[7] for Illegal
Dismissal against Villamaria and his wife Teresita. In his Position
Paper,[8] Bustamante alleged that he was employed by Villamaria in
July 1996 under the boundary system, where he was required to
remit P450.00 a day. After one year of continuously working for them,
the spouses Villamaria presented the Kasunduan for his signature, with
the assurance that he (Bustamante) would own the jeepney by March
2001 after paying P550.00 in daily installments and that he would
thereafter continue driving the vehicle along the same route under the
same franchise. He further narrated that in July 2000, he informed the
Villamaria spouses that the surplus engine of the jeepney needed to be
replaced, and was assured that it would be done. However, he was
later arrested and his drivers license was confiscated because
100 | P a g e
apparently, the replacement engine that was installed was taken from a
stolen vehicle. Due to negotiations with the apprehending authorities,
the jeepney was not impounded. The Villamaria spouses took the
jeepney from him on July 24, 2000, and he was no longer allowed to
drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully
prayed that judgment be rendered ordering the respondents, jointly and
severally, the following:
1. Reinstate complainant to his former position without loss of
seniority rights and execute a Deed of Sale in favor of the complainant
relative to the PUJ with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the amount
of P400.00 a day and other benefits computed from July 24, 2000 up
to the time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00
and P180,000.00 for the expenses incurred by the complainant in the
repair and maintenance of the subject jeep;
4. Ordering the respondents to refund the amount of One Hundred
(P100.00) Pesos per day counted from August 7, 1997 up to June 2000
or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorneys fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being
prayed for.[9]
In their Position Paper,[10] the spouses Villamaria admitted the
existence of the Kasunduan, but alleged that Bustamante failed to pay
the P10,000.00 downpayment and the vehicles annual registration
fees.They further alleged that Bustamante eventually failed to remit
the requisite boundary-hulog of P550.00 a day, which prompted them
to issue the Paalaala. Instead of complying with his obligations,
Bustamante stopped making his remittances despite his daily trips and
even brought the jeepney to the province without permission. Worse,
the jeepney figured in an accident and its license plate was
confiscated; Bustamante even abandoned the vehicle in a gasoline
station in Sucat, Paraaque City for two weeks. When the security
guard at the gasoline station requested that the vehicle be retrieved and
Teresita Villamaria asked Bustamante for the keys, Bustamante told
her: Di kunin ninyo. When the vehicle was finally retrieved, the tires
were worn, the alternator was gone, and the battery was no longer
working.
Citing the cases of Cathedral School of Technology v.
NLRC[11] and Canlubang Security Agency Corporation v. NLRC,[12] the
spouses Villamaria argued that Bustamante was not illegally dismissed
since the Kasunduan executed on August 7, 1997 transformed the
employer-employee relationship into that of vendor-vendee. Hence,
the spouses concluded, there was no legal basis to hold them liable for
illegal dismissal. They prayed that the case be dismissed for lack of
jurisdiction and patent lack of merit.
In his Reply,[13] Bustamante claimed that Villamaria exercised control
and supervision over the conduct of his employment. He maintained
that the rulings of the Court in National Labor Union v.
Dinglasan,[14] Magboo v. Bernardo,[15] and Citizen's League of Free
Workers v. Abbas[16] are germane to the issue as they define the nature
of the owner/operator-driver relationship under the boundary
system. He further reiterated that it was the Villamaria spouses who
presented the Kasunduan to him and that he conformed thereto only
upon their representation that he would own the vehicle after four
years.Moreover, it appeared that the Paalala was duly received by
him, as he, together with other drivers, was made to affix his signature
on a blank piece of paper purporting to be an attendance sheet.
101 | P a g e
On March 15, 2002, the Labor Arbiter rendered judgment[17] in favor
of the spouses Villamaria and ordered the complaint dismissed on the
following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as
the PAALALA, to prove their claim that complainant violated the terms
of their contract and afterwards abandoned the vehicle assigned to
him. As against the foregoing, [the] complaints (sic) mere allegations
to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to
damages and attorney's fees.[18]
Bustamante appealed the decision to the NLRC,[19] insisting that
the Kasunduan did not extinguish the employer-employee relationship
between him and Villamaria. While he did not receive fixed wages, he
kept only the excess of the boundary-hulog which he was required to
remit daily to Villamaria under the agreement. Bustamante maintained
that he remained an employee because he was engaged to perform
activities which were necessary or desirable to Villamarias trade or
business.
The NLRC rendered judgment[20] dismissing the appeal for lack of
merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby
DISMISSED for reasons not stated in the Labor Arbiter's decision but
mainly on a jurisdictional issue, there being none over the subject
matter of the controversy.[21]
The NLRC ruled that under the Kasunduan, the juridical relationship
between Bustamante and Villamaria was that of vendor and vendee,
hence, the Labor Arbiter had no jurisdiction over the
complaint.Bustamante filed a Motion for Reconsideration, which the
NLRC resolved to deny on May 30, 2003.[22]
Bustamante elevated the matter to the CA via Petition for Certiorari,
alleging that the NLRC erred

I that the apparently restrictive conditions in the Kasunduan did not
IN DISMISSING PETITIONERS APPEAL FOR REASON NOT
STATED IN THE LABOR ARBITERS DECISION, BUT MAINLY
ON JURISDICTIONAL ISSUE;
II
IN DISREGARDING THE LAW AND PREVAILING
JURISPRUDENCE WHEN IT DECLARED THAT THE
RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS
DEFINITELY A MATTER WHICH IS BEYOND THE
PROTECTIVE MANTLE OF OUR LABOR LAWS.[23]
Bustamante insisted that despite the Kasunduan, the relationship
between him and Villamaria continued to be that of employer-
employee and as such, the Labor Arbiter had jurisdiction over his
complaint. He further alleged that it is common knowledge that
operators of passenger jeepneys (including taxis) pay their drivers not
on a regular monthly basis but on commission or boundary basis, or
even the boundary-hulog system. Bustamante asserted that he was
dismissed from employment without any lawful or just cause and
without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof
of their employer-employee relationship. He further pointed out that
the Dinglasan case pertains to the boundary system and not the
boundary-hulog system, hence inapplicable in the instant case. He
argued that upon the execution of the Kasunduan, the juridical tie
between him and Bustamante was transformed into a vendor-vendee
relationship. Noting that he was engaged in the manufacture and sale
of jeepneys and not in the business of transporting passengers for
consideration, Villamaria contended that the daily fees which
Bustmante paid were actually periodic installments for the the vehicle
and were not the same fees as understood in the boundary system. He
added that the boundary-hulog plan was basically a scheme to help the
driver-buyer earn money and eventually pay for the unit in full, and for
the owner to profit not from the daily earnings of the driver-buyer but
102 | P a g e
from the purchase price of the unit sold. Villamaria further asserted
mean that the means and method of driver-buyers conduct was
controlled, but were mere ways to preserve the vehicle for the benefit
of both parties: Villamaria would be able to collect the agreed
purchase price, while Bustamante would be assured that the vehicle
would still be in good running condition even after four
years. Moreover, the right of vendor to impose certain conditions on
the buyer should be respected until full ownership of the property is
vested on the latter. Villamaria insisted that the parallel circumstances
obtaining in Singer Sewing Machine Company v. Drilon[24] has
analogous application to the instant issue.
In its Decision[25] dated August 30, 2004, the CA reversed and set
aside the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the
impugned resolutions of the NLRC must be, as they are hereby
are, REVERSED AND SET ASIDE, and judgment entered in favor
of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner
Jerry Bustamante separation pay computed from the time of his
employment up to the time of termination based on the prevailing
minimum wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to pay
petitioner Jerry Bustamante back wages computed from the time of his
dismissal up to March 2001 based on the prevailing minimum wage at
the time of his dismissal.
Without Costs.
SO ORDERED.[26]
The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamantes complaint. Under the Kasunduan, the relationship
between him and Villamaria was dual: that of vendor-vendee and
employer-employee. The CA ratiocinated that Villamarias exercise of
control over Bustamantes conduct in operating the jeepney is
inconsistent with the formers claim that he was not engaged in the
transportation business. There was no evidence that petitioner was
allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not
mentioned in the Kasunduan, it did not mean that Villamaria could not
exercise it. It explained that the existence of an employment
relationship did not depend on how the worker was paid but on the
presence or absence of control over the means and method of the
employees work. In this case, Villamarias directives (to drive
carefully, wear an identification card, don decent attire, park the
vehicle in his garage, and to inform him about provincial trips, etc.)
was a means to control the way in which Bustamante was to go about
his work. In view of Villamarias supervision and control as employer,
the fact that the boundary represented installment payments of the
purchase price on the jeepney did not remove the parties employer-
employee relationship.
While the appellate court recognized that a weeks default in paying the
boundary-hulog constituted an additional cause for terminating
Bustamantes employment, it held that the latter was illegally
dismissed. According to the CA, assuming that Bustamante failed to
make the required payments as claimed by Villamaria, the latter
nevertheless failed to take steps to recover the unit and waited for
Bustamante to abandon it. It also pointed out that Villamaria neither
submitted any police report to support his claim that the vehicle
figured in a mishap nor presented the affidavit of the gas station guard
to substantiate the claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and
filed, on September 17, 2004, a motion for reconsideration
103 | P a g e
thereof. The CA denied the motion in a Resolution[27] dated November
2, 2004, and Villamaria received a copy thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for
review on certiorari under Rule 65 of the Rules of Court, alleging that
the CA committed grave abuse of its discretion amounting to excess or
lack of jurisdiction in reversing the decision of the Labor Arbiter and
the NLRC. He claims that the CA erred in ruling that the juridical
relationship between him and respondent under the Kasunduan was a
combination of employer-employee and vendor-vendee
relationships. The terms and conditions of the Kasunduan clearly state
that he and respondent Bustamante had entered into a conditional deed
of sale over the jeepney; as such, their employer-employee relationship
had been transformed into that of vendor-vendee. Petitioner insists that
he had the right to reserve his title on the jeepney until after the
purchase price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate
remedy of petitioner was an appeal via a petition for review
on certiorari under Rule 45 of the Rules of Court and not a special
civil action of certiorari under Rule 65. He argues that petitioner failed
to establish that the CA committed grave abuse of its discretion
amounting to excess or lack of jurisdiction in its decision, as the said
ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by
petitioner which provides for a boundary-hulog scheme was a devious
circumvention of the Labor Code of the Philippines. Respondent
insists that his juridical relationship with petitioner is that of employer-
employee because he was engaged to perform activities which were
necessary or desirable in the usual business of petitioner, his employer.
In his Reply, petitioner avers that the Rules of Procedure should be
liberally construed in his favor; hence, it behooves the Court to resolve
the merits of his petition.
We agree with respondents contention that the remedy of petitioner
from the CA decision was to file a petition for review
on certiorari under Rule 45 of the Rules of Court and not the
independent action of certiorari under Rule 65. Petitioner had 15 days
from receipt of the CA resolution denying his motion for the
reconsideration within which to file the petition under Rule 45.[28] But
instead of doing so, he filed a petition for certiorari under Rule
65 on November 22, 2004, which did not, however, suspend the
running of the 15-day reglementary period; consequently, the CA
decision became final and executory upon the lapse of the
reglementary period for appeal. Thus, on this procedural lapse, the
instant petition stands to be dismissed.[29]
It must be stressed that the recourse to a special civil action under Rule
65 of the Rules of Court is proscribed by the remedy of appeal under
Rule 45. As the Court elaborated in Tomas Claudio Memorial College,
Inc. v. Court of Appeals:[30]
We agree that the remedy of the aggrieved party from a decision or
final resolution of the CA is to file a petition for review
on certiorari under Rule 45 of the Rules of Court, as amended, on
questions of facts or issues of law within fifteen days from notice of
the said resolution. Otherwise, the decision of the CA shall become
final and executory. The remedy under Rule 45 of the Rules of Court
is a mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review
is not a matter of right but is a matter of judicial discretion. The
aggrieved party may, however, assail the decision of the CA via a
petition for certiorari under Rule 65 of the Rules of Court within sixty
days from notice of the decision of the CA or its resolution denying
the motion for reconsideration of the same. This is based on the
premise that in issuing the assailed decision and resolution, the CA
acted with grave abuse of discretion, amounting to excess or lack of
jurisdiction and there is no plain, speedy and adequate remedy in the
ordinary course of law. A remedy is considered plain, speedy and
adequate if it will promptly relieve the petitioner from the injurious
effect of the judgment and the acts of the lower court.
104 | P a g e
The aggrieved party is proscribed from filing a petition for certiorari if
appeal is available, for the remedies of appeal and certiorari are
mutually exclusive and not alternative or successive. The aggrieved
party is, likewise, barred from filing a petition for certiorari if the
remedy of appeal is lost through his negligence. A petition
for certiorari is an original action and does not interrupt the course of
the principal case unless a temporary restraining order or a writ of
preliminary injunction has been issued against the public respondent
from further proceeding. A petition for certiorari must be based on
jurisdictional grounds because, as long as the respondent court acted
within its jurisdiction, any error committed by it will amount to
nothing more than an error of judgment which may be corrected or
reviewed only by appeal.[31]
However, we have also ruled that a petition for certiorari under Rule
65 may be considered as filed under Rule 45, conformably with the
principle that rules of procedure are to be construed liberally, provided
that the petition is filed within the reglementary period under Section
2, Rule 45 of the Rules of Court, and where valid and compelling
circumstances warrant that the petition be resolved on its merits.[32] In
this case, the petition was filed within the reglementary period and
petitioner has raised an issue of substance: whether the existence of a
boundary-hulog agreement negates the employer-employee
relationship between the vendor and vendee, and, as a corollary,
whether the Labor Arbiter has jurisdiction over a complaint for illegal
dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof,
as well as, which court or agency of the government has jurisdiction
over the same, are determined by the material allegations of the
complaint in relation to the law involved and the character of the
reliefs prayed for, whether or not the complainant/plaintiff is entitled
to any or all of such reliefs.[33] A prayer or demand for relief is not part
of the petition of the cause of action; nor does it enlarge the cause of
action stated or change the legal effect of what is alleged.[34] In
determining which body has jurisdiction over a case, the better policy
is to consider not only the status or relationship of the parties but also
the nature of the action that is the subject of their controversy.[35]
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence
of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wage, rates of pay, hours of work, and
other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relationship, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over
all cases decided by Labor Arbiters.
105 | P a g e
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements, and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements.
In the foregoing cases, an employer-employee relationship is an
indispensable jurisdictional requisite.[36] The jurisdiction of Labor
Arbiters and the NLRC under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes
or their collective bargaining agreement.[37] Not every dispute between
an employer and employee involves matters that only the Labor
Arbiter and the NLRC can resolve in the exercise of their adjudicatory
or quasi-judicial powers. Actions between employers and employees
where the employer-employee relationship is merely incidental is
within the exclusive original jurisdiction of the regular
courts.[38] When the principal relief is to be granted under labor
legislation or a collective bargaining agreement, the case falls within
the exclusive jurisdiction of the Labor Arbiter and the NLRC even
though a claim for damages might be asserted as an incident to such
claim.[39]
We agree with the ruling of the CA that, under the boundary-
hulog scheme incorporated in the Kasunduan, a dual juridical
relationship was created between petitioner and respondent: that of
employer-employee and vendor-vendee. The Kasunduan did not
extinguish the employer-employee relationship of the parties extant
before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v.
Dinglasan[40] that the jeepney owner/operator-driver relationship under
the boundary system is that of employer-employee and not lessor-
lessee. This doctrine was affirmed, under similar factual settings,
in Magboo v. Bernardo[41] and Lantaco, Sr. v. Llamas,[42] and was
analogously applied to govern the relationships between auto-
calesa owner/operator and driver,[43] bus owner/operator and
conductor,[44] and taxi owner/operator and driver.[45]
The boundary system is a scheme by an owner/operator engaged in
transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latters daily earnings are
remitted to the owner/operator less the excess of the boundary which
represents the drivers compensation. Under this system, the
owner/operator exercises control and supervision over the driver. It is
unlike in lease of chattels where the lessor loses complete control over
the chattel leased but the lessee is still ultimately responsible for the
consequences of its use. The management of the business is still in the
hands of the owner/operator, who, being the holder of the certificate of
public convenience, must see to it that the driver follows the route
prescribed by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations. The fact that the
driver does not receive fixed wages but only the excess of the
boundary given to the owner/operator is not sufficient to change the
relationship between them. Indubitably, the driver performs activities
which are usually necessary or desirable in the usual business or trade
of the owner/operator.[46]
Under the Kasunduan, respondent was required to remit P550.00 daily
to petitioner, an amount which represented the boundary of petitioner
as well as respondents partial payment (hulog) of the purchase price of
the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his
daily wage. Thus, the daily remittances also had a dual purpose: that of
petitioners boundary and respondents partial payment (hulog) for the
vehicle. This dual purpose was expressly stated in the Kasunduan. The
well-settled rule is that an obligation is not novated by an instrument
that expressly recognizes the old one, changes only the terms of
payment, and adds other obligations not incompatible with the old
provisions or where the new contract merely supplements the previous
one. [47] The two obligations of the respondent to remit to petitioner the
boundary-hulog can stand together.
106 | P a g e
In resolving an issue based on contract, this Court must first examine
the contract itself, keeping in mind that when the terms of the
agreement are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations shall
prevail.[48] The intention of the contracting parties should be
ascertained by looking at the words used to project their intention, that
is, all the words, not just a particular word or two or more words
standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly.[49] The parts and clauses
must be interpreted in relation to one another to give effect to the
whole. The legal effect of a contract is to be determined from the
whole read together.[50]
Under the Kasunduan, petitioner retained supervision and control over
the conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng
boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG
PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG
UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG
IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o
pangangalakal sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG
IKALAWANG PANIG sa mga bagay na makapagdudulot ng
kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng
UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang
maglagay ng ID Card sa harap ng windshield upang sa pamamagitan
nito ay madaliang malaman kung ang nagmamaneho ay awtorisado
ng VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga
ng] multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit
ang ID card sa wastong lugar o anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang
materyales o piyesa na papalitan ng nasira o nawala ito dahil sa
kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang
hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang
nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang
ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG
IKALAWANG PANIG ay obligadong itawag ito muna sa
VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na
awtorisado ng VILLAMARIA MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa
panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas,
naka short pants at nakasando lamang. Dapat ang nagmamaneho ay
laging nasa maayos ang kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado
niyang driver ay magpapakita ng magandang asal sa mga pasaheros
at hindi dapat magsasalita ng masama kung sakali man may
pasaherong pilosopo upang maiwasan ang anumang kaguluhan na
maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG
ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw
ay ang opisina ng VILLAMARIA MOTORS ang may karapatang
107 | P a g e
mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng
responsibilidad. Ang halagang dapat bayaran sa opisina ay may
karagdagang multa ng P50.00 sa araw-araw na ito ay nasa
pangangasiwa ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang
ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa
rehistro, comprehensive insurance taon-taon at kahit anong uri ng
aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG
PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo
sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa
tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang
anumang mungkahi sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat
ng mga patakaran na magkakaroon ng pagbabago o karagdagan sa
mga darating na panahon at hindi magiging hadlang sa lahat ng mga
balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at
ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging
buwaya sa pasahero upang hindi kainisan ng kapwa driver at
maiwasan ang pagkakasangkot sa anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang
kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi
naman ay sisikapin mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin
ng dalawa o higit pang araw sa lalawigan ay dapat lamang na
ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan
ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang
pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang
aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon
sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay
iparating agad ito sa kinauukulan at iwasan na iparating ito kung
[kani-kanino] lamang upang maiwasan ang anumang usapin.
Magsadya agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso
kong sinasang-ayunan at buong sikap na pangangalagaan ng
TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at
gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa.[51]
The parties expressly agreed that petitioner, as vendor, and respondent,
as vendee, entered into a contract to sell the jeepney on a daily
installment basis of P550.00 payable in four years and that petitioner
would thereafter become its owner. A contract is one of conditional
sale, oftentimes referred to as contract to sell, if the ownership or title
over the
property sold is retained by the vendor, and is not passed to the vendee
unless and until there is full payment of the purchase price and/or upon
faithful compliance with the other terms and conditions that may
lawfully be stipulated.[52] Such payment or satisfaction of other
preconditions, as the case may be, is a positive suspensive condition,
the failure of which is not a breach of contract, casual or serious, but
simply an event that would prevent the obligation of the vendor to
convey title from acquiring binding force.[53] Stated differently, the
efficacy or obligatory force of the vendor's obligation to transfer title is
subordinated to the happening of a future and uncertain event so that if
the suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed.[54] The vendor may
extrajudicially terminate the operation of the contract, refuse
108 | P a g e
conveyance, and retain the sums or installments already received,
where such rights are expressly provided for.[55]
Under the boundary-hulog scheme, petitioner retained ownership of
the jeepney although its material possession was vested in respondent
as its driver. In case respondent failed to make his P550.00 daily
installment payment for a week, the agreement would be of no force
and effect and respondent would have to return the jeepney to
petitioner; the employer-employee relationship would likewise be
terminated unless petitioner would allow respondent to continue
driving the jeepney on a boundary basis of P550.00 daily despite the
termination of their vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner
and respondent was not negated by the foregoing stipulation in
the Kasunduan, considering that petitioner retained control of
respondents conduct as driver of the vehicle. As correctly ruled by the
CA:
The exercise of control by private respondent over petitioners conduct
in operating the jeepney he was driving is inconsistent with private
respondents claim that he is, or was, not engaged in the transportation
business; that, even if petitioner was allowed to let some other person
drive the unit, it was not shown that he did so; that the existence of an
employment relation is not dependent on how the worker is paid but
on the presence or absence of control over the means and method of
the work; that the amount earned in excess of the boundary hulog is
equivalent to wages; and that the fact that the power of dismissal was
not mentioned in the Kasunduan did not mean that private respondent
never exercised such power, or could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or
to wear an identification card, or to don a decent attire, or to park the
vehicle in Villamaria Motors garage, or to inform Villamaria Motors
about the fact that the unit would be going out to the province for
two days of more, or to drive the unit carefully, etc. necessarily related
to control over the means by which the petitioner was to go about his
work; that the ruling applicable here is not Singer Sewing
Machine but National Labor Union since the latter case involved
jeepney owners/operators and jeepney drivers, and that the fact that the
boundary here represented installment payment of the purchase price
on the jeepney did not withdraw the relationship from that of
employer-employee, in view of the overt presence of supervision and
control by the employer.[56]
Neither is such juridical relationship negated by petitioners claim that
the terms and conditions in the Kasunduan relative to respondents
behavior and deportment as driver was for his and respondents benefit:
to insure that respondent would be able to pay the requisite daily
installment of P550.00, and that the vehicle would still be in good
condition despite the lapse of four years. What is primordial is that
petitioner retained control over the conduct of the respondent as driver
of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the
franchise, is entitled to exercise supervision and control over the
respondent, by seeing to it that the route provided in his franchise, and
the rules and regulations of the Land Transportation Regulatory Board
are duly complied with. Moreover, in a business establishment, an
identification card is usually provided not just as a security measure
but to mainly identify the holder thereof as a bona fide employee of
the firm who issues it.[57]
As respondents employer, it was the burden of petitioner to prove that
respondents termination from employment was for a lawful or just
cause, or, at the very least, that respondent failed to make his daily
remittances of P550.00 as boundary. However, petitioner failed to do
so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected
in accordance with law. The just and authorized causes for termination
of employment are enumerated under Articles 282, 283 and 284 of the
Labor Code.
109 | P a g e
Parenthetically, given the peculiarity of the situation of the parties
here, the default in the remittance of the boundary hulog for one week
or longer may be considered an additional cause for termination of
employment. The reason is because the Kasunduan would be of no
force and effect in the event that the purchaser failed to remit the
boundary hulog for one week. The Kasunduan in this case pertinently
stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol
pa.
Moreover, well-settled is the rule that, the employer has the burden of
proving that the dismissal of an employee is for a just cause. The
failure of the employer to discharge this burden means that the
dismissal is not justified and that the employee is entitled to
reinstatement and back wages.
In the case at bench, private respondent in his position paper before the
Labor Arbiter, alleged that petitioner failed to pay the miscellaneous
fee of P10,000.00 and the yearly registration of the unit; that petitioner
also stopped remitting the boundary hulog, prompting him (private
respondent) to issue a Paalala, which petitioner however ignored; that
petitioner even brought the unit to his (petitioners) province without
informing him (private respondent) about it; and that petitioner
eventually abandoned the vehicle at a gasoline station after figuring in
an accident. But private respondent failed to substantiate these
allegations with solid, sufficient proof. Notably, private respondents
allegation viz, that he retrieved the vehicle from the gas station, where
petitioner abandoned it, contradicted his statement in the Paalala that
he would enforce the provision (in the Kasunduan) to the effect that
default in the remittance of the boundary hulog for one week would
result in the forfeiture of the unit. The Paalala reads as follows:
Sa lahat ng mga kumukuha ng sasakyan
Sa pamamagitan ng BOUNDARY HULOG
Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan
particular na ang paragrapo 13 na nagsasaad na kung hindi kayo
makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa
ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng
wala ng paghahabol pa.
Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin
na pong ipatutupad ang nasabing Kasunduan kayat aking pinaaalala
sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang
maiwasan natin ito.
Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang
hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli
ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo
pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan
ang naging dahilan ng pagsampa ng kaso.
Sumasainyo
Attendance: 8/27/99
(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR.
If it were true that petitioner did not remit the boundary hulog for one
week or more, why did private respondent not forthwith take steps to
recover the unit, and why did he have to wait for petitioner to abandon
it?
On another point, private respondent did not submit any police report
to support his claim that petitioner really figured in a vehicular mishap.
110 | P a g e
Neither did he present the affidavit of the guard from the gas station to
substantiate his claim that petitioner abandoned the unit there.[58]
Petitioners claim that he opted not to terminate the employment of
respondent because of magnanimity is negated by his (petitioners) own
evidence that he took the jeepney from the respondent only on July 24,
2000.
IN LIGHT OF ALL THE FOREGOING, the petition
is DENIED. The decision of the Court of Appeals in CA-G.R. SP No.
78720 is AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 139430. June 20, 2001]
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]
111 | P a g e
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]
112 | P a g e
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, up to the time of finality of this decision, without any deduction and
error for both the NLRC and the Court of Appeals to disallow qualification.
evidence on appeal which petitioners tried to present. SO ORDERED.
In this case, there is no proof either of the amount collected by ALAN D. GUSTILO, G.R. No. 149629
document analyst Mary Ann Samson and turned over to respondent or Petitioner,
of the amount which respondent turned over to POEA liaison officer Present:
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. PANGANIBAN, J., Chairman,
Petitioners simply alleged that respondent failed to account - versus - SANDOVAL-GUTIERREZ,
for P201,600.00 without showing how this figure was arrived CORONA, and
*
at. According to petitioners, three individuals, namely, Mary Ann CARPIO MORALES, JJ.
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 WYETH PHILIPPINES, INC., FILEMON Promulgated:
petitioners to show how much was turned over by Mary Ann Samson VERZANO, JR., AURELIO MERCADO
to respondent and how much the latter in turn turned over to Ferdinand and EDGAR EPILEPSIA,
De la Cruz. As the Court of Appeals aptly stated, if there are no Respondents. October 4, 2004
records to speak of, it follows that the discovered anomalies have no
basis too.[18] x ---------------------------------------------------------------------------------------------
Nor can the Court of Appeals be faulted for ordering payment of ------------x
separation pay in lieu of reinstatement. Indeed, if any party can
complain against this feature of the decision of the Court of Appeals, it DECISION
should be respondent, as employee, and not petitioners, who are the
employers. The strain in the relationship between the parties, not to SANDOVAL-GUTIERREZ, J.:
mention the length of time respondent has been out of petitioners
employ, make an award of separation pay appropriate.[19] The grant of At bar is a petition for review on certiorari under Rule 45 of the 1997
separation pay is of course to be understood as separate and in addition Rules of Civil Procedure, as amended, assailing the Decision[1] dated
to the payment of backwages which, in accordance with the ruling January 24, 2001 and Resolution[2] dated August 10, 2001 rendered by
in Bustamante v. NLRC,[20] should be computed from the time of the Court of Appeals in CA-G.R. SP No. 57545, entitled Wyeth Phils.,
respondents dismissal up to the time of finality of this decision and Inc. and/or Filemon Verzano, Jr., Aurelio Mercado and Edgar
without any deduction and qualification. Epilepsia vs. National Labor Relations Commission (Fourth Division)
WHEREFORE, the decision and resolution of the Court of Appeals and Alan Gustilo.
are AFFIRMED with the MODIFICATION that in addition to the
grant of separation pay, respondent Fermina D. Magsino is awarded The facts as borne by the records are:
backwages, inclusive of allowances, and other benefits, including 13th
month pay, which should be computed from the time of her dismissal
113 | P a g e
On November 7, 1990, Alan D. Gustilo, petitioner, was employed by
Wyeth Philippines, Inc., respondent company, as a pharmaceutical
territory manager. Eventually, he was placed in charge of its various
branches in Metro Bacolod City and Negros Occidental. To ensure a
profitable sale of its pharmaceutical products, he performed various
functions, such as visiting hospitals, pharmacies, drugstores and
physicians concerned; preparing and submitting his pre-dated
itinerary; and submitting periodic reports of his daily call visits,
monthly itinerary, and weekly locator and incurred expenses.
Petitioners employment records show that respondent company, on
various dates, reprimanded and suspended him for habitually
neglecting to submit his periodic reports. On November 28, 1994,
respondent company sent petitioner a notice reprimanding him for
submitting late his weekly expense report. Again, on July 5, 1995, he
was late in submitting the same report, prompting respondent company
to suspend him for five (5) days. Still, petitioner repeatedly incurred
delay in submitting his daily call reports dated October 16-20, 1995,
October 23-27, 1995, November 6-10, 1995, and November 13-17,
1995. He did not submit his daily call reports for the period from
November 20 to 24, 1995. As a consequence, respondent company
sent petitioner another notice suspending him for fifteen (15) days or
from January 2 to 22, 1996.
Meantime, respondent company, after integrating its pharmaceutical
products with Lederle, a sister company, conducted a nationwide on-
the-job training of sales personnel. With this development, petitioner
was assigned in charge of promoting four (4) Lederle pharmaceutical
products.
Subsequently, petitioner submitted to respondent company a plan of
action dated February 6, 1996 where he committed to make an average
of 18 daily calls to physicians; submit promptly all periodic reports;
and ensure 95% territory program performance for every cycle.
However, petitioner failed to achieve the above objectives, prompting
respondent company to send him two (2) separate notices dated
114 | P a g e
February 20, 1996 and April 10, 1996, charging him with willful
violation of company rules and regulations and directing him to submit
a written explanation.
In his explanation, petitioner stated that he was overworked and an
object of reprisal by his immediate supervisor.
On May 22, 1996, upon recommendation of a Review Panel,
respondent company terminated the services of petitioner.
Aggrieved, petitioner, on June 21, 1996, filed with the Regional
Arbitration Branch No. VI at Bacolod City a complaint against
respondent company for illegal suspension, illegal dismissal and
payment of allowances, other monetary benefits, damages and
attorneys fees, docketed as RAB Case No. 06-10267-96. Impleaded
also as party respondents were Filemon Verzano, Jr., petitioners
immediate supervisor, and Aurelio Mercado and Edgar Epilepsia,
corporate officers of respondent company.
On March 5, 1998, the Labor Arbiter rendered a Decision holding that
petitioner was illegally dismissed from employment and ordering
respondents company and Verzano, jointly and severally, to pay
him P991,157.90 representing his backwages, separation pay, car
reimbursement, damages and attorneys fees. The dispositive portion of
the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
against respondent company WYETH PHILS., INC. and respondent
FILEMON VERZANO, JR.,
ordering them to pay jointly and severally, complainant ALAN D.
GUSTILO, the following:
1. Backwages . P 676,162.64
2. Separation pay .. 106,890.00
3. Car reimbursement 68,000.00
4. Moral damages .. 25,000.00
5. Exemplary damages .. 25,000.00
6. Attorneys fees 90,105.26
Grand Total . P 991,157.90
Respondents are further directed to deposit the total amount of NINE
HUNDRED NINETY ONE THOUSAND ONE HUNDRED FIFTY
SEVEN PESOS and 90/100 (P991,157.90) with the Cashier, this
Arbitration Branch, within ten (10) days from receipt hereof, for
proper disposition.
SO ORDERED.
Respondents then appealed to the National Labor Relations
Commission (NLRC), Fourth Division at Cebu City.
On August 13, 1999, the NLRC (Fourth Division) promulgated a
Decision affirming with modification the Labor Arbiters Decision in
the sense that respondent company is ordered to reinstate petitioner, or
in lieu of reinstatement, to pay his separation benefits, thus:
WHEREFORE, premises considered, the appeal filed by complainant
is GRANTED and that of respondents is DENIED. The Decision of
Labor Arbiter Reynaldo J. Gulmatico dated March 5, 1998 is
MODIFIED, to wit:
Respondents are ordered:
1. To reinstate complainant Alan Gustilo to his former position
without loss of seniority rights and other privileges and to pay his full
backwages, inclusive of allowances and other benefits, or their
monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. If
reinstatement is no longer feasible, complainant may opt to receive his
separation pay equivalent to at least one month salary for every year of
service, in lieu of reinstatement.
115 | P a g e
2. To refund, jointly and severally, complainant in the amount
of P4,190.00; and
3. To pay 10% of the total monetary award as attorneys fees.
SO ORDERED.
Respondents filed their motion for reconsideration but was denied by
the NLRC in a Resolution dated December 28, 1999.
As a consequence, respondents filed with the Court of Appeals a
petition for certiorari with prayer for issuance of a temporary
restraining order and a writ of preliminary injunction.
On January 24, 2001, the Appellate Court rendered a Decision
reversing the NLRCs Decision and dismissing petitioners complaint
for illegal dismissal, but awarding him separation pay considering the
mitigating factors of length of service, the loyalty awards he received,
and respondent Verzanos grudge against him.
The Court of Appeals held:
Respondent Gustilo cannot deny the numerous violations of company
rules during his employment with Wyeth. Gustilos 201 file reveal the
following:
1. On February 2, 1993, he was suspended for falsifying, tampering
and/or altering the gasoline receipt (Annex 12, Wyeths Position Paper,
Rollo, p. 142).
2. On June 28, 1993, he was warned for false reporting of his trade
outlet calls (Annex 13, Wyeths Position Paper, Rollo, p. 143).
3. On September 8, 1993, he was guilty of unauthorized availment of
sick leaves, emergency leaves, vacation leaves and unauthorized
absences (Annex 14, Wyeths Position Paper, Rollo, p. 144).
4. On November 28, 1994, he was cited for his repeated delay in
submitting his expense reports (Annex 4, Wyeths Position Paper,
Rollo, p. 132).
5. On July 10, 1995, he was cited for failure to submit his expense
report on time (Annex 5, Wyeths Position Paper, Rollo, p. 133).
6. On September 26, 1995, he was charged with breach of the rule on
submission of required reports (Annex 8, Wyeths Position Paper,
Rollo, p. 136).
7. On November 28, 1995, he was again cited for unauthorized
absence on October 19, 1995 and other violations of company rules as
contained in a letter of the same date (Annex 9, Wyeths Position
Paper, Rollo, p. 137).
From 1993 up to 1995, respondent has repeatedly guaranteed not to
repeat transgressing company rules under pain of termination, but to
no avail (Letter dated January 16, 1993; Rollo, p. 141; Internal Memo
dated February 1, 1993; Rollo, p. 142; Internal Memo dated July 11,
1995; Rollo, p. 134; Plan of Action dated February 6, 1996; Rollo, p.
147). It has become clear that respondent Gustilo is a habitual
offender whose numerous contraventions of company rules has left
Wyeth with no choice but to terminate him based on Article 282 of
the Labor Code, gross and habitual neglect by the employee of his
duties, being a valid cause for termination.
While dismissal is proper, the Court however considers the length
of service of respondent Gustilo with Wyeth, the loyalty awards he
received and the grudge of petitioner Verzano, Jr. as mitigating
factors. The Court is inclined to reinstate respondent Gustilo to his
former position without backwages and other benefits. However in
view of the strained relationship between respondent Gustilo and
petitioner Verzano, Jr., the Court rules to award separation pay to
respondent Gustilo in the amount of P106,890.00.
116 | P a g e
In view of our finding that there are valid causes for dismissal, it
follows that the award for payment of backwages, damages and
attorneys fees has to be recalled for want of basis.
Being uncontested, the refund of car expenses in the amount
of P4,190.00 to respondent Gustilo and payment of P68,000.00
representing the difference between the KIA car, the supposed car and
the NISSAN LEC have to be maintained.
In view of our finding that there was a valid dismissal, petitioners
Aurello Mercado and Edgar Epilepsia, as a consequence, cannot be
held personally liable to respondent Gustilo. Even assuming ex grati
argumenti that termination is illegal, corporate officers like petitioners
Mercado and Epilepsia are mere agents of Wyeth and acts done in
good faith and in representation or on behalf of said company and
within the scope of their authority cannot give rise to any liability on
their part as said acts are considered corporate acts.
xxx
WHEREFORE, the subject Decision and Resolution, promulgated on
August 13, 1999 and December 28, 1999, respectively, by respondent
National Labor Relations Commission are SET ASIDE and
REVERSED and a new judgment is rendered, as follows:
1. The Complaint for illegal dismissal against petitioners Wyeth
Philippines, Inc., Aurelio Mercado and Edgar Epilepsia is dismissed
for lack of merit;
2. Petitioner Wyeth Philippines, Inc. is ordered to pay respondent Alan
Gustilo P106,890.00 as separation pay;
3. Wyeth Philippines, Inc. is ordered to pay respondent
Gustilo P68,000.00 representing the difference between the prices of
the supposed car, KIA and the NISSAN LEC, and P4,190.00
equivalent to the cost of one piece of tire, headlight and tire wrench.
SO ORDERED.

On February 16, 2001, petitioner filed a motion for reconsideration,
but was denied by the Appellate Court in a Resolution dated August
10, 2001.
Hence, this petition for review on certiorari.
Petitioner, in the present petition, contends that he was illegally
dismissed from the service by respondent company. Hence, he should
be reinstated and paid his full backwages and other benefits and
privileges.
In Philippine Journalists, Inc. vs. Mosqueda,[3] we reiterated the well-
established rule that findings of fact by the Court of Appeals are
conclusive on the parties and are not reviewable by this Court.x x
x. The rationale behind this doctrine is that review of the findings of
fact by the Court of Appeals is not a function that the Supreme Court
normally undertakes.
Here, the Court of Appeals unequivocally ruled that Gustilo (herein
petitioner) is a habitual offender whose numerous contraventions of
company rules has left Wyeth (herein respondent) with no choice but
to terminate his services x x x.
Evidently, there is no cogent reason why we should not accord
deference and finality to the Appellate Courts factual findings which
are supported by substantial evidence as shown by the records.
In Family Planning Organization of the Philippines, Inc. vs.
NLRC,[4] we held:
It is the employer's prerogative to prescribe reasonable rules and
regulations necessary or proper for the conduct of its business or
concern, to provide certain disciplinary measures to implement said
rules and to assure that the same be complied with. At the same time, it
is one of the fundamental duties of the employee to yield obedience to
all reasonable rules, orders, and instructions of the employer, and
willful or intentional disobedience thereof, as a general rule, justifies
117 | P a g e
rescission of the contract of service and the preemptory dismissal of
the employee."
Records show the various violations of respondent companys rules and
regulations committed by petitioner. His dismissal from the service is,
therefore, in order. Indeed, in Piedad vs. Lanao del Norte Electric
Cooperative, Inc., [5] we ruled that a series of irregularities when put
together may constitute serious misconduct, which under Article 282
of the Labor Code, as amended, [6] is a just cause for dismissal.
But the Court of Appeals still awarded him separation pay
of P106,890.00 by reason of several mitigating factors mentioned in its
assailed Decision. The issue for our determination now is whether
he is entitled to such an award.
The rule embodied in the Omnibus Rules Implementing the Labor
Code is that a person dismissed for cause as defined therein is not
entitled to separation pay.[7] However, in PLDT vs. NLRC and
Abucay,[8] we held:
x x x henceforth, separation pay shall be allowed as a measure of
social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid
dismissal is, x x x an offense involving moral turpitude x x x, the
employer may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
Similarly, in Telefunken Semiconductors Employees Union-FFW vs.
Court of Appeals,[9] we ruled:
The same view holds with respect to the award of financial assistance
or separation pay. The assumption for granting financial assistance or
separation pay, which is, that there is an illegally dismissed employee
and that illegally dismissed employee would otherwise have been
entitled to reinstatement, is not present in the case at bench. Here, the
striking workers have been validly dismissed Where the employees
dismissal was for a just cause, it would be neither fair nor just to allow
the employee to recover something he has not earned or could not
have earned. This being so, there can be no award of backwages, for it
must be pointed out that while backwages are granted on the basis of
equity for earnings which a worker or employee has lost due to his
illegal dismissal, where private respondents dismissal is for just cause,
as in the case herein, there is no factual or legal basis to order the
payment of backwages; otherwise, private respondent would be
unjustly enriching herself at the expense of petitioners. (Cathedral
School of Technology vs. National Labor Relations Commission, 214
SCRA 551). Consequently, granting financial assistance to the strikers
is clearly a specious inconsistency (supra).We are of course aware
that financial assistance may be allowed as a measure of social
justice in exceptional circumstances and as an equitable
concession. We are likewise mindful that financial assistance is
allowed only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those
reflecting on his moral character (Zenco Sales, Inc. vs. National
Labor Relations Commission, 234 SCRA 689). x x x.
In the case at bar, we find no exceptional circumstances to warrant the
grant of financial assistance or separation pay to petitioner. It bears
stressing that petitioner did not only violate company disciplinary
rules and regulations. As found by the Court of Appeals, he falsified
his employment application form by not stating therein that he is
the nephew of Mr. Danao, respondent Wyeths Nutritional
Territory Manager. Also, on February 2, 1993, he was suspended
for falsifying a gasoline receipt. On June 28, 1993, he was warned
for submitting a false report of his trade outlet calls. On September
8, 1993, he was found guilty of unauthorized availment of sick,
vacation and emergency leaves. These infractions manifest his
slack of moral principle. In simple term, he is dishonest.
Neither can petitioner find reliance on the policy of social justice. As
aptly held by this Court in the same case of Philippine Long Distance
Telephone vs. NLRC and Abucay,[10] [T]hose who invoke social justice
118 | P a g e
may do so only if their hands are clean and their motives blameless x x
x. Here, petitioner failed to measure up to such requirement.
In sum, we find that petitioner was legally dismissed from
employment and is, therefore, not entitled to reinstatement or an award
of separation pay or other benefits. Unfortunately, respondent
company did not interpose an appeal to this Court. Hence, no
affirmative relief can be extended to it. A party in a case who did not
appeal is not entitled to any affirmative relief.[11] Thus, respondent
company has to comply with the Appellate Courts mandate to grant
petitioner his separation pay.
WHEREFORE, the petition is DENIED. Costs against petitioner.
SO ORDERED.
G.R. No. 144315 July 17, 2006
PHILCOM EMPLOYEES UNION, petitioner,
vs.
PHILIPPINE GLOBAL COMMUNICATIONS and PHILCOM
CORPORATION, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 to annul the Decision2 dated 31 July 2000
of the Court of Appeals in CA-G.R. SP No. 53989. The Court of
Appeals affirmed the assailed portions of the 2 October 1998 and 27
November 1998 Orders of the Secretary of Labor and Employment in
OS-AJ-0022-97.
The Facts
The facts, as summarized by the Court of Appeals, are as follows:
Upon the expiration of the Collective Bargaining Agreement (CBA)
between petitioner Philcom Employees Union (PEU or union, for
brevity) and private respondent Philippine Global Communications,
Inc. (Philcom, Inc.) on June 30, 1997, the parties started negotiations
for the renewal of their CBA in July 1997. While negotiations were
ongoing, PEU filed on October 21, 1997 with the National
Conciliation and Mediation Board (NCMB) – National Capital
Region, a Notice of Strike, docketed as NCMB-NCR-NS No. 10-435-
97, due to perceived unfair labor practice committed by the company
(Annex "1", Comment, p. 565, ibid.). In view of the filing of the
Notice of Strike, the company suspended negotiations on the CBA
which moved the union to file on November 4, 1997 another Notice of
Strike, docketed as NCMB-NCR-NS No. 11-465-97, on the ground of
bargaining deadlock (Annex "2", Comment, p. 566, ibid.)
On November 11, 1997, at a conciliation conference held at the
NCMB-NCR office, the parties agreed to consolidate the two (2)
Notices of Strike filed by the union and to maintain the
status quo during the pendency of the proceedings (Annex "3",
Comment, p. 567, ibid.).
On November 17, 1997, however, while the union and the company
officers and representatives were meeting, the remaining union
officers and members staged a strike at the company premises,
barricading the entrances and egresses thereof and setting up a
stationary picket at the main entrance of the building. The following
day, the company immediately filed a petition for the Secretary of
Labor and Employment to assume jurisdiction over the labor dispute in
accordance with Article 263(g) of the Labor Code.
On November 19, 1997, then Acting Labor Secretary Cresenciano B.
Trajano issued an Order assuming jurisdiction over the dispute,
enjoining any strike or lockout, whether threatened or actual, directing
the parties to cease and desist from committing any act that may
exacerbate the situation, directing the striking workers to return to
work within twenty-four (24) hours from receipt of the Secretary's
Order and for management to resume normal operations, as well as
accept the workers back under the same terms and conditions prior to
the strike. The parties were likewise required to submit their respective
position papers and evidence within ten (10) days from receipt of said
order (Annex "4", Comment, pp. 610-611, ibid.). On November 28,
1997, a second order was issued reiterating the previous directive to all
striking employees to return to work immediately.
On November 27, 1997, the union filed a Motion for Reconsideration
assailing, among others, the authority of then Acting Secretary Trajano
to assume jurisdiction over the labor dispute. Said motion was denied
in an Order dated January 7, 1998.
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As directed, the parties submitted their respective position papers. In
its position paper, the union raised the issue of the alleged unfair labor
practice of the company hereunder enumerated as follows:
"(a) PABX transfer and contractualization of PABX service and
position;
"(b) Massive contractualization;
"(c) Flexible labor and additional work/function;
"(d) Disallowance of union leave intended for union seminar;
"(e) Misimplementation and/or non-implementation of employees'
benefits like shoe allowance, rainboots, raincoats, OIC shift
allowance, P450.00 monthly allowance, driving allowance, motorcycle
award and full-time physician;
"(f) Non-payment, discrimination and/or deprivation of overtime,
restday work, waiting/stand by time and staff meetings;
"(g) Economic inducement by promotion during CBA negotiation;
"(h) Disinformation scheme, surveillance and interference with union
affairs;
"(i) Issuance of memorandum/notice to employees without giving
copy to union, change in work schedule at Traffic Records Section and
ITTO policies; and
"(j) Inadequate transportation allowance, water and facilities."
(Annex A, Petition; pp. 110-182, ibid.)
The company, on the other hand, raised in its position paper the sole
issue of the illegality of the strike staged by the union (Annex B,
Petition; pp. 302-320, ibid.).
On the premise that public respondent Labor Secretary cannot rule on
the issue of the strike since there was no petition to declare the same
illegal, petitioner union filed on March 4, 1998 a
Manifestation/Motion to Strike Out Portions of & Attachments in
Philcom's Position Paper for being irrelevant, immaterial and
impertinent to the issues assumed for resolution (Annex C, Petition;
pp. 330-333, ibid.).
In opposition to PEU's Manifestation/Motion, the company argued that
it was precisely due to the strike suddenly staged by the union on
November 17, 1997 that the dispute was assumed by the Labor
Secretary. Hence, the case would necessarily include the issue of the
legality of the strike (Opposition to PEU'S Motion to Strike Out;
Annex F, Petition; pp. 389-393, ibid.).3
On 2 October 1998, the Secretary of Labor and Employment
("Secretary") issued the first assailed order. The pertinent parts of the
Order read:
Going now to the first issue at hand, a reading of the complaints
charged by the Union as unfair labor practices would reveal that these
are not so within the legal connotation of Article 248 of the Labor
Code. On the contrary, these complaints are actually mere grievances
which should have been processed through the grievance machinery or
voluntary arbitration outlined under the CBA. The issues of flexible
labor and additional functions, misimplementation or non-
implementation of employee benefits, non-payment of overtime and
other monetary claims and inadequate transportation allowance, are all
a matter of implementation or interpretation of the economic
provisions of the CBA subject to the grievance procedure.
Neither do these complaints amount to gross violations which, thus,
may be treated as unfair labor practices outside of the coverage of
Article 261. The Union failed to convincingly show that there is
flagrant and/or malicious refusal by the Company to comply with the
economic provisions stipulated in the CBA.
With respect to the charges of contractualization and economic
inducement, this Office is convinced that the acts of said company
qualify as a valid exercise of management prerogative. The act of the
Company in contracting out work or certain services being performed
by Union members should not be seen as an unfair labor practice act
per se. First, the charge of massive contractualization has not been
substantiated while the contractualization of the position of PABX
operator is an isolated instance. Secondly, in the latter case, there was
no proof that such contracting out interfered with, restrained or
coerced the employees in the exercise of their right to self-
organization. Thus, it is not unfair labor practice to contract out work
for reason of reduction of labor cost through the acquisition of
automatic machines.
Likewise, the promotion of certain employees, who are incidentally
members of the Union, to managerial positions is a prerogative of
management. A promotion which is manifestly beneficial to an
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employee should not give rise to a gratuitous speculation that such a
promotion was made simply to deprive the union of the membership of
the promoted employee (Bulletin Publishing Co. v. Sanchez, et. al.,
G.R. No. 74425, October 7, 1986).
There remains the issue on bargaining deadlock. The Company has
denied the existence of any impasse in its CBA negotiations with the
Union and instead maintains that it has been negotiating with the latter
in good faith until the strike was initiated. The Union, on the other
hand, contends otherwise and further prays that the remaining CBA
proposals of the Union be declared reasonable and equitable and thus
be ordered incorporated in the new CBA to be executed.
As pointed out by the Union, there are already thirty-seven (37) items
agreed upon by the parties during the CBA negotiations even before
these were suspended. Prior to this Office's assumption over the case,
the Company furnished the Union its improved CBA counter-proposal
on the matter of promotional and wage increases which however was
rejected by the Union as divisive. Even as the Union has submitted its
remaining CBA proposals for resolution, the Company remains silent
on the matter. In the absence of any basis, other than the Union's
position paper, on which this Office may make its determination of the
reasonableness and equitableness of these remaining CBA proposals,
this Office finds it proper to defer deciding on the matter and first
allow the Company to submit its position thereon.
We now come to the question of whether or not the strike staged by
the Union on November 17, 1997 is illegal. The Company claims it is,
having been held on grounds which are non-strikeable, during the
pendency of preventive mediation proceedings in the NCMB, after this
Office has assumed jurisdiction over the dispute, and with the strikers
committing prohibited and illegal acts. The Company further prays for
the termination of some 20 Union officers who were positively
identified to have initiated the alleged illegal strike. The Union, on the
other hand, refuses to submit this issue for resolution.
Considering the precipitous nature of the sanctions sought by the
Company, i.e., declaration of illegality of the strike and the
corresponding termination of the errant Union officers, this Office
deems it wise to defer the summary resolution of the same until both
parties have been afforded due process. The non-compliance of the
strikers with the return-to-work orders, while it may warrant dismissal,
is not by itself conclusive to hold the strikers liable. Moreover, the
Union's position on the alleged commission of illegal acts by the
strikers during the strike is still to be heard. Only after a full-blown
hearing may the respective liabilities of Union officers and members
be determined. The case of Telefunken Semiconductors Employees
Union-FFW v. Secretary of Labor and Employment and Temic
Telefunken Micro-Electronics (Phils.), Inc. (G.R. No. 122743 and
127215, December 12, 1997) is instructive on this point:
It may be true that the workers struck after the Secretary of Labor and
Employment had assumed jurisdiction over the case and that they may
have failed to immediately return to work even after the issuance of a
return-to-work order, making their continued strike illegal. For, a
return-to-work order is immediately effective and executory
notwithstanding the filing of a motion for reconsideration. But, the
liability of each of the union officers and the workers, if any, has yet to
be determined. xxx xxx xxx.4
The dispositive portion of the Order reads:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered as follows:
The Union's Manifestation/Motion to Implead Philcom Corporation is
hereby granted. Let summons be issued to respondent Philcom
Corporation to appear before any hearing that may hereafter be
scheduled and to submit its position paper as may be required.
The Union's Manifestation/Motion to Strike Out Portions of and
Attachments in Philcom's Position Paper is hereby denied for lack of
merit.
The Union's charges of unfair labor practice against the Company are
hereby dismissed.
Pending resolution of the issues of illegal strike and bargaining
deadlock which are yet to be heard, all the striking workers are
directed to return to work within twenty-four (24) hours from receipt
of this Order and Philcom and/or Philcom Corporation are hereby
directed to unconditionally accept back to work all striking Union
officers and members under the same terms and conditions prior to the
strike. The parties are directed to cease and desist from committing
any acts that may aggravate the situation.
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Atty. Lita V. Aglibut, Officer-In-Charge of the Legal Service, this
Department is hereby designated as the Hearing Officer to hear and
receive evidence on all matters and issues arising from the present
labor dispute and, thereafter, to submit a report/recommendation
within twenty (20) days from the termination of the proceedings.
The parties are further directed to file their respective position papers
with Atty. Lita V. Aglibut within ten (10) days from receipt of this
Order.
SO ORDERED.5
Philcom Corporation ("Philcom") filed a motion for reconsideration.
Philcom prayed for reconsideration of the Order impleading it as
party-litigant in the present case and directing it to accept back to work
unconditionally all the officers and members of the union who
participated in the strike.6 Philcom also filed a Motion to Certify Labor
Dispute to the National Labor Relations Commission for Compulsory
Arbitration.7
For its part, Philcom Employees Union (PEU) filed a Motion for
Partial Reconsideration. PEU asked the Secretary to "partially
reconsider" the 2 October 1998 Order insofar as it dismissed the unfair
labor practices charges against Philcom and included the illegal strike
issue in the labor dispute.8
The Secretary denied both motions for reconsideration of Philcom and
PEU in its assailed Order of 27 November 1998. The pertinent parts of
the Order read:
The question of whether or not Philcom Corporation should be
impleaded has been properly disposed of in the assailed Order. We
reiterate that neither the Company herein nor its predecessor was able
to convincingly establish that each is a separate entity in the absence of
any proof that there was indeed an actual closure and cessation of the
operations of the predecessor-company. We would have
accommodated the Company for a hearing on the matter had it been
willing and prepared to submit evidence to controvert the finding that
there was a mere merger. As it now stands, nothing on record would
prove that the two (2) companies are separate and distinct from each
other.
Having established that what took place was a mere merger, we
correspondingly conclude that the employer-employee relations
between the Company and the Union officers and members was never
severed. And in merger, the employees of the merged companies or
entities are deemed absorbed by the new company (Filipinas Port
Services, Inc. v. NLRC, et. al., G.R. No. 97237, August 16, 1991).
Considering that the Company failed miserably to adduce any
evidence to provide a basis for a contrary ruling, allegations to the
effect that employer-employee relations and positions previously
occupied by the workers no longer exist remain just that — mere
allegations. Consequently, the Company cannot now exempt itself
from compliance with the Order. Neither can it successfully argue that
the employees were validly dismissed. As held in Telefunken
Semiconductor Employees Union-FFW v. Secretary of Labor and
Employment (G.R. Nos. 122743 and 122715, December 12, 1997), to
exclude the workers without first ascertaining the extent of their
individual participation in the strike or non-compliance with the
return-to-work orders will be tantamount to dismissal without due
process of law.
With respect to the unfair labor practice charges against the Company,
we have carefully reviewed the records and found no reason to depart
from the findings previously rendered. The issues now being raised by
the Union are the same issues discussed and passed upon in our earlier
Order.
Finally, it is our determination that the issue of the legality of the strike
is well within the jurisdiction of this Office. The same has been
properly submitted and assumed jurisdiction by the Office for
resolution.9
The dispositive portion of the Order reads:
WHEREFORE, there being no merit in the remaining Motions for
Reconsideration filed by both parties, the same are hereby DENIED.
Our 2 October 1998 Order STANDS. To expedite the resolution of the
Motion to Certify Labor Dispute to the NLRC for Compulsory
Arbitration, Philcom Employees Union is hereby directed to submit its
Opposition thereto within ten (10) days from receipt of the copy of this
Order.
SO ORDERED.10
PEU filed with this Court a petition for certiorari and prohibition under
Rule 65 of the Rules of Court assailing the Secretary's Orders of 2
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October 1998 and 27 November 1998. This Court, in accordance with
its Decision of 10 March 1999 in G.R. No. 123426 entitled National
Federation of Labor (NFL) vs. Hon. Bienvenido E. Laguesma,
Undersecretary of the Department of Labor and Employment, and
Alliance of Nationalist Genuine Labor Organization, Kilusang Mayo
Uno (ANGLO-KMU),11 referred the case to the Court of Appeals.12
The Ruling of the Court of Appeals
On 31 July 2000, the Court of Appeals rendered judgment as follows:
WHEREFORE, PREMISES CONSIDERED, this petition is hereby
DENIED. The assailed portions of the Orders of the Secretary of
Labor and Employment dated October 2, 1998 and November 27,
1998 are AFFIRMED.
SO ORDERED.13
The Court of Appeals ruled that, contrary to PEU's view, the Secretary
could take cognizance of an issue, even only incidental to the labor
dispute, provided the issue must be involved in the labor dispute itself
or otherwise submitted to him for resolution.
The Court of Appeals pointed out that the Secretary assumed
jurisdiction over the labor dispute upon Philcom's petition as a
consequence of the strike that PEU had declared and not because of
the notices of strike that PEU filed with the National Conciliation and
Mediation Board (NCMB).
The Court of Appeals stated that the reason of the Secretary's
assumption of jurisdiction over the labor dispute was the staging of the
strike. Consequently, any issue regarding the strike is not merely
incidental to the labor dispute between PEU and Philcom, but also part
of the labor dispute itself. Thus, the Court of Appeals held that it was
proper for the Secretary to take cognizance of the issue on the legality
of the strike.
The Court of Appeals also ruled that for an employee to claim an
unfair labor practice by the employer, the employee must show that the
act charged as unfair labor practice falls under Article 248 of the Labor
Code. The Court of Appeals held that the acts enumerated in Article
248 relate to the workers' right to self-organization. The Court of
Appeals stated that if the act complained of has nothing to do with the
acts enumerated in Article 248, there is no unfair labor practice.
The Court of Appeals held that Philcom's acts, which PEU complained
of as unfair labor practices, were not in any way related to the workers'
right to self-organization under Article 248 of the Labor Code. The
Court of Appeals held that PEU's complaint constitutes an
enumeration of mere grievances which should have been threshed out
through the grievance machinery or voluntary arbitration outlined in
the Collective Bargaining Agreement (CBA).
The Court of Appeals also held that even if by Philcom's acts, Philcom
had violated the provisions of the CBA, still those acts do not
constitute unfair labor practices under Article 248 of the Labor Code.
The Court of Appeals held that PEU failed to show that those
violations were gross or that there was flagrant or malicious refusal on
the part of Philcom to comply with the economic provisions of the
CBA.
The Court of Appeals stated that as of 21 March 1989, as held in PAL
vs. NLRC,14 violations of CBAs will no longer be deemed unfair labor
practices, except those gross in character. Violations of CBAs, except
those gross in character, are mere grievances resolvable through the
appropriate grievance machinery or voluntary arbitration as provided
in the CBAs.
Hence, this petition.
The Issues
In assailing the Decision of the Court of Appeals, petitioner contends
that:
1. The Honorable Court of Appeals has failed to faithfully adhere with
the decisions of the Supreme Court when it affirmed the
order/resolution of the Secretary of Labor denying the Union's
Manifestation/Motion to Strike Out Portions of & Attachments in
Philcom's Position Paper and including the issue of illegal strike
notwithstanding the absence of any petition to declare the strike
illegal.
2. The Honorable Court of Appeals has decided a question of
substance in a way not in accord with law and jurisprudence when it
affirmed the order/resolution of the Secretary of Labor dismissing the
Union's charges of unfair labor practices.
3. The Honorable Court of Appeals has departed from the edict of
applicable law and jurisprudence when it failed to issue such order
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mandating/directing the issuance of a writ of execution directing the
Company to unconditionally accept back to work the Union officers
and members under the same terms and conditions prior to the strike
and as well as to pay their salaries/backwages and the monetary
equivalent of their other benefits from October 6, 1998 to date.15
The Ruling of the Court
The petition must fail.
PEU contends that the Secretary should not have taken cognizance of
the issue on the alleged illegal strike because it was not properly
submitted to the Secretary for resolution. PEU asserts that after
Philcom submitted its position paper where it raised the issue of the
legality of the strike, PEU immediately opposed the same by filing
its Manifestation/Motion to Strike Out Portions of and Attachments in
Philcom's Position Paper. PEU asserts that it stated in its
Manifestation/Motion that certain portions of Philcom's position paper
and some of its attachments were "irrelevant, immaterial and
impertinent to the issues assumed for resolution." Thus, PEU asserts
that the Court of Appeals should not have affirmed the Secretary's
order denying PEU's Manifestation/Motion.
PEU also contends that, contrary to the findings of the Court of
Appeals, the Secretary's assumption of jurisdiction over the labor
dispute was based on the two notices of strike that PEU filed with the
NCMB. PEU asserts that only the issues on unfair labor practice and
bargaining deadlock should be resolved in the present case.
PEU insists that to include the issue on the legality of the strike despite
its opposition would convert the case into a petition to declare the
strike illegal.
PEU's contentions are untenable.
The Secretary properly took cognizance of the issue on the legality of
the strike. As the Court of Appeals correctly pointed out, since the
very reason of the Secretary's assumption of jurisdiction was PEU's
declaration of the strike, any issue regarding the strike is not merely
incidental to, but is essentially involved in, the labor dispute itself.
Article 263(g) of the Labor Code provides:
When, in his opinion, there exists a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national
interest, the Secretary of Labor and Employment may assume
jurisdiction over the dispute and decide it or certify the same to the
Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the
intended or impending strike or lockout as specified in the assumption
or certification order. If one has already taken place at the time of
assumption or certification, all striking or locked out employees shall
immediately return to work and the employer shall immediately
resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The Secretary of
Labor and Employment or the Commission may seek the assistance of
law enforcement agencies to ensure the compliance with this provision
as well as with such orders as he may issue to enforce the same.
x x x x.
The powers granted to the Secretary under Article 263(g) of the Labor
Code have been characterized as an exercise of the police power of the
State, with the aim of promoting public good.16 When the Secretary
exercises these powers, he is granted "great breadth of discretion"
in order to find a solution to a labor dispute. The most obvious of
these powers is the automatic enjoining of an impending strike or
lockout or its lifting if one has already taken place.17
In this case, the Secretary assumed jurisdiction over the dispute
because it falls in an industry indispensable to the national interest. As
noted by the Secretary.
[T]he Company has been a vital part of the telecommunications
industry for 73 years. It is particularly noted for its expertise and
dominance in the area of international telecommunications. Thus, it
performs a vital role in providing critical services indispensable to the
national interest. It is for this very reason that this Office strongly
opines that any concerted action, particularly a prolonged work
stoppage is fraught with dire consequences. Surely, the on-going strike
will adversely affect not only the livelihood of workers and their
dependents, but also the company's suppliers and dealers, both in the
public and private sectors who depend on the company's facilities in
the day-to-day operations of their businesses and commercial
transactions. The operational viability of the company is likewise
adversely affected, especially its expansion program for which it has
incurred debts in the approximate amount of P2 Billion. Any
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prolonged work stoppage will also bring about substantial losses in
terms of lost tax revenue for the government and would surely pose a
serious set back in the company's modernization program.
At this critical time when government is working to sustain the
economic gains already achieved, it is the paramount concern of this
Office to avert any unnecessary work stoppage and, if one has already
occurred, to minimize its deleterious effect on the workers, the
company, the industry and national economy as a whole.18
It is of no moment that PEU never acquiesced to the submission for
resolution of the issue on the legality of the strike. PEU cannot prevent
resolution of the legality of the strike by merely refusing to submit the
issue for resolution. It is also immaterial that this issue, as PEU asserts,
was not properly submitted for resolution of the Secretary.
The authority of the Secretary to assume jurisdiction over a labor
dispute causing or likely to cause a strike or lockout in an industry
indispensable to national interest includes and extends to all
questions and controversies arising from such labor dispute. The
power is plenary and discretionary in nature to enable him to
effectively and efficiently dispose of the dispute.19
Besides, it was upon Philcom's petition that the Secretary immediately
assumed jurisdiction over the labor dispute on 19 November 1997.20 If
petitioner's notices of strike filed on 21 October and 4 November 1997
were what prompted the assumption of jurisdiction, the Secretary
would have issued the assumption order as early as those dates.
Moreover, after an examination of the position paper21 Philcom
submitted to the Secretary, we see no reason to strike out those
portions which PEU seek to expunge from the records. A careful study
of all the facts alleged, issues raised, and arguments presented in the
position paper leads us to hold that the portions PEU seek to expunge
are necessary in the resolution of the present case.
On the documents attached to Philcom's position paper, except for
Annexes MM-2 to MM-22 inclusive22 which deal with the supposed
consolidation of Philippine Global Communications, Inc. and Philcom
Corporation, we find the other annexes relevant and material in the
resolution of the issues that have emerged in this case.
PEU also claims that Philcom has committed several unfair labor
practices. PEU asserts that there are "factual and evidentiary bases" for
the charge of unfair labor practices against Philcom.
On unfair labor practices of employers, Article 248 of the Labor Code
provides:
Unfair labor practices of employers. - It shall be unlawful for an
employer to commit any of the following unfair labor practice:
(a) To interfere with, restrain or coerce employees in the exercise of
their right to self-organization;
(b) To require as a condition of employment that a person or an
employee shall not join a labor organization or shall withdraw from
one to which he belongs;
(c) To contract out services or functions being performed by union
members when such will interfere with, restrain or coerce employees
in the exercise of their rights to self-organization;
(d) To initiate, dominate, assist or otherwise interfere with the
formation or administration of any labor organization, including the
giving of financial or other support to it or its organizers or supporters;
(e) To discriminate in regard to wages, hours of work, and other terms
and conditions of employment in order to encourage or discourage
membership in any labor organization. x x x
(f) To dismiss, discharge, or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony
under this Code;
(g) To violate the duty to bargain collectively as prescribed by this
Code;
(h) To pay negotiation or attorney's fees to the union or its officers or
agents as part of the settlement of any issue in collective bargaining or
any other dispute; or
(i) To violate a collective bargaining agreement.
Unfair labor practice refers to acts that violate the workers' right to
organize. The prohibited acts are related to the workers' right to self-
organization and to the observance of a CBA. Without that element,
the acts, no matter how unfair, are not unfair labor practices.23 The
only exception is Article 248(f), which in any case is not one of the
acts specified in PEU's charge of unfair labor practice.
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A review of the acts complained of as unfair labor practices of
Philcom convinces us that they do not fall under any of the prohibited
acts defined and enumerated in Article 248 of the Labor Code. The
issues of misimplementation or non-implementation of employee
benefits, non-payment of overtime and other monetary claims,
inadequate transportation allowance, water, and other facilities, are all
a matter of implementation or interpretation of the economic
provisions of the CBA between Philcom and PEU subject to the
grievance procedure.
We find it pertinent to quote certain portions of the assailed Decision,
thus —
A reading of private respondent's justification for the acts complained
of would reveal that they were actually legitimate reasons and not in
anyway related to union busting. Hence, as to compelling employees
to render flexible labor and additional work without additional
compensation, it is the company's explanation that the employees
themselves voluntarily took on work pertaining to other assignments
but closely related to their job description when there was slack in the
business which caused them to be idle. This was the case of the
International Telephone Operators who tried telemarketing when they
found themselves with so much free time due to the slowdown in the
demand for international line services. With respect to the Senior
Combination Technician at the Cebu branch who was allegedly made
to do all around work, the same happened only once when the lineman
was absent and the lineman's duty was his ultimate concern. Moreover,
the new assignment of the technicians at CTSS who were promoted to
QCE were based on the job description of QCE, while those of the
other technicians were merely temporary due to the promotion of
several technicians to QCE (pars. 9-12, Philcom's Reply to PEU's
Position Paper; Annex "E", Petition; pp. 350-351, ibid.).
On the alleged misimplementation and/or non-implementation of
employees' benefits, such as shoe allowance, rainboots, raincoats, OIC
shift allowance, P450.00 monthly allowance, driving allowance,
motorcycle award and full-time physician, the company gave the
following explanation which this Court finds plausible, to wit:
16. The employees at CTSS were given One Thousand Pesos
(P1,000.00) cash or its equivalent in purchase orders because it was
their own demand that they be given the option to buy the pair of
leather boots they want. For the Cebu branch, the employees
themselves failed to include these benefits in the list of their demands
during the preparation of the budget for the year 1997 despite the
instruction given to them by the branch manager. According to the
employees, they were not aware that they were entitled to these
benefits. They thought that because they have been provided with two
vans to get to their respective assignments, these benefits are available
only to collectors, messengers and technicians in motorcycles.
17. The P450.00 monthly allowance was provided by the CBA to be
given to counter clerks. However, the position of counter clerks had
been abolished in accordance with the reorganization plan undertaken
by the company in April 1995, with the full knowledge of the Union
membership. As a result of the abolition of the position of counter
clerks, there was no more reason for granting the subject allowance.
18. The company more than satisfied the provision in the CBA to
engage the services of a physician and provided adequate medical
services. Aside from a part time physician who reports for duty
everyday, the company has secured the services of Prolab Diagnostics,
which has complete medical facilities and personnel, to serve the
medical needs of the employees. x x x
19. The Union demands that a full-time physician to be assigned at the
Head Office. This practice, is not provided in the CBA and, moreover
is too costly to maintain. The medical services offered by Prolab
[D]iagnostics are even better and more comprehensive than any full
time physician can give. It places at the employees' disposal numerous
specialists in various fields of medicine. It is beyond understanding
why the Union would insist on having a full-time physician when they
could avail of better services from Prolab Diagnostics.
(Philcom's Reply to PEU's Position Paper, pp.352, 354, ibid.)
On the issue of non-payment, discrimination and/or deprivation of
overtime, restday work, waiting/stand by time and staff meeting
allowance, suffice it to state that there is nothing on record to prove the
same. Petitioner did not present evidence substantial enough to support
its claim.
As to the alleged inadequate transportation allowance and facilities,
the company posits that:
126 | P a g e
30. The transportation allowances given to the Dasmarinas and
Pinugay employees are more than adequate to defray their daily
transportation cost. Hence, there is absolutely no justification for an
increase in the said allowance. In fact, said employees at Dasmarinas
and Pinugay, who are only residing in areas near their place of work,
are more privileged as they receive transportation expenses while the
rest of the company workers do not.
31. As to the demand for clean drinking water, the company has
installed sufficient and potable water inside the Head Office even
before the strike was staged by the Union. Any person who visits the
Makati Head Office can attest to this fact.
(Philcom's Reply to PEU's Position Paper, p. 357, ibid.)
Anent the allegation of PABX transfer and contractualization of
PABX service and position, these were done in anticipation of the
company to switch to an automatic PABX machine which requires no
operator. This cannot be treated as ULP since management is at
liberty, absent any malice on its part, to abolish positions which it
deems no longer necessary (Arrieta vs. National Labor Relations
Commission, 279 SCRA 326, 332). Besides, at the time the company
hired a temporary employee to man the machine during daytime, the
subject position was vacant while the assumption of the function by
the company guard during nighttime was only for a brief period.
With respect to the perceived massive contractualization of the
company, said charge cannot be considered as ULP since the hiring of
contractual workers did not threaten the security of tenure of regular
employees or union members. That only 160 employees out of 400
employees in the company's payroll were considered rank and file
does not of itself indicate unfair labor practice since this is but a
company prerogative in connection with its business concerns.
Likewise, the offer or promotions to a few union members is neither
unlawful nor an economic inducement. These offers were made in
accordance with the legitimate need of the company for the services of
these employees to fill positions left vacant by either retirement or
resignation of other employees. Besides, a promotion is part of the
career growth of employees found competent in their work. Thus,
in Bulletin Publishing Corporation vs. Sanchez (144 SCRA 628, 641),
the Supreme Court held that "(T)he promotion of employees to
managerial or executive positions rests upon the discretion of
management. Managerial positions are offices which can only be held
by persons who have the trust of the corporation and its officers. It is
the prerogative of management to promote any individual working
within the company to a higher position. It should not be inhibited or
prevented from doing so. A promotion which is manifestly beneficial
to an employee should not give rise to a gratuitous speculation that
such a promotion was made simply to deprive the union of the
membership of the promoted employee, who after all appears to have
accepted his promotion."
That the promotions were made near or around the time when CBA
negotiations were about to be held does not make the company's action
an unfair labor practice. As explained by the company, these
promotions were based on the availability of the position and the
qualification of the employees promoted (p. 6, Annex "4", Philcom's
Reply to PEU's Position Paper; p. 380, ibid.)
On the union's charge that management disallowed leave of union
officers and members to attend union seminar, this is belied by the
evidence submitted by the union itself. In a letter to PEU's President,
the company granted the leave of several union officers and members
to attend a seminar notwithstanding that its request to be given more
details about the affair was left unheeded by the union (Annex "Y",
PEU's Position Paper; p. 222, ibid.). Those who were denied leave
were urgently needed for the operation of the company.
On the ULP issue of disinformation scheme, surveillance and
interference with union affairs, these are mere allegations unsupported
by facts. The charge of "black propaganda" allegedly committed by the
company when it supposedly posted two (2) letters addressed to the
Union President is totally baseless. Petitioner presents no proof that it
was the company which was behind the incident. On the purported
disallowance of union members to observe the July 27, 1997 CBA
meeting, the company explained that it only allowed one (1) employee
from ITTO, instead of two (2), as it would adversely affect the
operation of the group. It also took into consideration the fact that
ITTO members represent only 20% of the union. Other union
members from other departments of the company should have equal
representation (Annex "L", Position Paper for the Union; pp. 205-206,
127 | P a g e
ibid.). As to the alleged surveillance of the company guards during a
union seminar, We find the idea of sending guards to spy on a mere
union seminar quite preposterous. It is thus not likely for the company
which can gain nothing from it to waste its resources in such a scheme.
On the issuance of memorandum/notice to employees without giving
copy to union, change in work schedule at Traffic Records Section and
ITTO policies, the company has sufficiently rebutted the same, thus:
27. The Union also whines about the failure of the company to furnish
copies of memoranda or notices sent to employees and change of work
schedules at the Traffic Records Section and ITTO policies. The CBA,
however, does not obligate the Company to give the Union a copy of
each and every memorandum or notice sent to employees. This would
be unreasonable and impractical. Neither did the Union demand that
they be furnished copies of the same. This is clearly a non-issue as
copies of all memoranda or notices issued by management are readily
available upon request by any employee or the Union.
28. Contrary to the allegations of the Union, the rationale and
mechanics for the abolishment of the midnight schedule at the Traffic
Record Services had been thoroughly and adequately discussed with
the Union's President, Robert Benosa, and the staff of Traffic Record
Services in the meeting held on May 9, 1997. The midnight services
were abolished for purely economic reasons. The company realized
that the midnight work can be handled in the morning without
hampering normal operations. At the same time, the company will be
able to save on cost. For this objective, the employees concerned
agreed to create a manning and shifting schedule starting at 6:00 a.m.
up to 10:00 p.m., with each employee rendering only eight hours of
work every day without violating any provision of the labor laws or
the CBA.24
The Court has always respected a company's exercise of its
prerogative to devise means to improve its operations. Thus, we have
held that management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring,
work assignments, supervision and transfer of employees, working
methods, time, place and manner of work.25
This is so because the law on unfair labor practices is not intended to
deprive employers of their fundamental right to prescribe and enforce
such rules as they honestly believe to be necessary to the proper,
productive and profitable operation of their business.26
Even assuming arguendo that Philcom had violated some provisions in
the CBA, there was no showing that the same was a flagrant or
malicious refusal to comply with its economic provisions. The law
mandates that such violations should not be treated as unfair labor
practices.27
PEU also asserts that the Court of Appeals should have issued an order
directing the issuance of a writ of execution ordering Philcom to
accept back to work unconditionally the striking union officers and
members under the same terms and conditions prevailing before the
strike. PEU asserts that the union officers and members should be paid
their salaries or backwages and monetary equivalent of other benefits
beginning 6 October 1998 when PEU received a copy of the
Secretary's 2 October 1998 return-to-work order.
PEU claims that even if the "issue of illegal strike can be included in
the assailed orders and that the union officers and members have been
terminated as a result of the alleged illegal strike, still, the Secretary
has to rule on the illegality of the strike and the liability of each
striker." PEU asserts that the union officers and members should first
be accepted back to work because a return-to-work order is
immediately executory.28
We rule on the legality of the strike if only to put an end to this
protracted labor dispute. The facts necessary to resolve the legality of
the strike are not in dispute.
The strike and the strike activities that PEU had undertaken were
patently illegal for the following reasons:
1. Philcom is engaged in a vital industry protected by Presidential
Decree No. 823 (PD 823), as amended by Presidential Decree No. 849,
from strikes and lockouts. PD 823, as amended, provides:
Sec. 1. It is the policy of the State to encourage free trade unionism
and free collective bargaining within the framework of compulsory
and voluntary arbitration. Therefore, all forms of strikes, picketings
and lockouts are hereby strictly prohibited in vital industries, such as
in public utilities, including transportation and communications, x x
x. (Emphasis supplied)
128 | P a g e
Enumerating the industries considered as vital, Letter of Instruction
No. 368 provides:
For the guidance of workers and employers, some of whom have been
led into filing notices of strikes and lockouts even in vital industries,
you are hereby instructed to consider the following as vital industries
and companies or firms under PD 823 as amended:
1. Public Utilities:
xxxx
B. Communications:
1) Wire or wireless telecommunications such as telephone, telegraph,
telex, and cable companies or firms; (Emphasis supplied)
xxxx
It is therefore clear that the striking employees violated the no-strike
policy of the State in regard to vital industries.
2. The Secretary had already assumed jurisdiction over the
dispute. Despite the issuance of the return-to-work orders dated 19
November and 28 November 1997, the striking employees failed to
return to work and continued with their strike.
Regardless of their motives, or the validity of their claims, the striking
employees should have ceased or desisted from all acts that would
undermine the authority given the Secretary under Article 263(g) of
the Labor Code. They could not defy the return-to-work orders by
citing Philcom's alleged unfair labor practices to justify such
defiance.29
PEU could not have validly anchored its defiance to the return-to-work
orders on the motion for reconsideration that it had filed on the
assumption of jurisdiction order. A return-to-work order is
immediately effective and executory despite the filing of a motion
for reconsideration. It must be strictly complied with even during
the pendency of any petition questioning its validity.30
The records show that on 22 November 1997, Philcom published in
the Philippine Daily Inquirer a notice to striking employees to return
to work.31 These employees did not report back to work but continued
their mass action. In fact, they lifted their picket lines only on 22
December 1997.32 Philcom formally notified twice these employees to
explain in writing why they should not be dismissed for defying the
return-to-work order.33 Philcom held administrative hearings on these
disciplinary cases.34 Thereafter, Philcom dismissed these employees
for abandonment of work in defiance of the return-to-work order.35
A return-to-work order imposes a duty that must be discharged more
than it confers a right that may be waived. While the workers may
choose not to obey, they do so at the risk of severing their relationship
with their employer.36
The following provision of the Labor Code governs the effects of
defying a return-to-work order:
ART. 264. Prohibited activities. ─ (a) x x x x
No strike or lockout shall be declared after assumption of
jurisdiction by the President or the Ministeror after certification or
submission of the dispute to compulsory or voluntary arbitration or
during the pendency of cases involving the same grounds for the strike
or lockout x x x x
Any union officer who knowingly participates in illegal strike and any
worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have
lost his employment status: Provided, That mere participation of a
worker in a lawful strike, shall not constitute sufficient ground for
termination of his employment, even if a replacement had been hired
by the employer during such lawful strike. (Emphasis supplied)
A strike undertaken despite the Secretary's issuance of an assumption
or certification order becomes a prohibited activity, and thus,
illegal, under Article 264(a) of the Labor Code. The union
officers who knowingly participate in the illegal strike are deemed to
have lost their employment status. The union members, including
union officers, who commit specific illegal acts or who knowingly
defy a return-to-work order are also deemed to have lost their
employment status.37 Otherwise, the workers will simply refuse to
return to their work and cause a standstill in the company operations
while retaining the positions they refuse to discharge and preventing
management to fill up their positions.38
Hence, the failure of PEU's officers and members to comply
immediately with the return-to-work orders dated 19 November and 28
November 1997 cannot be condoned. Defiance of the return-to-work
orders of the Secretary constitutes a valid ground for dismissal.39
3. PEU staged the strike using unlawful means and methods.
129 | P a g e
Even if the strike in the present case was not illegal per se, the strike
activities that PEU had undertaken, especially the establishment of
human barricades at all entrances to and egresses from the company
premises and the use of coercive methods to prevent company officials
and other personnel from leaving the company premises, were
definitely illegal.40 PEU is deemed to have admitted that its officers
and members had committed these illegal acts, as it never disputed
Philcom's assertions of PEU's unlawful strike activities in all the
pleadings that PEU submitted to the Secretary and to this Court.
PEU's picketing officers and members prohibited other tenants at the
Philcom building from entering and leaving the premises. Leonida S.
Rabe, Country Manager of Societe Internationale De
Telecommunications Aeronautiques(SITA), a tenant at the Philcom
building, wrote two letters addressed to PEU President Roberto B.
Benosa. She told Benosa that PEU's act of obstructing the free ingress
to and egress from the company premises "has badly disrupted normal
operations of their organization."41
The right to strike, while constitutionally recognized, is not without
legal constrictions. Article 264(e) of the Labor Code, on prohibited
activities, provides:
No person engaged in picketing shall commit any act of violence,
coercion or intimidation or obstruct the free ingress to or egress from
the employer's premises for lawful purposes, or obstruct public
thoroughfares.
The Labor Code is emphatic against the use of violence, coercion, and
intimidation during a strike and to this end prohibits the obstruction of
free passage to and from the employer's premises for lawful purposes.
A picketing labor union has no right to prevent employees of another
company from getting in and out of its rented premises, otherwise, it
will be held liable for damages for its acts against an innocent by-
stander.42
The sanction provided in Article 264(a) is so severe that any worker or
union officer who knowingly participates in the commission of illegal
acts during a strike may be declared to have lost his employment
status.43
By insisting on staging the prohibited strike and defiantly picketing
Philcom's premises to prevent the resumption of company operations,
the striking employees have forfeited their right to be readmitted.44
4. PEU declared the strike during the pendency of preventive
mediation proceedings at the NCMB.
On 17 November 1997, while a conciliation meeting was being held at
the NCMB in NCMB-NCR-NS 10-435-97, PEU went on strike. It
should be noted that in their meeting on 11 November 1997, both
Philcom and PEU were even "advised to maintain the status
quo."45 Such disregard of the mediation proceedings was a blatant
violation of Section 6, Book V, Rule XXII of the Omnibus Rules
Implementing the Labor Code, which explicitly obliges the parties to
bargain collectively in good faith and prohibits them from impeding or
disrupting the proceedings.46 The relevant provision of the
Implementing Rules provides:
Section 6. Conciliation. ─ x x x x
During the proceedings, the parties shall not do any act which may
disrupt or impede the early settlement of dispute. They are obliged, as
part of their duty, to bargain collectively in good faith, to participate
fully and promptly in the conciliation meetings called by the regional
branch of the Board. x x x x
Article 264(a) of the Labor Code also considers it a prohibited activity
to declare a strike "during the pendency of cases involving the same
grounds for the same strike."
Lamentably, PEU defiantly proceeded with their strike during the
pendency of the conciliation proceedings.
5. PEU staged the strike in utter disregard of the grievance procedure
established in the CBA.
By PEU's own admission, "the Union's complaints to the management
began in June 1997 even before the start of the 1997 CBA
renegotiations."47 Their CBA expired on 30 June 1997.48 PEU could
have just taken up their grievances in their negotiations for the new
CBA. This is what a Philcom officer had suggested to the Dasmariñas
staff when the latter requested on 16 June 1997 for an increase in
transportation allowance.49 In fact, when PEU declared the strike,
Philcom and PEU had already agreed on 37 items in their negotiations
for the new CBA.50
130 | P a g e
The bottom line is that PEU should have immediately resorted to the
grievance machinery provided for in the CBA.51 In disregarding this
procedure, the union leaders who knowingly participated in the strike
have acted unreasonably. The law cannot interpose its hand to protect
them from the consequences of their illegal acts.52
A strike declared on the basis of grievances which have not been
submitted to the grievance committee as stipulated in the CBA of the
parties is premature and illegal.53
Having held the strike illegal and having found that PEU's officers and
members have committed illegal acts during the strike, we hold that no
writ of execution should issue for the return to work of PEU officers
who participated in the illegal strike, and PEU members who
committed illegal acts or who defied the return-to-work orders that the
Secretary issued on 19 November 1997 and 28 November 1997. The
issue of who participated in the illegal strike, committed illegal acts, or
defied the return-to-work orders is a question of fact that must be
resolved in the appropriate proceedings before the Secretary of Labor.
WHEREFORE, we DISMISS the petition and AFFIRM the
Decision of the Court of Appeals in CA-G.R. SP No. 53989, with
the MODIFICATION that the Secretary of Labor is directed to
determine who among the Philcom Employees Union officers
participated in the illegal strike, and who among the union members
committed illegal acts or defied the return-to-work orders of 19
November 1997 and 28 November 1997. No pronouncement as to
costs.
SO ORDERED.
[G.R. No. 146621. July 30, 2004]
RENE P. VALIAO, petitioner, vs. HON. COURT OF APPEALS,
NATIONAL LABOR RELATIONS COMMISSION-FOURTH
DIVISION (Cebu City), WEST NEGROS
COLLEGE, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the Decision[1] dated August 22, 2000 of the
Court of Appeals in CA-G.R. SP No. 55133, and
its Resolution[2] dated November 22, 2000 denying the motion for
reconsideration. The Court of Appeals dismissed the petition for
certiorari filed by petitioner and affirmed the Resolution dated July 7,
1999 of the National Labor Relations Commission (NLRC)-Fourth
Division in NLRC Case No. V-000134-98 (RAB Case No. 06-01-
10026-95), which sustained the Decision of Labor Arbiter Benjamin E.
Pelaez, directing private respondent West Negros College (WNC) to
pay petitioner Rene P. Valiaos salary during the period of his
preventive suspension and attorneys fees, while dismissing all other
claims.
The facts, as culled from records, are as follows:
On February 5, 1990, petitioner Rene Valiao was appointed by private
respondent West Negros College (WNC) as Student Affairs Office
(SAO) Director, with a starting salary of P2,800 per month. On May
14, 1990, he was assigned as Acting Director, Alumni Affairs Office.
On July 29, 1990, petitioner was transferred to a staff position and
designated as Records Chief at the Registrars Office but was again re-
assigned as a typist on June 24, 1991.
The latest re-assignment was due to his tardiness and absences, as
reflected in the summary of tardiness and absences report, which
showed him to have been absent or late for work from a minimum of
seven (7) to a maximum of seventy-five (75) minutes for the period
March to October 31, 1991, and to have reported late almost every day
for the period November to December 1991.
Copies of his tardiness/absences reports were furnished petitioner,
along with memoranda requiring him to explain but his explanations
were either unacceptable or unsatisfactory. Subsequent reports also
showed that he did not change his habits resulting in tardiness and
absences. He was even caught one time manipulating the bundy clock,
thus necessitating another memorandum to him asking him to explain
his dishonest actuations in accomplishing the daily attendance logbook
and in using the bundy clock.
On December 10, 1991, petitioner received a suspension order without
pay for fifteen (15) days effective January 1, 1992, because of
dishonesty in reporting his actual attendance. After serving the
suspension, the petitioner reported back to office on January 16, 1992.
On June 15, 1992, another adverse report on tardiness and absences
from the Registrar was made against the petitioner prompting WNC to
send him another memorandum with an attached tardiness and
131 | P a g e
absences report, calling his attention on his tardiness and absences for
the period February to April 1992.
On June 20, 1992, petitioner sent a letter of appeal and explained his
side to the new college president, Suzette Arbolario-Agustin, who
gave petitioner another chance. The petitioner was then appointed as
Information Assistant effective immediately. However, the petitioner
did not immediately assume the post of Information Assistant
prompting the President of private respondent WNC to call his
attention. When the petitioner finally assumed his post, he was allowed
a part-time teaching job in the same school to augment his income.
Sometime in December 1992, WNC won a case against the officials of
the union before the NLRC. Petitioner was ordered to prepare a media
blitz of this victory but the petitioner did not comply with the order on
the ground that such a press release would only worsen the already
aggravated situation and strained relations between WNC management
and the union officials.
When petitioner reported for work on the first day of January 1993, he
was relieved from his post and transferred to the College of Liberal
Arts as Records Evaluator. Not for long, the Dean of the Liberal Arts
sent a letter to the Human Resources Manager complaining about the
petitioners poor performance and habitual absenteeism, as shown in
the daily absence reports.
On January 18, 1993, petitioner was again absent from work without
permission or notice to his immediate superior. It turned out that he
went to Bacolod City and on January 28, 1993, the petitioner was one
of those arrested during a raid in the house of one Toto Ruiz, a
suspected drug pusher and was brought to the Bacolod Police Station
along with four (4) other suspects. Upon further search and
investigation by the Narcotics Control Division, the petitioner was
found possessing two (2) suspected marijuana roaches (butts) which
were placed inside his left shoe. The event was widely publicized,
focusing on petitioners position as an Economics teacher of WNC, and
considering further that one of his fellow suspects was a member of
the Philippine Army, who was caught with an unlicensed firearm, a
tooter and other shabu paraphernalia. The petitioner and other suspects
were then charged with violation of the Dangerous Drugs Act of 1972
(Republic Act No. 6425, as amended).
Petitioner was asked to explain within 24 hours why he should not be
terminated as a result of the raid and the charges against him for
violation of Rep. Act No. 6425 as amended. Petitioner allegedly was
not able to answer immediately since he was in jail and received said
memorandum only on January 30, 1993, although his wife had earlier
received the memorandum on January 28, 1993.
On January 29, 1993, the petitioner was dismissed for failure to
answer said memorandum.
On February 1, 1993, the petitioner wrote to the President of WNC
explaining his side and asking for due process. WNC cancelled its
Notice of Termination dated January 29, 1993, and granted the
petitioners request.The petitioner was notified through a memorandum
about the grant of his request and that a hearing would be
conducted. He was then placed under preventive suspension and an
investigation committee was organized to conduct the probe. On
March 6, 1993, a notice of hearing/investigation was sent to the
petitioner.
After the investigation attended by the petitioner and his counsel, with
proceedings duly recorded, the investigation committee recommended
the dismissal of petitioner. A notice of termination was then sent to
petitioner informing him of his termination from the service for serious
misconduct and gross and habitual neglect of duty. The petitioner
received the notice on March 25, 1993, but did not file a grievance
concerning the notice of termination.
On January 19, 1995, petitioner filed a Complaint against WNC for
illegal suspension, illegal dismissal, backwages, salary differential for
salary increases and other benefits granted after his dismissal as well
as for moral and exemplary damages and attorneys fees.
In its Answer, WNC alleged that petitioner was dismissed on charges
of serious misconduct, and gross and willful neglect of duty. WNC
said his dismissal was effected after due notice and prior hearing. It
claimed also that since petitioner was terminated for a valid cause after
a due hearing, the latters claim for moral and exemplary damages, and
attorneys fees had no basis in fact and in law.
After due proceedings, the Labor Arbiter rendered a decision, the
decretal portion of which reads as follows:
132 | P a g e
WHEREFORE, premises considered, judgment is hereby rendered
DIRECTING respondent West Negros College to pay complainant
Rene P. Valiao (a) P3,300.00 as salary for the period of his preventive
suspension, and (b) P330.00 as attorneys fees, or the total amount of
THREE THOUSAND SIX HUNDRED THIRTY PESOS (P3,630.00).
Further, all other claims are DISMISSED for lack of merit.
SO ORDERED.[3]
The Labor Arbiter found no justifiable reason to place the petitioner
under preventive suspension as there was no serious or imminent
threat to the life or property of his employer or co-workers.
However, the Labor Arbiter found the dismissal of the petitioner from
WNC to be valid due to absenteeism and tardiness and after he was
accorded the procedural due process aspect of the law as reflected in
the records showing that the petitioner was formally investigated and
given the opportunity to refute the alleged findings by the management
of WNC. The Labor Arbiter held that frequent absenteeism and
tardiness of the petitioner constituted not only willful disobedience but
also gross and habitual neglect of duties, which are valid grounds for
termination of employment. He stressed that the petitioners frequent
absences without proper leave of absence was not only unfair to WNC
and the petitioners co-employees but also set an undesirable example
to the employees under his supervision, considering that the petitioner
was not a mere rank-and-file employee but one who owed more than
the usual fealty to the organization.
On appeal to the NLRC, the latter affirmed the decision of the Labor
Arbiter, sustained the latters findings of facts, and made its own
findings on the apprehension of the petitioner for possession of
prohibited drugs. The decretal portion of the decision reads as follows:
WHEREFORE, premises considered, the appeal is DISMISSED and
the decision of the Executive Labor Arbiter is AFFIRMED in its
entirety.
SO ORDERED.[4]
Petitioner then filed a Petition for Certiorari under Rule 65 before the
Court of Appeals but this was dismissed for lack of merit. The decretal
portion of the decision reads as follows:
WHEREFORE, the questioned Decision and Resolution dated
December 11, 1998 and July 7, 1999, respectively, of public
respondent National Labor Relations Commission are hereby
AFFIRMED.
SO ORDERED.[5]
The Court of Appeals held that the petitioner was validly dismissed for
serious misconduct and gross habitual neglect of duties, which was
aggravated by his arrest for violation of Rep. Act No. 6425, as
amended [the January 28, 1993 incident] and that he was afforded the
twin requirements of notice and hearing and the opportunity to defend
himself by the investigating committee. The appellate court noted that
WNC had presented sufficient evidence to support petitioners
termination from employment after taking into consideration the
totality of the infractions or the number of violations committed by
petitioner during the period of employment and stressed that it
properly exercised its management prerogative by observing due
process. Finally, the Court of Appeals ruled that the NLRC correctly
denied the claim for damages and attorneys fees for lack of evidentiary
support.
Petitioner duly filed a Motion of Reconsideration, which was denied
by the Court of Appeals.
Hence, this petition alleging that:
A. THE HONORABLE PUBLIC RESPONDENT COURT OF
APPEALS ERRED IN HOLDING THAT THE DISMISSAL OF
PETITIONER WAS VALID, DESPITE THE FACT THAT THERE
IS CLEAR AND BLATANT VIOLATION OF THE BASIC
CONSTITUTIONAL RIGHTS OF THE HEREIN PETITIONER
BOTH SUBSTANTIVE AND PROCEDURAL DUE PROCESS.
B. THE HONORABLE PUBLIC RESPONDENT COURT OF
APPEALS IN (SIC) DISMISSING THE RELIEFS FOR MORAL
AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.[6]
In our view, the only relevant issue for our resolution is whether or not
the petitioner was validly dismissed from employment on the ground
of serious misconduct and gross habitual neglect of duties, including
habitual tardiness and absenteeism.
Petitioner claims that his outright dismissal from employment was not
valid and too harsh and that he was not dismissed from employment
because of tardiness or absences but because he was among those
apprehended in a raid. Also, he was not accorded due process because
133 | P a g e
although his wife received the show cause notice, he did not have the
proper mind to reply as he was in jail and was psychologically
disturbed.
Considering the submissions of the parties as well as the records
before us, we find the petition without merit. Petitioners dismissal
from employment is valid and justified.
For an employees dismissal to be valid, (a) the dismissal must be for a
valid cause and (b) the employee must be afforded due process.[7]
Serious misconduct and habitual neglect of duties are among the just
causes for terminating an employee under the Labor Code of the
Philippines. Gross negligence connotes want of care in the
performance of ones duties. Habitual neglect implies repeated failure
to perform ones duties for a period of time, depending upon the
circumstances.[8] The Labor Arbiters findings that petitioners habitual
absenteeism and tardiness constitute gross and habitual neglect of
duties that justified his termination of employment are sufficiently
supported by evidence on record. Petitioners repeated acts of absences
without leave and his frequent tardiness reflect his indifferent attitude
to and lack of motivation in his work. More importantly, his repeated
and habitual infractions, committed despite several warnings,
constitute gross misconduct unexpected from an employee of
petitioners stature. This Court has held that habitual absenteeism
without leave constitute gross negligence and is sufficient to justify
termination of an employee.[9]
However, petitioner claims that he was dismissed not for his tardiness
or absences but for his arrest as a suspected drug user. His claim,
however, is merely speculative. We find such contention devoid of
basis. First, the decisions of the Labor Arbiter, the NLRC, and the
Court of Appeals are indubitable. They show that indeed petitioner had
incurred numerous and repeated absences without any
leave. Moreover, he was not punctual in reporting for work. These
unexplained absences and tardiness were reflected on the summary
reports submitted by WNC before the labor arbiter, but petitioner
failed to controvert said reports. Second, contrary to petitioners
assertion, the NLRC did not base its conclusions on the fact of the
arrest of petitioner for violation of Rep. Act No. 6425 but on the
totality of the number of infractions incurred by the petitioner during
the period of his employment in different positions he occupied at
WNC. Thus:
In the case of petitioner Valiao, his services were terminated by private
respondent after having been found guilty of serious
misconduct and gross habitual neglect of duty which was
aggravated by the January 28, 1993 incident. In exercising such
management prerogative, due process was properly observed. Private
respondent presented sufficient evidence to support its act in
terminating the services of petitioner. Private respondent took into
consideration the totality of the infractions or the number of
violations committed by petitioner during the period of
employment. Furthermore, it hardly needs reminding that, in view of
petitioners position and responsibilities, he must demonstrate a
scrupulous regard for rules and policies befitting those who would be
role models for their young charges.[10] (Emphasis and italics supplied)
Indeed, even without the arrest incident, WNC had more than enough
basis for terminating petitioner from employment. It bears stressing
that petitioners absences and tardiness were not isolated incidents but
manifested a pattern of habituality. In one case, we held that where the
records clearly show that the employee has not only been charged with
the offense of highgrading but also has been warned 21 times for
absences without official leave, these repeated acts of misconduct and
willful breach of trust by an employee justify his dismissal and
forfeiture of his right to security of tenure.[11] The totality of
infractions or the number of violations committed during the period of
employment shall be considered in determining the penalty to be
imposed upon an erring employee. The offenses committed by him
should not be taken singly and separately but in their totality. Fitness
for continued employment cannot be compartmentalized into tight
little cubicles of aspects of character, conduct, and ability separate and
independent of each other.[12]
Needless to say, so irresponsible an employee like petitioner does not
deserve a place in the workplace, and it is within the managements
prerogative of WNC to terminate his employment. Even as the law is
solicitous of the welfare of employees, it must also protect the rights of
an employer to exercise what are clearly management prerogatives. As
long as the companys exercise of those rights and prerogative is in
134 | P a g e
good faith to advance its interest and not for the purpose of defeating
or circumventing the rights of employees under the laws or valid
agreements, such exercise will be upheld.[13]
Still, petitioner claims that he was not afforded due process so that his
dismissal from employment should be declared invalid. This
contention deserves scant consideration. The Court of Appeals held
that the records reveal that petitioner was afforded the twin
requirements of notice and hearing and was likewise given the
opportunity to defend himself before the investigating committee. We
find no reason to set aside these factual findings of the Court of
Appeals as they are supported by evidence on record. Besides, we may
not review the appellate courts findings of fact in an appeal
via certiorari,[14] since as a rule, the Supreme Courts review is limited
to errors of law allegedly committed by the appellate court.[15] Judicial
review of labor cases does not go as far as to evaluate the sufficiency
of evidence upon which the Labor Arbiter and National Labor
Relations Commission based their determinations.[16]
In this case, petitioner was asked to explain his several absences and
tardiness on many occasions. A notice to explain was sent to him
regarding the arrest incident wherein he was able to reply. An
investigation committee was formed by WNC to investigate the arrest
incident and the absences and tardiness of petitioner. It must be
emphasized that proceedings of the committee were duly recorded, and
petitioner actively participated therein by answering the various questions
interposed by the panel members. Finally, a notice of his termination was
sent to petitioner, although he claims to have received it late as he was in
jail. It is an undeniable fact, however, that his wife had actually received
the notice in his house earlier, even before petitioners termination and this
matter was later communicated to him.
At any rate, petitioner was given enough opportunity to be heard, and
his dismissal was based on valid grounds. The essence of due process
is simply an opportunity to be heard, or as applied to administrative
proceedings, an opportunity to explain ones side or an opportunity to
seek a reconsideration of the action or ruling complained of. A formal
or trial-type hearing is not at all times and in all instances essential, as
the due process requirements are satisfied where the parties are
afforded fair and reasonable opportunity to explain their side of the
controversy at hand. What is frowned upon is the absolute lack of
notice and hearing.[17]
Finally, the Labor Arbiter found that petitioner is entitled to salary
differentials for the period of his preventive suspension, as there is no
sufficient basis shown to justify his preventive suspension. During the
pendency of the investigation, the employer may place the worker
concerned under preventive suspension if his continued employment
poses a serious and imminent threat to life or property of the employer
or of his co-workers.[18] But in this case, there is no indication that
petitioner posed a serious threat to the life and property of the
employer or his co-employees. Neither was it shown that he was in
such a position to unduly influence the outcome of the
investigation. Hence, his preventive suspension could not be justified,
and the payment of his salary differentials is in order.
However, the award of attorneys fees to him cannot be sustained, in
view of our findings that petitioner was validly dismissed from
employment. Said award lacks legal basis and could not be granted
properly in this case.
WHEREFORE, the assailed Decision dated August 22, 2000 and
Resolution dated November 22, 2000 of the Court of Appeals in CA-
G.R. SP No. 55133 are AFFIRMED with MODIFICATION in that the
award of attorneys fees is deleted. No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna,
JJ., concur.
MERCEDITA ACUA, G.R. No. 159832
MYRNA RAMONES, and
JULIET MENDEZ, Present:
Petitioners,
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
- versus - TINGA, and
VELASCO, JR., JJ.
135 | P a g e
HON. COURT OF APPEALS Promulgated:
and JOIN INTERNATIONAL
CORPORATION and/or May 5, 2006
ELIZABETH ALAON,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - -x
DECISION
QUISUMBING, J.:
This petition seeks the review and reversal of the Court of
Appeals Decision[1] dated January 27, 2003, in CA-G.R. SP No.
70724, entitled Join International Corporation and/or Elizabeth Alaon
v. National Labor Relations Commission (Third Division), Mercedita
Acua, Juliet Mendez, and Myrna Ramones, setting aside the
resolutions of the NLRC and dismissing the complaint of petitioners.
Petitioners are Filipino overseas workers deployed by private
respondent Join International Corporation (JIC), a licensed recruitment
agency, to its principal, 3D Pre-Color Plastic, Inc., (3D) in Taiwan,
Republic of China, under a uniformly-worded employment contract
for a period of two years. Herein private respondent Elizabeth Alaon is
the president of Join International Corporation.
Sometime in September 1999, petitioners filed with private
respondents applications for employment abroad. They submitted their
passports, NBI clearances, medical clearances and other requirements
and each paid a placement fee of P14,850, evidenced by official
receipts[2] issued by private respondents.
After their papers were processed, petitioners claimed they signed a
uniformly-worded employment contract[3] with private respondents
which stipulated that they were to work as machine operators with a
monthly salary of NT$15,840.00, exclusive of overtime, for a period On January 14, 2000, petitioners Acua and Mendez invoking Republic
of two years. Act No. 8042,[13] filed a complaint for illegal dismissal and non-
payment/underpayment of salaries or wages, overtime pay, refund of
On December 9, 1999, with 18 other contract workers they left transportation fare, payment of salaries/wages for 3 months, moral and
for Taiwan. Upon arriving at the job site, a factory owned by 3D, they exemplary damages, and refund of placement fee before the National
were made to sign another contract which stated that their salary was Labor Relations Commission (NLRC). Petitioner Ramones filed her
only NT$11,840.00.[4] They were likewise informed that the dormitory complaint on January 20, 2000.
which would serve as their living quarters was still under
construction. They were requested to temporarily bear with the The Labor Arbiter ruled in favor of petitioners, declaring that Myrna
inconvenience but were assured that their dormitory would be Ramones, Juliet Mendez and Mercedita Acua did not resign
completed in a short time.[5] voluntarily from their jobs. Thus, private respondents were ordered to
pay jointly and severally, in Philippine Peso, at the rate of exchange
Petitioners alleged that they were brought to a small room with a prevailing at the time of payment, the following:
cement floor so dirty and smelling with foul odor (sic). Forty women 1. MERCEDIT
were jampacked in the room and each person was given a pillow.Since A ACUA
the ladies comfort room was out of order, they had to ask permission a. Unexpired NT$95,000.0
to use the mens comfort room.[6] Petitioners claim they were made to Portion 0
work twelve hours a day, from 8:00 p.m. to 8:00 a.m. b. Salary for 4 2,436.92
days
The petitioners averred that on December 16, 1999, due to unbearable c. Overtime pay
working conditions, they were constrained to inform management that for 4 hrs. in 4 1,523.07
they were leaving. They booked a flight home, at their own days
expense. Before they left, they were made to sign a written NT$98,960.00*
waiver.[7] In addition, petitioners were not paid any salary for work d. Refund of PHP45,000.0
rendered on December 11-15, 1999.[8] placement fee 0
(Less: Amount received per 13,640.00 31,360.00
Immediately upon arrival in the Philippines, petitioners went to private Quitclaim)
respondents office, narrated what happened, and demanded the return e. Moral 25,000.00
of their placement fees and plane fare. Private respondents refused. damages
f. Exemplary 40,000.00
On December 28, 1999, private respondents offered a damages
settlement. Petitioner Mendez received P15,080.[9] The next day,
petitioners Acua and Ramones went back and 2. JULIET C.
received P13,640[10] and P16,200,[11] respectively. They claim they MENDEZ
signed a waiver, otherwise they would not be refunded.[12] a. Unexpired NT$95,000.0
Portion 0

136 | P a g e
 b. Salary for 4 2,436.92 NT$296,880.00 and P285,080.00 The other claims were dismissed for
days lack of merit.
c. Overtime pay
for 4 hrs. in 4 1,523.07 Private respondents thereafter appealed the decision to the National
days Labor Relations Commission. The NLRC ruled that the inclusion of
NT$98,960.00 Alaon as party respondent in this case had no basis since respondent
d. Refund of PHP45,000.0 JIC, being a juridical person, has a legal personality, separate and
placement fee 0 distinct from its officers.[16] It partially granted the appeal and ordered
(Less: Amount received per 15,080.00[14] 29,920.00 that the amounts of P15,080, P13,640 and P16,200 received under the
Quitclaim) quitclaim by Mendez, Acua and Ramones, respectively, be deducted
e. Moral 25,000.00 from their respective awards. They were awarded attorneys fees
damages equivalent to ten percent (10%) of their awarded labor-standards
f. Exemplary 40,000.00 claims for unpaid wages and overtime pays. No moral and exemplary
damages damages and placement fees were awarded.[17] Private respondents
motion for partial reconsideration was denied.
3. MYRNA R.
RAMONES On appeal, the Court of Appeals ruled for private respondents. It set
a. Unexpired NT$95,000.0 aside the resolutions dated February 26, 2002 and December 10,
Portion 0 2001 of the NLRC and dismissed the complaint of petitioners.[18]
b. Salary for 4 2,436.92
days In their petition before us, petitioners raise the following issues:
c. Overtime pay I
for 4 hrs. in 4 1,523.07 WHETHER OR NOT PUBLIC RESPONDENT COURT OF
days APPEALS ERRED AND/OR GRAVELY ABUSED ITS
NT$98,960.00 DISCRETION, AMOUNTING TO LACK OF JURISDICTION, IN
d. Refund of PHP45,000.0 TAKING COGNIZANCE OF THE PETITION FOR CERTIORARI
placement fee 0 FILED BY THE PRIVATE RESPONDENTS, DESPITE THE FACT
(Less: Amount received per 16,200.00 28,800.00 THAT THE NLRCS RESOLUTION OF DECEMBER 10, 2001 HAD
Quitclaim) ALREADY BECOME FINAL AND EXECUTORY, PRIVATE
e. Moral 25,000.00 RESPONDENTS MOTION FOR PARTIAL RECONSIDERATION
damages WITH THE NLRC HAVING BEEN FILED OUT OF TIME
f. Exemplary 40,000.00[15 II
damages ] ALTERNATIVELY, WHETHER OR NOT PUBLIC RESPONDENT
COURT OF APPEALS ERRED IN SETTING ASIDE THE
The Labor Arbiter likewise ordered the payment of attorneys fees RESOLUTIONS OF THE NLRC, AND IN DISMISSING THE
equivalent to ten percent (10%) of the award which totaled COMPLAINT OF THE PETITIONERS.[19]

137 | P a g e
Prefatorily, petitioners aver that private respondents Verification and
Certification of the Petition for Certiorari stated that the copy of the
resolution of the NLRC dated December 10, 2001 was received on
January 4, 2002 and its partial motion for reconsideration filed on
January 29, 2002, or 15 days beyond
the reglementary period. However, a perusal of the Partial Motion for
Reconsideration[20] filed by private respondents show that the NLRC
Resolution dated December 10, 2001 was in fact received by private
respondents on January 24, 2002 and not on January 4, 2002. Hence,
the appeal was properly filed within the 10-day reglementary period.
In this petition the issue left for resolution is whether petitioners were
illegally dismissed under Rep. Act No. 8042, thus entitling them to
benefits plus damages.
The Labor Arbiter and the NLRC found that petitioners admitted they
resigned from their jobs without force, coercion, intimidation and
pressure from private respondents principal abroad.[21]
According to the Labor Arbiter, while it may be true that petitioners
were not coerced into giving up their jobs, the deplorable, oppressive
and sub-human working conditions drove petitioners to resign.In
effect, according to the Labor Arbiter, the petitioners did not
voluntarily resign.[22]
The NLRC also ruled that there was constructive dismissal since
working under said conditions was unbearable.[23]
As we have held previously, constructive dismissal covers the
involuntary resignation resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is a
demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to an employee.[24]
In this case, the appellate court found that petitioners did not deny that
the accommodations were not as homely as expected. In the petitioners
138 | P a g e
memorandum, they admitted that they were told by the principal, upon
their arrival, that the dormitory was still under construction and were
requested to bear with the temporary inconvenience and the dormitory
would soon be finished. We likewise note that petitioners did not
refute private respondents assertion that they had deployed
approximately sixty other workers to their principal, and to the best of
their knowledge, no other worker assigned to the same principal has
resigned, much less, filed a case for illegal dismissal.[25]
To our mind these cited circumstances do not reflect malice by private
respondents nor do they show the principals intention to subject
petitioners to unhealthy accommodations. Under these facts, we cannot
rule that there was constructive dismissal.
Private respondents also claim that petitioners were not entitled to
overtime pay, since they had offered no proof that they actually
rendered overtime work. Petitioners, on the other hand, say that they
could not show any documentary proof since their employment
records were all in the custody of the principal employer. It was
sufficient, they claim, that they alleged the same with particularity.
On this matter, we rule for the petitioners. The claim for overtime pay
should not have been disallowed because of the failure of the
petitioners to substantiate them.[26] The claim of overseas workers
against foreign employers could not be subjected to same rules of
evidence and procedure easily obtained by complainants whose
employers are locally based.[27] While normally we would require the
presentation of payrolls, daily time records and similar documents
before allowing claims for overtime pay, in this case, that would be
requiring the near-impossible.
To our mind, it is private respondents who could have obtained the
records of their principal to refute petitioners claim for overtime
pay. By their failure to do so, private respondents waived their defense
and in effect admitted the allegations of the petitioners.
It is a time-honored rule that in controversies between a worker and his a disparity between the amount of the quitclaim and the amount
employer, doubts reasonably arising from the evidence, or in the actually due the petitioners.
interpretation of agreements and writing should be resolved in the
workers favor.[28] The policy is to extend the applicability of the decree Conformably then the petitioners are entitled to the following amounts
to a greater number of employees who can avail of the benefits under in Philippine Peso at the rate of exchange prevailing at the time of
the law, which is in consonance with the avowed policy of the State to payment:
give maximum aid and protection to labor.[29] Accordingly, we rule 1. MERCEDITA ACUA
that private respondents are solidarily liable with the foreign principal a. Salary for 4 days NT $ 2,436.92
for the overtime pay claims of petitioners. b. Overtime pay for 4 hours in 4 days 1,523.07
NT $ 3,959.99
On the award of moral and exemplary damages, we hold that such
award lacks legal basis. Moral and exemplary damages are recoverable
only where the dismissal of an employee was attended by bad faith or 2. JULIET C. MENDEZ
fraud, or constituted an act oppressive to labor, or was done in a a. Salary for 4 days NT $ 2,436.92
manner contrary to morals, good customs or public policy.[30] The b. Overtime pay for 4 hours in 4 days 1,523.07
person claiming moral damages must prove the existence of bad faith NT $ 3,959.99
by clear and convincing evidence, for the law always presumes good
faith.[31] Petitioners allege they suffered humiliation, sleepless nights 3. MYRNA R. RAMONES
and mental anguish, thinking how they would pay the money they a. Salary for 4 days NT $ 2,436.92
borrowed for their placement fees.[32] Even so, they failed to prove bad b. Overtime pay for 4 hours in 4 days 1,523.07
faith, fraud or ill motive on the part of private respondents.[33] Moral NT $ 3,959.99
damages cannot be awarded. Without the award of moral damages, According to the Bangko Sentral Treasury Department, the prevailing
there can be no award of exemplary damages, nor attorneys fees.[34] exchange rates on December 1999 was NT$1 to P1.268805. Hence,
after conversion to Philippine pesos, the amount of the quitclaim paid
Quitclaims executed by the employees are commonly frowned upon as to petitioners was actually higher than the amount due them.
contrary to public policy and ineffective to bar claims for the full
measure of the workers legal rights, considering the economic WHEREFORE, the petition is DISMISSED, without prejudice to the
disadvantage of the employee and the inevitable pressure upon him by filing of illegal recruitment complaint against the respondents pursuant
financial necessity.[35] Nonetheless, the so-called economic difficulties to Section 6(i) of The Migrant Workers and Overseas Filipino Act of
and financial crises allegedly confronting the employee is not an 1995 (Rep. Act No. 8042).
acceptable ground to annul the compromise agreement[36] unless it is SO ORDERED.
accompanied by a gross disparity between the actual claim and the
amount of the settlement.[37]
G.R. No. 153750 January 25, 2006
A perusal of the records reveals that petitioners were not in any way ORIENTAL SHIPMANAGEMENT CO., INC., Petitioner,
deceived, coerced or intimidated into signing a quitclaim waiver in the vs.
amounts of P13,640, P15,080 and P16,200 respectively. Nor was there
139 | P a g e
HON. COURT OF APPEALS, FELICISIMO S. CUESTA and
WILFREDO B. GONZAGA, Respondents.
DECISION
QUISUMBING, J.:
For review on certiorari are (1) the Decision1 dated January 31, 2002
and (2) the Resolution2 dated May 29, 2002, of the Court of Appeals
in CA-G.R. SP. No. 61073. The Court of Appeals had set aside the
Decision3 dated June 30, 2000, and Resolution4 dated July 31, 2000 of
the National Labor Relations Commission (NLRC) in NLRC NCR CA
No. 021454-99 which affirmed with modification the Labor Arbiter’s
Decision5 of August 18, 1999.
The antecedent facts are as follows:
Petitioner Oriental Shipmanagement Co., Inc. (Oriental, for brevity) is
a recruitment agency duly licensed by the Philippine Overseas
Employment Administration (POEA) to recruit seafarers for
employment on board vessels accredited to it. Kara Seal Shipping Co.,
Ltd. (Kara Seal, for brevity) is petitioner’s foreign-based principal,
which owns and manages M/V Agios Andreas, a vessel accredited to
petitioner.
Respondents Felicisimo Cuesta and Wilfredo Gonzaga were hired in
the latter part of 1998 as Third Engineers on board M/V Agios
Andreas for a one-year contract with a monthly salary of nine hundred
US dollars (US$900). It was through Oriental that Kara Seal hired
them.
Cuesta boarded M/V Agios Andreas on November 14, 1998, at Durban,
South Africa while Gonzaga boarded the ship on January 5, 1999, at
the Port of Marseille, France.
On November 27, 1998, Kara Seal and M/V Agios
Andreas’ Shipmaster signed an Agreement with the International
Transport Workers Federation (ITF for brevity) increasing the monthly
salary of the vessel’s employees. Based on said Agreement,
respondents were entitled to an increased monthly salary of one
thousand nine hundred thirty-six US dollars (US$1,936).
On January 8, 1999, at the Port of Marseille, an ITF Inspector
boarded M/V Agios Andreas for a routine check. He discovered that
the vessel’s crew had not been paid according to the ITF Agreement.
140 | P a g e
The Shipmaster assured the ITF Inspector he would comply as soon as
the vessel reached its next port, Piombino in Italy.
However, upon reaching Port Piombino on January 19, 1999,
respondents were ordered repatriated to Manila. Before their
repatriation, they were made to sign Letters of Indemnity, which we
quote:
Letter of Indemnity
TO WHOM IT MAY CONCERN:
This confirm that no disciplinary measures or legal proceedings or
other action will be instituteted (sic) against Mr. CUESTA
FELICISIMO – concerned (sic) his service aboard of M/v AGIOS
ANDREAS – Cyprus Flag – as 3rd Engineer.
This certificate has been signed voluntarily and freely, it will not be
withdrawn in any such circumstances; as his consent the International
Transport Worker’s Federation (I.T.F.) or other Union for the
betterment of his employment.
The contract of employment of the above crewmember is terminated
by mutual agreement up to 23rd January 1999, in the Port of Piombino
(Italy).
The seamen (sic) hereby acknowledge has been received all what is
due to him, arising from his employment on board of the mentioned
vessel; consequently he declares to have no claim whatever against the
Shipowner. 6
Letter of Indemnity
TO WHOM IT MAY CONCERN:
This confirm that no disciplinary measures or legal proceedings or
other action will be instituteted (sic) against Mr. GONZAGA
WILFREDO – concerned (sic) his service aboard of M/v AGIOS
ANDREAS – Cyprus Flag – as 3rd Engineer.
This certificate has been signed voluntarily and freely, it will not be
withdrawn in any such circumstances; as his consent the International
Transport Worker’s Federation (I.T.F.) or other Union for the
betterment of his employment.
The contract of employment of the above crewmember is terminated
by mutual agreement up to 23rd January 1999, in the Port of Piombino
(Italy).
 The seamen (sic) hereby acknowledge has been received all what is
due to him, arising from his employment on board of the mentioned
vessel; consequently he declares to have no claim whatever against the
Shipowner. 7
On January 23, 1999, respondents received from Kara Seal the
following payments for their services:
For respondent Cuesta: (Payment in US$)
From November 13, 1998 to November 26, 1998 (14 days)
Wages: (900 divided by 30 x 14) = 420
Vacation Leave Pay: (75 divided by 30 x 14) = 35
Overtime Pay: (270 divided by 30 x 14) = 126
Extra Overtime: 47.52
From November 27, 1998 to December 31, 1998 (34 days)
New Wages: (1,936 divided by 30 x 34) = 2,194.13
Extra Overtime: (27 x 6.61) = 178.47
From January 1, 1999 to January 24, 1999 (24 days)
New Wages: (1,936 divided by 30 x 24) = 1,5488
For respondent Gonzaga: (Payment in US$)
From January 5, 1999 to January 6, 1999 (1 day)
Wages: (900 divided by 30 x 1) = 30
Vacation Leave Pay: (75 divided by 30 x 1) = 2.50
From January 7, 1999 to January 24, 1999 (18 days)
New Wages: (1,936 divided by 30 x 18) = 1,161.599
Thus, on April 19, 1999, respondents filed a Complaint10 against
Oriental and Kara Seal for illegal dismissal. They prayed that
judgment be rendered ordering Oriental and Kara Seal to pay:
a) US$7,470.00 or US$3,735.00, each, representing three (3) months
salaries of complainants for the unexpired portion of their contracts;
b) US$175.00, as and by way of unpaid vacation leave pay of
complainant Cuesta;
c) P200,000.00, as moral damages;
d) P100,000.00, representing exemplary damages;
e) Attorney’s fees of not less than 10% of the total claims plus
litigation expenses and costs of suit.11
Respondents averred that Kara Seal repeatedly failed to pay their
wages according to the ITF Agreement. They also claimed that they
141 | P a g e
did not voluntarily resign, but were forced to sign the Letters of
Indemnity under threat of possible disciplinary actions. They added
that prior to their termination, they had demanded from the Shipmaster
the payment of their unpaid wages. They also protested, before they
were dismissed, the lack of adequate provisions such as medicine,
winter jacket, and safety gears as well as the lack of a washing
machine and air conditioning units at the vessel’s control room and
crew’s cabin.
In defense, Oriental and Kara Seal alleged that respondents voluntarily
resigned, as evidenced by the Letters of Indemnity bearing their
signatures. They added that respondents were duly paid their full
wages.1awphil.net
In its three-page Decision, the Labor Arbiter dismissed the complaint
thus:
The validity of the resignation and repatriation of the complainants
must be acknowledged. The voluntariness of their resignation is
confirmed and reflected from the Letter of Indemnity they executed.
They were executed in the presence and with the participation of the
ITF. ITF acts as the protector of seamen’s rights against any abuse or
shortcomings of ship owners. They will not allow such eventuality had
the complainants been under duress. Besides, there is really no
evidence of threat or intimidation to the complainant’s resignation.
Accordingly, the validity of their resignation and repatriation must be
upheld.
On the other hand, complainant Cuesta must be paid the sum of
$175.00 as payment for vacation leave of which he has not been paid
and this claim was not at all disputed by the respondents.
WHEREFORE, the complaint for illegal dismissal is dismissed for
lack of merit. However, the respondents are hereby ordered to pay
complainant Cuesta the sum of $175.00 as payment for vacation leave.
SO ORDERED.12
On appeal, the NLRC affirmed the Labor Arbiter’s Decision with
modification. It reduced the vacation leave pay awarded to Cuesta
from US$175 to US$75. Thus:
We sustain the Labor Arbiter’s conclusion that the Letters of
Indemnity were valid. Even complainants admit that said letter of
indemnity were confirmed by representative of ITF. Hence, the
presumption of regularity of the Letter of Indemnity must be
considered in respondent’s favor.
However, the award of vacation pay must be corrected. The contract
show that Cuesta is only entitled to $75.00 vacation pay and not
$175.00 as awarded.... Respondent’s prayer for attorney’s fees and
litigation expenses must fail in view of lack of evidence showing bad
faith on part of complainants.
WHEREFORE, the appealed Decision is hereby MODIFIED in that
the award of vacation leave in favor of complainant Cuesta must be
reduced to seventy five dollars only ($75).
SO ORDERED.13
Aggrieved, respondents filed a motion for reconsideration, which the
NLRC denied for lack of merit. Thus, respondents filed with the Court
of Appeals a special civil action for certiorari, alleging that grave
abuse of discretion was committed by the NLRC.
In its assailed Decision, the Court of Appeals set aside the questioned
Decision and Resolution of the NLRC. The dispositive part of the
appellate court’s Decision reads:lawphil.net
WHEREFORE, the petition is GRANTED. The assailed Decision of
the Labor Arbiter, dated August 18, 1999 and the Decision and
Resolution of the National Labor Relations Commission, respectively
dated June 30, 2000 and July 31, 2000, are hereby ANNULLED and
SET ASIDE. A new judgment is hereby entered DECLARING the
subject "Letters of Indemnity", dated January 23, 1999, to be VOID
AND WITHOUT ANY LEGAL EFFECT. Petitioners, FELICISIMO
S. CUESTA and WILFREDO B. GONZAGA, are furthermore
DECLARED to have been illegally dismissed from employment and
private respondents, KARA SEAL SHIPPING CO., LTD and
ORIENTAL SHIP MANAGEMENT CO., INC. are, therefore,
ORDERED to solidarily PAY CUESTA and GONZAGA, as follows:
a. Five thousand eight hundred eight US dollars (US$5,808.00), each,
representing their three-month salaries for the unexpired portion of
their contracts;
b. US$142.50, as and by way of unpaid vacation leave pay for
petitioner CUESTA;
c. Ten thousand pesos (P10,000.00), each, as moral damages;
d. Five thousand pesos (P5,000.00), each, as exemplary damages;
142 | P a g e
e. Attorneys’ fees equivalent to ten percent (10%) of five thousand
eight hundred eight US dollars (US$5,808.00), the amount of wages
recovered; and the costs of suit.
SO ORDERED.14
Oriental and Kara Seal filed a Motion for Reconsideration, which the
Court of Appeals denied in its assailed Resolution.
Hence, the instant petition anchored on the sole ground that:
The Court of Appeals erred in setting aside the Labor Arbiter’s and
National Labor Relations Commissions’ findings that private
respondents voluntarily resigned from employment as shown by the
Letters of Indemnity they executed as the said findings were based on
substantial evidence and law and rendered without any grave abuse of
discretion.15
Petitioner contends that respondents voluntarily executed the Letters of
Indemnity in the presence of an ITF representative who also signed it.
It adds that respondents failed to substantiate claims of threat and
intimidation allegedly exerted by petitioner. In any case, Oriental
stresses it could not have threatened or intimidated respondents as the
latter were abroad, while petitioner is based in Manila.
Further, petitioner points out that a seaman who requests for early
termination of his contract is liable for his repatriation cost as well as
the transportation cost of his replacement, deductible from the
seafarer’s balance of wages. Relatedly, petitioner claims that the
repatriation money it extended to respondents constituted sufficient
consideration for the latter’s quitclaims.
For their part, respondents counter that the petition should be denied
outright for raising a factual question. They point out that the sole
issue in this case is whether or not the Letters of Indemnity were
voluntarily executed by respondents, which according to respondents
is clearly a factual issue.
At any rate, respondents maintain that the Court of Appeals correctly
ruled that the dismissal was illegal. They insist they are entitled to
security of tenure until the expiration of the term of their respective
contracts. Thus, their employment may only be terminated for valid
cause and after notice and hearing.
On the Letters of Indemnity, respondents argue that these should be
strictly construed against petitioner as the one who prepared it, and
respondents’ participation was limited to merely affixing their
signatures on it. Respondents claim that the Letters of Indemnity, far
from signifying their resignation, merely express an undertaking on the
part of petitioner and Kara Seal not to file any disciplinary action
against respondents. Respondents posit that petitioner and Kara Seal
used said undertaking as leverage to obtain their signature.
We rule for the respondents.
Pacta privata juri publico derogare non possunct. Private agreements
between parties cannot derogate from public right.
The law is solicitous of the welfare of employees because they stand
on unequal footing with their employers and are usually left at the
mercy of the latter. This is especially true of Filipino migrant workers
who, alone in a foreign country, might have no adequate alternative
resources even for their own personal daily needs.
Hence, quitclaims signed by our migrant workers, such as the Letters
of Indemnity in the instant case, are viewed with strong disfavor.
Public policy dictates that they be presumed to have been executed at
the behest of the employer. It is the employer’s duty to prove that such
quitclaims were voluntary.16 The employee’s acknowledgment of his
termination with nary a protest or objection is not enough to satisfy the
requirement of voluntariness on his part.17
Resignation is defined as the voluntary act of an employee who finds
himself in a situation where he believes that personal reasons cannot
be sacrificed in favor of the exigency of the service, and he has no
other choice but to disassociate himself from his employment.18
It would have been illogical for respondents to resign and then claim
that they were illegally terminated. Well-entrenched is the rule that
resignation is inconsistent with the filing of a complaint for illegal
dismissal.
We note that respondents Cuesta and Gonzaga, when repatriated to
Manila, had each been employed for only a little over two (2) months
and less than one (1) month, respectively. Prior to their repatriation,
their monthly salaries were even increased from US$900 to US$1,936.
Hence, it is rather strange that they would suddenly resign after barely
beginning service of their twelve (12)-month contract.
Prior to their dismissal, respondents demanded payment of their
unpaid wages and protested the substandard conditions of their
143 | P a g e
employment. The Letters of Indemnity supra contained a waiver by
petitioner and Kara Seal of the right to institute disciplinary action
against respondents. Hence, respondents were under the impression
that they would be disciplinarily dealt with if they would not sign the
waiver.
Based on the foregoing disquisition, we are convinced that respondents
were forced to sign the Letters of Indemnity. Thus, said Letters of
Indemnity must be deemed void. The stamp and signature of the ITF
representative thereon add nothing to render the letters of any legal
effect, but instead add to the impression of pressure exerted by ITF on
the individual Filipino seamen.
Having ruled out voluntary resignation, we now ascertain whether
respondents were illegally dismissed. Try hard as we may, no clear
showing could be found in this case of any valid and legal cause which
justifies respondents’ removal from employment. Instead we find that
Oriental and/or Kara Seal did not serve two written notices to
respondents prior to their termination from employment as required by
the Labor Code.19 Plainly, there was no due process in their dismissal,
and we have here a clear case of illegal dismissal.
In this connection, paragraph 5, Section 10 of Republic Act No.
804220 provides:
In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the worker shall be
entitled to the full reimbursement of his placement fee with interest at
twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
Following the provisions of our law abovecited, each of the
respondents is entitled to an amount equivalent to the salaries for three
(3) months, representing the unexpired portion of their respective
twelve (12)-month contracts, computed as follows:
US$1,936 x 3 = US$5,808
We note that there is no evidence on record of payment of placement
fee. Hence, we are unable to award reimbursement of the same.
Anent the vacation leave pay owing to respondent Cuesta, records
show that he only received an amount corresponding to the period
November 13, 1998 – November 26, 1998, but none for the period
November 27, 1998 – January 24, 1999. Since his Contract of
Employment21 guarantees vacation leave pay of US$75 monthly, he is
entitled to unpaid vacation leave pay computed as follows:
US$75 divided by 30 x (34 + 24) = US$145.
Pursuant to his Contract of Employment,22 respondent Gonzaga is also
entitled to unpaid vacation leave pay for the period January 7, 1999 –
January 24, 1999, computed as follows:
US$75 divided by 30 x 18 = US$45.
We also noticed that the salary received by respondent Gonzaga for
the period January 5, 1999 – January 6, 1999 did not reflect the
increased wages based on the November 27, 1998 ITF Agreement. He
is entitled to the differential computed thus:
US$1,936 divided by 30 x 1 = US$64.53
US$64.53 – US$2.50 = US$62.03.
Settled is the rule that quitclaims are ineffective in barring full
recovery of the benefits due the employee.23 The acceptance of any
monetary benefit, such as repatriation expenses and accrued wages in
this case, would not divest respondents of the right to fully claim the
remainder of what is rightfully due them.
Lastly, for petitioner’s breach of contract and bad faith, respondents
should be awarded P50,000 in moral damages and another P50,000 as
exemplary damages. In addition, they should also be awarded
attorney’s fees equivalent to ten percent (10%) of the aggregate
monetary awards.
WHEREFORE, the petition is DENIED. The assailed Decision dated
January 31, 2002, and Resolution dated May 29, 2002, of the Court of
Appeals in CA-G.R. SP. No. 61073,
are AFFIRMED with MODIFICATION. Petitioner Oriental
Shipmanagement Co., Inc. and Kara Seal Shipping Co., Ltd.
are ORDERED to solidarily PAY to each of the respondents,
FELICISIMO CUESTA and WILFREDO GONZAGA, as follows:
a. FIVE THOUSAND EIGHT HUNDRED EIGHT US dollars
(US$5,808.00), representing the three (3)-month salaries for the
unexpired portion of their respective contracts;
b. FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
c. FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages;
and
144 | P a g e
d. FIVE HUNDRED EIGHTY DOLLARS AND EIGHTY CENTS
(US$580.80) as attorney’s fees equivalent to ten percent (10%) of
FIVE THOUSAND EIGHT HUNDRED EIGHT US dollars
(US$5,808.00).
Petitioner Oriental Shipmanagement Co., Inc. and Kara Seal Shipping
Co., Ltd. are further ORDERED to solidarily PAY respondent
FELICISIMO CUESTA the amount of ONE HUNDRED FORTY
FIVE US dollars (US$145) as vacation leave pay, and respondent
WILFREDO GONZAGA the amounts of FORTY FIVE US dollars
(US$45) and SIXTY TWO US dollars and THREE CENTS
(US$62.03) as vacation leave pay and unpaid salary differential,
respectively.
Costs against petitioner.
SO ORDERED.
G.R. No. 91298 June 22, 1990
CORAZON PERIQUET, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and THE
PHIL. NATIONAL CONSTRUCTION CORPORATION
(Formerly Construction Development Corp. of the
Phils.), respondents.
Tabaquero, Albano & Associates for petitioner.
The Government Corporate Counsel for private respondent.
CRUZ, J.:
It is said that a woman has the privilege of changing her mind but this
is usually allowed only in affairs of the heart where the rules are
permissibly inconstant. In the case before us, Corazon Periquet, the
herein petitioner, exercised this privilege in connection with her work,
where the rules are not as fickle.
The petitioner was dismissed as toll collector by the Construction
Development Corporation of the Philippines, private respondent
herein, for willful breach of trust and unauthorized possession of
accountable toll tickets allegedly found in her purse during a surprise
inspection. Claiming she had been "framed," she filed a complaint for
illegal dismissal and was sustained by the labor arbiter, who ordered
her reinstatement within ten days "without loss of seniority rights and
other privileges and with fun back wages to be computed from the date
of her actual dismissal up to date of her actual reinstatement." 1 On
appeal, this order was affirmed in toto by public respondent NLRC on
August 29, 1980. 2
On March 11, 1989, almost nine years later, the petitioner filed a
motion for the issuance of a writ of execution of the decision. The
motion was granted by the executive labor arbiter in an order dated
June 26, 1989, which required payment to the petitioner of the sum of
P205,207.42 "by way of implementing the balance of the judgment
amount" due from the private respondent.3 Pursuant thereto, the said
amount was garnished by the NLRC sheriff on July 12, 1989. 4 On
September 11, 1989, however, the NLRC sustained the appeal of the
CDCP and set aside the order dated June 20, 1989, the corresponding
writ of execution of June 26, 1989, and the notice of garnishment. 5
In its decision, the public respondent held that the motion for
execution was time-barred, having been filed beyond the five-year
period prescribed by both the Rules of Court and the Labor Code. It
also rejected the petitioner's claim that she had not been reinstated on
time and ruled as valid the two quitclaims she had signed waiving her
right to reinstatement and acknowledging settlement in full of her back
wages and other benefits. The petitioner contends that this decision is
tainted with grave abuse of discretion and asks for its reversal. We
shall affirm instead.
Sec. 6, Rule 39 of the Revised Rules of Court, provides:
SEC. 6. Execution by motion or by independent action. — A judgment
may be executed on motion within five (5) years from the date of its
entry or from the date it becomes final and executory. After the lapse
of such time, and before it is barred by the statute of limitations, a
judgment may be enforced by action.
A similar provision is found in Art. 224 of the Labor Code, as
amended by RA 6715, viz.
ART. 224. Execution of decision, orders, awards. — (a) The Secretary
of Labor and Employment or any Regional Director, the Commission
or any Labor Arbiter or Med-Arbiter, or the Voluntary Arbitrator
may, motu propio, or on motion of any interested party, issue a writ of
execution on a judgment within five (5) years from the date it becomes
145 | P a g e
final and executory, requiring a sheriff or a duly deputized officer to
execute or enforce a final decision, order or award. ...
The petitioner argues that the above rules are not absolute and cites the
exception snowed in Lancita v. Magbanua, 6 where the Court held:
Where judgments are for money only and wholly unpaid, and
execution has been previously withheld in the interest of the judgment
debtor, which is in financial difficulties, the court has no discretion to
deny motions for leave to issue execution more than five years after
the judgments are entered. (Application of Molnar, Belinsky, et al. v.
Long Is. Amusement Corp., I N.Y.S, 2d 866)
In computing the time limited for suing out of an execution, although
there is authority to the contrary, the general rule is that there should
not be included the time when execution is stayed, either by agreement
of the parties for a definite time, by injunction, by the taking of an
appeal or writ of error so as to operate as a supersedeas, by the death
of a party, or otherwise. Any interruption or delay occasioned by the
debtor will extend the time within which the writ may be issued
without scire facias.
xxx xxx xxx
There has been no indication that respondents herein had ever slept on
their rights to have the judgment executed by mere motions, within the
reglementary period. The statute of limitation has not been devised
against those who wish to act but cannot do so, for causes beyond their
central.
Periquet insists it was the private respondent that delayed and
prevented the execution of the judgment in her favor, but that is not the
way we see it. The record shows it was she who dilly-dallied.
The original decision called for her reinstatement within ten days from
receipt thereof following its affirmance by the NLRC on August 29,
1980, but there is no evidence that she demanded her reinstatement or
that she complained when her demand was rejected. What appears is
that she entered into a compromise agreement with CDCP where she
waived her right to reinstatement and received from the CDCP the sum
of P14,000.00 representing her back wages from the date of her
dismissal to the date of the agreement. 7
Dismissing the compromise agreement, the petitioner now claims she
was actually reinstated only on March 16, 1987, and so should be
granted back pay for the period beginning November 28, 1978, date of
her dismissal, until the date of her reinstatement. She conveniently
omits to mention several significant developments that transpired
during and after this period that seriously cast doubt on her candor
and bona fides.
After accepting the sum of P14,000.00 from the private respondent and
waiving her right to reinstatement in the compromise agreement, the
petitioner secured employment as kitchen dispatcher at the Tito Rey
Restaurant, where she worked from October 1982 to March 1987.
According to the certification issued by that business, 8 she received a
monthly compensation of P1,904.00, which was higher than her salary
in the CDCP.
For reasons not disclosed by the record, she applied for re-employment
with the CDCP and was on March 16,1987, given the position of xerox
machine operator with a basic salary of P1,030.00 plus P461.33 in
allowances, for a total of P1,491.33 monthly. 9
On June 27, 1988; she wrote the new management of the CDCP and
asked that the rights granted her by the decision dated August 29,
1980, be recognized because the waiver she had signed was invalid. 10
On September 19, 1988, the Corporate Legal Counsel of the private
respondent (now Philippine National Construction Corporation)
recommended the payment to the petitioner of the sum of P9,544.00,
representing the balance of her back pay for three years at P654. 00 per
month (minus the P14,000.00 earlier paid). 11
On November 10, 1988, the petitioner accepted this additional amount
and signed another Quitclaim and Release reading as follows:
KNOW ALL MEN BY THESE PRESENTS:
THAT, I CORAZON PERIQUET, of legal age, married and resident
of No. 87 Annapolis St., Quezon City, hereby acknowledged receipt of
the sum of PESOS: NINE THOUSAND FIVE HUNDRED FORTY
FOUR PESOS ONLY (P9,544.00) Philippine currency, representing
the unpaid balance of the back wages due me under the judgment
award in NLRC Case No. AB-2-864-79 entitled "Corazon Periquet vs.
PNCC- TOLLWAYS" and I further manifest that this payment is in
full satisfaction of all my claims/demands in the aforesaid case.
Likewise, I hereby manifest that I had voluntarily waived
reinstatement to my former position as TOLL TELLER and in lieu
146 | P a g e
thereof, I sought and am satisfied with my present position as XEROX
MACHINE OPERATOR in the Central Office.
Finally, I hereby certify that delay in my reinstatement, after finality of
the Decision dated 10 May 1979 was due to my own fault and that
PNCC is not liable thereto.
I hereby RELEASE AND DISCHARGE the said corporation and its
officers from money and all claims by way of unpaid wages,
separation pay, differential pay, company, statutory and other benefits
or otherwise as may be due me in connection with the above-entitled
case. I hereby state further that I have no more claims or right of action
of whatever nature, whether past, present, future or contingent against
said corporation and its officers, relative to NLRC Case No. AB-2-
864-79.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day
of November 1988 at Mandaluyong, Metro Manila. (Emphasis
supplied.) 12
The petitioner was apparently satisfied with the settlement, for in the
memorandum she sent the PNCC Corporate Legal Counsel on
November 24, 1988, 13 she said in part:
Sir, this is indeed my chance to express my gratitude to you and all
others who have helped me and my family enjoy the fruits of my years
of stay with PNCC by way of granting an additional amount of
P9,544.00 among others ...
As per your recommendation contained therein in said memo, I am
now occupying the position of xerox machine operator and is (sic)
presently receiving a monthly salary of P2,014.00.
Reacting to her inquiry about her entitlement to longevity pay, yearly
company increases and other statutory benefits, the private respondent
adjusted her monthly salary from P2,014.00 to P3,588.00 monthly.
Then the lull. Then the bombshell.
On March 11, 1989, she filed the motion for execution that is now the
subject of this petition.
It is difficult to understand the attitude of the petitioner, who has
blown hot and cold, as if she does not know her own mind. First she
signed a waiver and then she rejected it; then she signed another
waiver which she also rejected, again on the ground that she had been
deceived. In her first waiver, she acknowledged full settlement of the
judgment in her favor, and then in the second waiver, after accepting
additional payment, she again acknowledged fun settlement of the
same judgment. But now she is singing a different tune.
In her petition she is now disowning both acknowledgments and
claiming that the earlier payments both of which she had accepted as
sufficient, are insufficient. They were valid before but they are not
valid now. She also claimed she was harassed and cheated by the past
management of the CDCP and sought the help of the new management
of the PNCC under its "dynamic leadership." But now she is
denouncing the new management-for also tricking her into signing the
second quitclaim.
Not all waivers and quitclaims are invalid as against public policy. If
the agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned
simply because of a change of mind. It is only where there is clear
proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its face, that
the law will step in to annul the questionable transaction. But where it
is shown that the person making the waiver did so voluntarily, with
full understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be
recognized as a valid and binding undertaking. As in this case.
The question may be asked: Why did the petitioner sign the
compromise agreement of September 16, 1980, and waive all her
rights under the judgment in consideration of the cash settlement she
received? It must be remembered that on that date the decision could
still have been elevated on certiorari before this Court and there was
still the possibility of its reversal. The petitioner obviously decided
that a bird in hand was worth two on the wing and so opted for the
compromise agreement. The amount she was then waiving, it is worth
noting, had not yet come up to the exorbitant sum of P205,207.42 that
she was later to demand after the lapse of eight years.
The back pay due the petitioner need not detain us. We have held in
countless cases that this should be limited to three years from the date
of the illegal dismissal, during which period (but not beyond) the
dismissed employee is deemed unemployed without the necessity of
proof. 14 Hence, the petitioner's contention that she should be paid
147 | P a g e
from 1978 to 1987 must be rejected, and even without regard to the
fact (that would otherwise have been counted against her) that she was
actually employed during most of that period.
Finally, the petitioner's invocation of Article 223 of the Labor Code to
question the failure of the private respondent to file a supersedeas
bond is not well-taken. As the Solicitor General correctly points out,
the bond is required only when there is an appeal from the decision
with a monetary award, not an order enforcing the decision, as in the
case at bar.
As officers of the court, counsel are under obligation to advise their
clients against making untenable and inconsistent claims like the ones
raised in this petition that have only needlessly taken up the valuable
time of this Court, the Solicitor General, the Government Corporate
Counsel, and the respondents. Lawyers are not merely hired
employees who must unquestioningly do the bidding of the client,
however unreasonable this may be when tested by their own expert
appreciation of the pertinent facts and the applicable law and
jurisprudence. Counsel must counsel.
WHEREFORE, the petition is DENIED, with costs against the
petitioner. It is so ordered.
Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ.,
concur.
[G.R. No. 148532. April 14, 2004]
EMCO PLYWOOD CORPORATION and JIMMY
LIM, petitioners, vs. PERFERIO ABELGAS, ARTURO
ABELLANA, FLORENCIO ABEQUIBEL, FELIZARDO
AGUELO, NECERATO ALCALA, PEDRO ALIVIO JR.,
RODOLFO ALDAYA, ABELARDO AMANTE, NELSON
ANGAC, ALEJO ANTOLIJAO, JOHN ALEX ARABEJO,
REYNALDO ARBOLONIO, RODRIGO ARSILUM, RONALDO
BABAYLAN, LEOPOLDO BAGA, AGRIPINO BARON, FELIPE
BAHIAN, JOEL BADILLA, NARCISO BANTILLAN, FELIPE
BANDIBAS, ERNESTO BEDRA, ROGELIO BONGATO,
ADOLFO BUCAL, DOMINADOR BUSTILLO, PLUTARCO
CABREROS, FELIPE CAMBARIHAN, PABLO CASANIA,
PERFECTO CASTANES, FERDINAND CASTILLO, ISIDRO
CERRO, MARCEDINO CELOCIA, LEODEGARIO CLARO,
ALFREDO CLAVANO, EDILBRETO CUABO, EDILBERTO
CURILAN, ANGELA DATIG, EDDIE DE LA CRUZ, DOMINO
DELA CRUZ, SEGUNDO DELIGERO, RAYMUNDO
DESAMPARADO, GAUDISIO DEVEYRA, HENRY ENERIO,
ANTONIO ENCISO, ANSELMO FELIAS JR., JULIAN GANZAN,
ALLAN HONCULADA, BIENVENIDO IBALANG, FREDERICK
JANOPOL, SAMUEL JUMAMOY, ISABELO LOREN,
PROCORIO LOLOR, RESTITUTO LOMOCSO, PEDRO
LOZADA, PEDRO LOZAGA, PASTOR MAGARO, ALLAN
MANAGA, SIMPLICIO MANDAS, SATURNINO MANISAN,
DIOSDADO MATA, EMMANUEL MATUTOD, MAXIMO
MEDALLE, MARCELINO MINOZA, NORBERTO MORDEN,
ARNOLD MORDEN, WILLIAM MORADA, RAYMUNDO
MORAGAS, RODRIGO MOSQUIDA, BENITO NEMENO JR.,
RICO OGCANG, EMELIANO ONDAP, FRANCISCO
PANDAWATAN, ALFREDO PAIGAN, VENANCIO PAJO, ELY
QUINONES, ALEJANDRO QUIPET, BENIGNO REPOLIDO,
PABLO SUMIDO, JOSE SUMALINOG, SAMUEL TABLA,
OSCAR TABANAO, MARIO TELIN, MANOLITO TIMTIM,
FELIX TINDUGAN, DANILO VELUESTO,
ALEJANDRO VILVESTRE, TEOFILO ZAPANTA, RODULFO
ALCALA, PERCY ALIPIN, ANGELO AMADA, PAQUITO
ANCAJAS, EDGARD ARBISO, PERFECTO ARABACA,
JUDITH BALMORIA, JOHANNES BONGATO, NARCISO
BULLECER JR., BERNADITA BURDEOS, WENCESLAO
BUSA, RODRIGO CABAL, DONALD CADILINA, JOSE
CAINGHOG, RODOLFO CATUBIG, GADIOSO CASTRODES,
VIRGINIA CERRO, FORTUNATO CELETONA, JUAN
CELLO, MARCIANO CORTEZ, ROLANDO CUMBA, ALMAR
DAPAR, MARISA DELA CRUZ, SIMEON DELIGERO,
DIOSDADO DOMINISE, FLORENTINO DUNCANO, CLAUDIO
DUMO, MARIDEL EFREN, ROMUALDO ESTRETO, JAIME
FLORES, ESMERALDO GALOPE, PROCESSO HERNANDO,
ALFREDO JAVIER, CRISPINO JUGARAP, DANIEL
LABRICA, ERNESTO LABADAN, AURELIO LINOGAO,
BENALDO LOPEZ, AMADOR LUMONGSOD, FRESCO
148 | P a g e
LUNOY, FLORENCIO MAGLASANG, EUTIQUEO MAJAIT,
ALBINO MANLA, FELIPE MANTILLA, CASIANO MELICOR,
ANECITA MENDOZA, NEMERIANO NACA, ZACARIAS
NALAM, SIXTO NAPAL JR., ALMAQUIO OBEDENCIO,
GODOFREDO OLAIZ, VIRGILIA OSORIO, ELEUTRIO
PAGADOR, ARDEN PASILANG, DIONESIO PASILANG,
ADELAIDO PAQUIPOT, FERNANDO PATINDOL, VIRGILIO
PENDICA, FRANKLIN PILOTON, GIL PILOTON, CHARLITA
PLAZA, EUFRACIA PLAZA, TORIBEO PUSA, FRANCISCO
RAMIRA, BELEN ROJAS, ALFONSO SABANDAL, CARMEN
SABELLANO, ROGELIO SIMPRON, CENIA SUMILE,
ESPEREDION TABIQUE, ARECIO TAGHOY, SILVANA
TAPALES, JEMCIE TIMTIM, ELENO TORILLO,
THOMAS TERRECAMPO, FE VALENZUELA, FLORENCIO
ABEQUIBEL, EFREN LUMINARIO, JULITO
ONDAP, respondents.
DECISION
PANGANIBAN, J.:
Not every loss incurred or expected to be incurred by employers can
justify retrenchment. They must prove, among others, that the losses
are substantial and that the retrenchment is reasonably necessary to
avert those losses.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of
Court, challenging the December 21, 2000 Decision[2] and the June 20,
2001 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR SP No.
51967. The assailed Decision disposed as follows:
WHEREFORE, the petition for certiorari is GRANTED and the
challenged Orders of the National Labor Relations Commission are
hereby declared NULL and VOID.
Considering that, as borne out of the records, EMCOs attempted
retrenchment of the [respondents] was legally ineffective, EMCO is
ordered to REINSTATE [respondents] with full backwages, inclusive
of allowances and other benefits or their monetary equivalent,
computed from the time their compensation was withheld from
them up to the time of their actual reinstatement. Where reinstatement
is no longer possible because the position they had previously filled
are no longer in existence, EMCO shall pay backwages, inclusive of
allowances and other benefits, computed from the time their
employment was terminated up to the time the decision herein
becomes final, and, in lieu of reinstatement, separation payequivalent
to one-months pay for every year of service including the putative
period for which backwages are payable. In all these cases, the
payments received by [respondents] and for which they executed
quitclaims shall be deducted from the backwages and separation pay
due to them. Costs against the [petitioners].[5]
The assailed Resolution denied petitioners Motion for Partial
Reconsideration.
The Facts
The factual antecedents of the case are summarized by the CA as
follows:
[Respondents], the retrenched employees of [petitioner] seek the
review and reversal of the resolutions of the National Labor
Relations Commission (NLRC), dated February 11, 1997 and March
25, 1997, respectively.
The first resolution dismissed [respondents] appeal for lack of merit
and affirmed the decision of the Labor Arbiter, dated July 24, 1996,
which, in turn, dismissed [respondents] complaint against EMCO and
the latters general manager, [petitioner] Jimmy N. Lim (Lim), for
illegal dismissal, damages and attorneys fees. The second resolution
assailed by the [respondents] consists of the NLRCs denial of their
motion for reconsideration of the earlier mentioned February 11,
1997 resolution.
EMCO is a domestic corporation engaged in the business of wood
processing, operating through its sawmill and plymill sections where
[respondents] used to be assigned as regular workers.
On January 20, 1993 and of March 2, 1993, EMCO, represented by
Lim, informed the Department of Labor and Employment
(DOLE) of its intention to retrench some of its workers. The intended
retrenchment was grounded on purported financial difficulties
occasioned by alleged lack of raw materials, frequent machinery
breakdown, low market demand and expiration of permit to
operate its sawmill department. A memorandum was thereafter
149 | P a g e
issued by EMCO, addressed to all its foremen, section heads,
supervisors and department heads, with the following instructions:
1) Retrench some of your workers based on the following guidelines:
a) Old Age (58 years and above except positions that are really
skilled);
b) Performance (Attitude, Attendance, Quality/ Quantity of Work[)];
2) Schedule the unspent VL/SL of your men without necessary
replacements. x x x
Per EMCOs notice to the DOLE, one hundred four (104) workers were
proposed for inclusion in its retrenchment program. As it turned out,
though, EMCO terminated two hundred fifty (250) workers. Among
them were herein [respondents].
[Respondents] received their separation pay in the amount of four
thousand eight hundred fifteen pesos (P4,815.00) each. Deductions
were, nevertheless, made by EMCO purportedly for the attorneys fees
payable to [respondents] lawyer, for the latters effort in purportedly
renegotiating, sometime in 1993, the three peso (P3.00) increase in the
wages of [respondents], as now contained in the Collective Bargaining
Agreement.
Upon receipt of their separation pay, [respondents] were made to sign
quitclaims, which read:
TO WHOM IT MAY CONCERN:
I, ___________ of legal age and a resident of _______________, for
and in consideration of the amount of (P____), the receipt of which, in
full, is hereby acknowledged, forever discharge and release x x x
EMCO PLYWOOD CORPORATION and all its officers men agents
and corporate assigns from any and all forms of actions/suits, debts,
sums of money, unpaid wages, overtime pay allowances, overtime pay
or an other liability of any nature by reason of my employment which
has ceased by this date.
Done this ______________, at Magallanes, Agusan del Norte.
About two (2) years later, [respondents], through their labor union,
lodged a compliant against EMCO for illegal dismissal, damages and
attorneys fees.
In the main, [respondents] questioned the validity of their
retrenchment and the sufficiency of the separation pay received by
them.
EMCO countered by interposing the defense of lack of cause of action,
contending that [respondents], by signing the quitclaims in favor of
EMCO, had, in fact, waived whatever claims they may have against
the latter.
Finding for EMCO, the Labor Arbiter dismissed [respondents]
complaint.
[Respondents] subsequent appeal to the NLRC was dismissed for lack
of merit and the decision of the Labor Arbiter was affirmed. Notably,
the NLRC glossed over the issue of whether [respondents] were
validly retrenched, and anchored its dismissal of the appeal on the
effect of [respondents] waivers or quitclaims, to quote:
The pivotal issue brought to fore is whether or not the
quitclaims/waivers executed by [respondents] are valid and
binding. The other issues raised by [respondents] are either related to
mere technicality, or are merely ancillary or dependent on the main
issue.
xxxxxxxxx
There is no doubt that the [respondents] voluntarily executed their
quitclaims/waivers as manifested by the fact that they did not promptly
question their validity within a reasonable time. It took them two (2)
years to challenge and dispute the validity of the waivers by claiming
belatedly that they were either forced or misled into signing the
same. Clearly, this case was instituted by [respondents] to unduly
exact more payment of separation benefits from [petitioner] at the
expense of fairness and justice.
In passing, the NLRC likewise affirmed EMCOs deductions of
attorneys fees from the separation pay received by the [respondents].
A motion for reconsideration of the afore-quoted resolution was filed
by [respondents] on March 10, 1997, but was denied by the NLRC,
purportedly, for lack of merit and for having been filed out of
time.[6] (Citations omitted)
Ruling of the Court of Appeals
The CA held that the evidence was insufficient to justify a ruling in
favor of EMCO, which had not complied with the one-month prior
notice requirement under the Labor Code. The appellate court added
that the corporation had not served on the employees the required
notice of termination. It opined that the Memorandum, having merely
150 | P a g e
provided the guidelines on the conduct of the intended lay-off, did not
constitute such notice.Furthermore, the Memorandum was not
addressed to the workers, but to the foremen, the department
supervisors and the section heads. Moreover, there was no proper
notice to DOLE. The corporation terminated the services of 250
employees but included only 104 of them in the list it filed with
DOLE. EMCOs argument that the 146 unlisted employees had
voluntarily resigned was brushed aside by the appellate court.
The CA also held that before EMCO resorted to retrenchment, the
latter had failed to adduce evidence of its losses and to prove that it
had undertaken measures to prevent the occurrence of its alleged
actual or impending losses.
Moreover, the CA ruled that the corporation had not paid the legally
prescribed separation pay, which was equal to one-month pay or at
least one-half month pay for every year of service, whichever was
higher.Deducting attorneys fees from the supposed separation pay of
the employees was held to be in clear violation of the law. Such fees
should have been charged against the funds of their union.
The appellate court further held that the cause of action of the
employees had not yet prescribed when the case was filed, because an
action for illegal dismissal constituted an injury to their rights. The CA
added that the provision applicable to the case was Article 1146 of the
New Civil Code, according to which the prescriptive period for such
causes of action was four (4) years. The Complaint, having been filed
by the employees only two years after their dismissal, had not
prescribed.
All in all, the appellate court concluded that the retrenchment was
illegal, because of EMCOs failure to comply with the legal
requirements.
Hence, this Petition.[7]
The Issues
In their Memorandum, petitioners raise these issues for our
consideration:
I.
Whether or not respondent Court of Appeals seriously erred in
reversing the factual findings of both the Labor Arbiter and the NLRC
that petitioners had substantially complied with the requisites for a
valid retrenchment?
II.
Whether or not respondent Court manifestly erred in reversing the
factual findings of both the Labor Arbiter and the NLRC that private
respondents had voluntarily executed their respective Quitclaims?
III.
Whether or not respondent Court may, in a petition for certiorari under
Rule 65 of the Rules of Court, correct the evaluation of evidence made
by both the Labor Arbiter and the NLRC, and thereafter substitute its
own findings for those of the Labor Arbiter and the NLRC? [8]
Simply put, petitioners are insisting on the validity of the retrenchment
and the enforceability of the Quitclaims. They are also questioning
whether or not the appellate court may disturb the findings of the labor
arbiter and the NLRC.
This Courts Ruling
The Petition has no merit.
Main Issue:
Retrenchment
Retrenchment is one of the authorized causes for the dismissal of
employees. Resorted to by employers to avoid or minimize business
losses,[9] it is recognized under Article 283 of the Labor Code.[10]
The loss referred to in this provision cannot be of just any kind or
amount; otherwise, a company could easily feign excuses to suit its
whims and prejudices or to rid itself of unwanted employees. The
Court has laid down the following standards that a company must meet
to justify retrenchment and to guard against abuse:
x x x Firstly, the losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bonafide nature of the retrenchment
would appear to be seriously in question. Secondly, the substantial loss
apprehended must be reasonably imminent, as such imminence can be
perceived objectively and in good faith by the employer. There should,
in other words, be a certain degree of urgency for the retrenchment,
which is after all a drastic recourse with serious consequences for the
livelihood of the employees retired or otherwise laid-off. Because of
151 | P a g e
the consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the expected
losses. The employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut other costs other
than labor costs. An employer who, for instance, lays off substantial
numbers of workers while continuing to dispense fat executive
bonuses and perquisites or so-called golden parachutes, can scarcely
claim to be retrenching in good faith to avoid losses. To impart
operational meaning to the constitutional policy of providing full
protection to labor, the employers prerogative to bring down labor
costs by retrenching must be exercised essentially as a measure of last
resort, after less drastic means e.g., reduction of both management and
rank-and-file bonuses and salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing and advertising
costs, etc. have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing evidence. The reason for
requiring this quantum of proof is readily apparent: any less exacting
standard of proof would render too easy the abuse of this ground for
termination of services of employees. x x x.[11]
Retrenchment is only a measure of last resort when other less drastic
means have been tried and found to be inadequate.[12]
To prove that the retrenchment was necessary to prevent substantial
losses, petitioners present their audited financial statements for the
years 1991 and 1992.[13] These statements show that EMCOs net
income of P1,052,817.00 for 1991 decreased to P880,407.85 in
1992. They allege that this decrease was due to low market demand,
lack of raw materials, frequent breakdown of old equipment and high
cost of operations. The financial statements also demonstrate that
EMCOs liability then increased from P106,507,214.14
to P123,901,838.30. Petitioners cite several cases in which this Court
has held that audited financial statements constitute the normal method
of proof of the profit-and-loss performance of a company. These
statements allegedly partake the nature of public documents, because
they have been audited and duly filed with the Bureau of Internal
Revenue. As such, they enjoy the presumption of regularity and
validity.
Petitioners further argue that EMCO undertook preventive measures to
prevent the occurrence of imminent losses.[14] To accommodate and
save all its employees, it allegedly implemented a scheme in which
they would work on a rotation basis -- on at least a three-day-work per
employee per week schedule.[15] This arrangement was, however,
short-lived to prevent a strike that the union and its members then
threatened to stage.[16]
Petitioners also contend that the 146 employees not included in the list
submitted to DOLE voluntarily resigned, not solely on the ground that
the companys permit to operate its sawmill department had expired,
but also because of a period of uncertainty brought about by the
aforementioned factors that allegedly justified the retrenchment
program.[17]
The Court is not persuaded. Not every loss incurred or expected to be
incurred by a company will justify retrenchment. The losses must be
substantial and the retrenchment must be reasonably necessary to avert
such losses.[18] The employer bears the burden of proving the existence
or the imminence of substantial losses with clear and satisfactory
evidence that there are legitimate business reasons justifying a
retrenchment.[19] Should the employer fail to do so, the dismissal shall
be deemed unjustified.[20]
In the present case, petitioners have presented only EMCOs audited
financial statements for the years 1991 and 1992. As already stated,
these show that their net income of P1,052,817.00 for 1991 decreased
to P880,407.85 in 1992. Somerville Stainless Steel Corporation v.
NLRC[21] held that the presentation of the companys financial
statements for a particular year was inadequate to overcome the
stringent requirement of the law. According to the Court, [t]he failure
of petitioner to show its income or loss for the immediately preceding
years or to prove that it expected no abatement of such losses in the
coming years bespeaks the weakness of its cause. The financial
statement for 1992, by itself, x x x does not show whether its losses
increased or decreased. Although [the employer] posted a loss for
1992, it is also possible that such loss was considerably less than those
152 | P a g e
previously incurred, thereby indicating the companys improving
condition.[22]
The Court further held therein that [i]n the analysis of financial
statements, (o)ne particular percentage of relationship may not be too
significant in itself ; that is, it may not suffice to point out those
unfavorable characteristics of the company that would require
immediate or even drastic action.[23] Petitioners have failed to prove
that their alleged losses were substantial, continuing and without any
immediate prospect of abating; hence, the nature of the retrenchment is
seriously disputable.
Retrenchment is a management prerogative consistently recognized
and affirmed by this Court. It is, however, subject to faithful
compliance with the substantive and the procedural requirements laid
down by law and jurisprudence.[24] It must be exercised essentially as a
measure of last resort, after less drastic means have been tried and
found wanting.
The only less drastic measure that EMCO undertook was the rotation
work scheme: the three-day-work per employee per week schedule. It
did not try other measures, such as cost reduction, lesser investment on
raw materials, adjustment of the work routine to avoid the scheduled
power failure, reduction of the bonuses and salaries of both
management and rank-and-file, improvement of manufacturing
efficiency, trimming of marketing and advertising costs, and so
on. The fact that petitioners did not resort to other such measures
seriously belies their claim that retrenchment was done in good faith to
avoid losses.
Defective Notice
For a valid termination due to retrenchment, the law requires that
written notices of the intended retrenchment be served by the employer
on the worker and on the Department of Labor and Employment at
least one (1) month before the actual date of the retrenchment.[25] The
purpose of this requirement is to give employees some time to prepare
for the eventual loss of their jobs, as well as to give DOLE the
opportunity to ascertain the verity of the alleged cause of
termination.[26]
There is no showing that such notice was served on the employees in
the present case. Petitioners argue that on January 20, 1993, Petitioner
Jimmy Lim gave the DOLE a formal notice of the intended
retrenchment and furnished the EMCO Labor Association and its
general membership copies of the notice by posting it on the bulletin
boards of their respective departments. On March 2, 1993, EMCO sent
DOLE another written notice.The next day, Lim sent a Memorandum
to the foremen, the section heads, the supervisors and the department
heads instructing them to retrench some of the workers based on
certain guidelines. Petitioners aver that the Memorandum also served
as a written notice to all the employees concerned. Clearly, it is not the
notice contemplated by law. The written notice should have been
served on the employees themselves, not on their supervisors.
The Notice sent to DOLE was defective, because it stated that EMCO
would terminate the services of 104 of its workers. The corporation,
however, actually dismissed 250. Petitioners aver that the 146
employees not listed in the Notice sent to DOLE voluntarily resigned;
hence, the latter were not retrenched. This assertion does not deserve
any consideration. Petitioners reiterate that those workers voluntarily
resigned because of the atmosphere of uncertainty, which occurred
after the Sawmill Department had been temporarily shut off in
February 1993. The renewal of the permit on March 31, 1993,
however, removed the alleged shroud of uncertainty.
Moreover, resignation is the voluntary act of employees who are
compelled by personal reasons to dissociate themselves from their
employment. It must be done with the intention of relinquishing an
office, accompanied by the act of abandonment.[27] Therefore, it would
have been illogical for respondents to resign and then file a Complaint
for illegal dismissal. Resignation is inconsistent with the filing of the
Complaint.[28]
Propriety of Separation Benefits
Article 283 of the Labor Code provides for the proper separation
benefits in this wise:
Article 283. x x x In case of retrenchment to prevent losses x x x, the
separation pay shall be equivalent to one (1) month pay or at least one
half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole
year.
153 | P a g e
The appellate court aptly ruled that petitioners had not complied with
this statutory requirement. They deducted the amount of attorneys fees
that had allegedly accrued as a result of the renegotiations for a new
collective bargaining agreement.[29] Without denying that they
deducted those fees, petitioners argue that the deduction was made
with the prior approval of respondents.[30]
This contention is untenable. The Labor Code prohibits such
arrangement in this wise:
Article 222. APPEARANCES AND FEES. x x x
xxxxxxxxx
(b) No attorneys fees, negotiation fees or similar charges of any kind
arising from any collective bargaining negotiations or conclusion of
the collective bargaining agreement shall be imposed on any
individual member of the contracting union: Provided, however, That
attorneys fees may be charged against union funds in an amount to be
agreed upon by the parties. Any contract, agreement or arrangement of
any sort to the contrary shall be null and void.
The obligation to pay attorneys fees belongs to the union and cannot
be shunted to the individual workers as their direct responsibility. The
law has made clear that any agreement to the contrary shall be null and
void ab initio.[31] Thus, petitioners deduction of attorneys fees from
respondents separation pay has no basis in law.
Second Issue:
Validity of the Quitclaims
Petitioners argue that the Quitclaims signed by respondents enjoy the
presumption of regularity, and that the latter had the burden of proving
that their consent had been vitiated.[32] They further maintain that aside
from Eddie de la Cruz, the other respondents did not submit their
respective supporting affidavits detailing how their individual consents
had been obtained. Allegedly, such documents do not constitute the
clear and convincing evidence required under the law to overturn the
validity of quitclaims.[33]
We hold that the labor arbiter and the NLRC erred in concluding that
respondents had voluntarily signed the Waivers and Quitclaim
Deeds. Contrary to this assumption, the mere fact that respondents
were not physically coerced or intimidated does not necessarily imply
that they freely or voluntarily consented to the terms
thereof.[34] Moreover, petitioners, not respondents, have the burden of
proving that the Quitclaims were voluntarily entered into.[35]
Furthermore, in Trendline Employees Association-Southern
Philippines Federation of Labor (TEA-SPFL) v. NLRC[36] and
Philippine Carpet Employees Association v. Philippine Carpet
Manufacturing Corporation,[37]similar retrenchments were found to be
illegal, as the employers had failed to prove that they were actually
suffering from poor financial conditions. In these cases, the Quitclaims
were deemed illegal, as the employees consents had been vitiated by
mistake or fraud.
These rulings are applicable to the case at bar. Because the
retrenchment was illegal and of no effect, the Quitclaims were
therefore not voluntarily entered into by respondents. Their consent
was similarly vitiated by mistake or fraud. The law looks with disfavor
upon quitclaims and releases by employees pressured into signing by
unscrupulous employers minded to evade legal responsibilities.[38]
As a rule, deeds of release or quitclaim cannot bar employees from
demanding benefits to which they are legally entitled or from
contesting the legality of their dismissal. The acceptance of those
benefits would not amount to estoppel.[39] The amounts already
received by the present respondents as consideration for signing the
Quitclaims should, however, be deducted from their respective
monetary awards.
Third Issue:
The Office of Certiorari
Petitioners aver that in a special civil action for certiorari, the appellate
court is limited to reviewing only questions related to jurisdiction or
grave abuse of discretion. As in the present case, however, the lower
tribunals factual findings will not be upheld where there is a showing
that such findings were totally devoid of support, or that the judgment
was based on a misapprehension of facts.[40]
WHEREFORE, the Petition is DENIED, and the assailed Decision
and Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. 167813 June 27, 2006
BENJAMIN L. SAROCAM, Petitioner,
vs.
154 | P a g e
INTERORIENT MARITIME ENT., INC., and DEMACO
UNITED LTD., Respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is a Petition for Review on certiorari under Rule 45
of the Rules of Court of the Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 84883, which affirmed the February 19, 20042 and
April 27, 20043Resolutions of the National Labor Relations
Commission (NLRC) in NCR Case No. 01-11-2492-00.
The Antecedents
On June 27, 2000 petitioner Benjamin L. Sarocam was hired by
Interorient Maritime Ent., Inc. and Demaco United Ltd., for a twelve-
month contract as 'bosun on board M/V Despina. His basic monthly
salary was US$450.00 on a 48-hour work week, with a fixed overtime
pay of US$180.00 per month for 105 hours, supplementary wage of
US$70.00, and vacation leave with pay of 2.5 days.4
While the vessel was navigating to China, petitioner suffered lumbar
sprain when he accidentally fell from a ladder.5On November 15,
2000, he was examined and found to have neuromyositis with the
waist and diabetes. The examining physician prescribed medicine and
recommended the signing off and hospitalization of petitioner.6 His
employers agreed to repatriate him on November 30, 2000.
On December 5, 2000, petitioner was referred to the company-
designated physician, Dr. Teodoro F. Pidlaoan, Medical Director of
the Our Lady of Fatima Medical Clinic. The x-ray of his lumbosacral
spine revealed normal results and his Fasting Blood Sugar test
revealed 9.1 (NV 4.1-6.1 umol/l). Petitioner was given Alaxan tablet
for his back pain and Euglocon for his elevated blood sugar. He was
also advised to return for follow-up evaluation. On December 13,
2000, he returned to the clinic with no more complaints of back pains.
His sugar examination likewise revealed normal results. Petitioner was
then declared 'fit for duty effective on that day.7
On March 20, 2001, or barely three months from being pronounced fit
to work, petitioner executed a release and quitclaim8 in favor of his
employers where he acknowledged the receipt of US$405.00 as his
sickwages and freed his employers from further liability.
However, on November 27, 2001, petitioner filed a complaint with the
labor arbitration branch of the NLRC for disability benefit, illness
allowance/reimbursement of medical expenses, damages and attorney's
fees.9 To support his claim, he presented the following: (1) a medical
certificate10 dated July 25, 2001 issued by Dr. Rimando C. Saguin
recommending a Grade VIII disability under the POEA schedule of
disability grading; (2) a medical certificate11 dated July 27, 2001
issued by Dr. Antonio A. Pobre, recommending the same Grade VIII
disability; and (3) a medical certificate12 dated August 2, 2001 issued
by Dr. Efren R. Vicaldo recommending a Grade VI disability.
On July 11, 2003, Labor Arbiter Antonio R. Macam rendered a
Decision13 dismissing the complaint, holding that petitioner was not
entitled to disability benefits because he was declared 'fit for duty. The
Labor Arbiter noted that petitioner had previously executed a release
and quitclaim in favor of his employers and already received his
sickness allowance. Thus, he could not claim for reimbursement for
medical expenses due to lack of pertinent substantiation. Petitioner's
claim for moral damages and attorney's fees were, likewise, not
awarded on the Labor Arbiter's ruling that there was no evidence of
bad faith and malice on the part of the employers.
The fallo of the Labor Arbiter's decision reads:
WHEREFORE, all the foregoing premises considered, judgment is
hereby rendered dismissing the complaint for lack of merit.
SO ORDERED.14chanroblesvirtuallawlibrary
Petitioner appealed the Decision15 to the NLRC onJuly 31, 2003 which
issued its Resolution16 dated February 19, 2004, affirming the decision
of the Labor Arbiter, with the modification that petitioner was entitled
to US$1,350.00 or its peso equivalent, representing his salary for three
(3) months. The NLRC ruled that petitioner should have been
reinstated by respondents considering that when the former was
declared 'fit for duty, his employment contract had not yet expired.
Thus, respondents were liable for his salary corresponding to the
unexpired portion of the employment contract or three months' salary
for every year of the unexpired term whichever is less, pursuant to
Section 10 of Republic Act No. 8042. The fallo of the Resolution
reads:
155 | P a g e
WHEREFORE, premises considered, the Appeal is DENIED.
However, for reasons stated above, the Decision dated 11 July 2003 is
hereby MODIFIED, ordering respondents-appellees to indemnify
complainant-appellant in the amount of US$1,350.00 or its peso
equivalent at time of payment.
SO ORDERED.17chanroblesvirtuallawlibrary
Petitioner filed a Motion for Reconsideration which the NLRC denied
on April 27, 2004.18 He forthwith filed a Petition for Certiorari19 with
the CA, assailing the ruling of the labor tribunal.
On January 25, 2005, the CA rendered judgment dismissing the
petition.The appellate court declared that the issues raised by petitioner
relating to the credibility and probative weight of the evidence
presented were factual in nature, hence, proscribed under Rule 65 of
the Rules of Court. The CA noted that petitioner did not even contest
the due execution, voluntariness and veracity of his own handwritten
quitclaim. Thus, he was estopped from assailing the Deed of Release
and Quitclaim he executed after receiving US$405.00 from
respondents.Considering that petitioner was examined by the
company-designated physician and did not protest the findings thereon
and later received sickwages, the appellate court concluded that the
NLRC was correct in its ruling. The dispositive portion of the CA
decision states:
IN VIEW OF ALL THE FOREGOING, the instant petition is
ordered DISMISSED. No pronouncements as to costs.
SO ORDERED.20chanroblesvirtuallawlibrary
Petitioner's motion for reconsideration was denied by the CA in its
Resolution21 dated April 19, 2005.
Petitioner thus filed the instant petition, raising the following issues:
I.
IN LIGHT OF THE DECISION OF THIS HONORABLE COURT IN
'GERMAN MARINE AGENCIES, INC. VS. NLRC, ET AL., 350
SCRA 629, CAN THE RESPONDENTS' COMPANY-
DESIGNATED DOCTOR BE CONSIDERED COMPETENT AND
RELIABLE ENOUGH TO DECLARE PETITIONER AS FIT TO
WORK CONTRARY TO THE DECLARATIONS OF THREE (3)
INDEPENDENT PHYSICIANS SIMILARLY FINDING HIM
OTHERWISE?
II.
DOES THE EXECUTION BY PETITIONER OF A RELEASE AND
QUITCLAIM ESTOP HIM FROM CLAIMING DISABILITY
BENEFITS UNDER THE POEA STANDARD EMPLOYMENT
CONTRACT?22
The Court's Ruling
As in the CA, the issues raised by the petitioner are factual.He
maintains that the diagnosis of his three (3) personal doctors declaring
him unfit to work is more accurate and reliable than that of Dr.
Pidlaoan, the company-designated physician. These three physicians,
two of whom are orthopedic surgeons, are likewise in a better position
to determine his fitness or unfitness for work, unlike Dr. Pidlaoan
whose expertise cannot be ascertained from the medical certificate he
issued. Petitioner thus assails the competence of Dr. Pidlaoan to assess
his fitness to work.
Petitioner avers that the quitclaim he executed is invalid, as the amount
he received as consideration therefor was much lower than what he
should have received under the POEA Standard Employment Contract.
He went on to argue that quitclaims are frowned upon by this Court as
they are contrary to public policy.
It must be stressed that in a petition for review on certiorari under Rule
45 of the Rules of Court, only questions of law may be raised.23 The
Court is not a trier of facts and is not to reassess the credibility and
probative weight of the evidence of the parties and the findings and
conclusions of the Labor Arbiter and the NLRC as affirmed by the
appellate court. Moreover, the factual findings of the Labor Arbiter
and the NLRC are accorded respect and finality when supported by
substantial evidence, which means suchevidence as that which a
reasonable mind might accept as adequate to support a conclusion. The
Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is
credible.24
In the instant case, the CA, the NLRC and the Labor Arbiter are one in
their findings that based on the evidence on record, petitioner is not
entitled to disability benefits.
Prescinding from the foregoing, the Court finds and so rules that under
the Standard Terms and Conditions Governing the Employment of
156 | P a g e
Filipino Seafarers On-Board Ocean-Going Vessel or the POEA
Standard Employment Contract issued pursuant to DOLE Department
Order No. 4, and POEA Memorandum Circular No. 9, both Series of
2000, petitioner is not entitled to disability benefits. Section 20-B,
paragraph 2 of the POEA Standard Employment Contract provides:
SECTION 20. COMPENSATION AND BENEFITS
xxxx
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related
injury or illness during the term of his contract are as follows:
xxxx
2. If the injury or illness requires medical and/or dental treatment in a
foreign port, the employer shall be liable for the full cost of such
medical, serious dental, surgical and hospital treatment as well as
board and lodging until the seafarer is declared fit to work or to be
repatriated.
However, if after repatriation, the seafarer still requires medical
attention arising from said injury or illness, he shall be so provided at
cost to the employer until such time he is declared fit or the degree of
his disability has been established by the company-designated
physician.
In the instant case, Dr. Pidlaoan diagnosed petitioner as 'fit for duty as
gleaned from his December 13, 2000 Medical Report, to wit:
xxxx
Referred and consulted our medical clinic on December 05, 2000 still
complaining of on-and-off low back pain aggravated by movements.
X-ray of the lumbosacral spine revealed normal findings, Fasting
Blood Sugar revealed 9.1 (NV 4.1 - 6.1 umol/l). Patient was given
Alaxan tablet 2-3x a day for his back pain and Eugoclon 1 tablet daily
for his elevated blood sugar and advised to come back regularly for
repeat blood sugar and for follow-up evaluation on his back pain.
Today, December 13, 2000, he came back with no more complaints of
back pain and repeat sugar examination revealed already normal
results.
DIAGNOSIS: Lumbar Strain
Diabetes Mellitus
RECOMMENDATION: Fit for duty effective today, December 13,
2000.
xxxx
Since he was declared fit for work, petitioner has no more right to
claim disability benefits under the contractual provisions of the POEA
Standard Employment Contract.
Under Section 20-B, paragraph 3 of the said contract, petitioner is
obliged to submit himself to a post-employment medical examination
by a company-designated physician within three working days upon
his return, except when he is physically incapacitated to do so, in
which case, a written notice to the agency within the same period is
deemed as compliance. Failure to comply with this mandatory
reporting requirement shall result in forfeiture of the right to claim the
above benefits.It is likewise provided that if a doctor appointed by the
seafarer disagrees with the assessment, a third doctor may be agreed
jointly between the employer and the seafarer whose decision shall be
final and binding on both parties.
Petitioner did not question the findings of Dr. Pidlaoan and his
recommendation.He questioned the doctor's competency and the
correctness of his findings only when he filed the complaint against
respondents before the Labor Arbiter, roughly 11 months after
petitioner was examined by the doctor. Petitioner consulted his
personal doctors only in July and August 2001, long after he had been
examined by the company-designated physician.
Petitioner's invocation of this Court's ruling in German Marine
Agencies v. NLRC25 militates against his claim for disability benefits.
As explicitly laid in the said case, it is the company-designated
physician who should determine the degree of disability of the seaman
or his fitness to work, thus:
x x x In order to claim disability benefits under the Standard
Employment Contract, it is the company-designated physician who
must proclaim that the seaman suffered a permanent disability,
whether total or partial, due to either injury or illness, during the term
of the latter's employment. x x x It is a cardinal rule in the
interpretation of contracts that if the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control.There is no ambiguity in the
157 | P a g e
wording of the Standard Employment Contract ' the only qualification
prescribed for the physician entrusted with the task of assessing the
seaman's disability is that he be company-designated.26
Dr. Pidlaoan examined and treated petitioner from the time he was
repatriated up to his recovery and subsequent assessment as fit for duty
on December 13, 2000. As in the German Marine case, the extensive
medical attention extended by Dr. Pidlaoan enabled the latter to
acquire familiarity, if not detailed knowledge, of petitioner's medical
condition. No doubt such specialized knowledge enabled Dr. Pidlaoan
to arrive at a much more accurate appraisal of petitioner's condition, as
compared to another physician not privy to petitioner's case from the
very beginning.27Indeed, the assessment of the three other personal
doctors of petitioner could not have been that reliable considering that
they based their conclusions on the prior findings of Dr. Pidlaoan;
moreover, they examined petitioner 7 or 8 months after he was
assessed as fit to work and treated him for only one day.
The only requirement stated in the POEA Standard Employment
Contract, as explained in the German Marine case, is that the doctor be
company-designated, and no other. Though it is prudent and advisable
to have a doctor specialized in his field to examine the seafarer's
condition ordegree of illness, the contractual provisions of the parties
only require that the doctor be 'company-designated. When the
language of the contract is explicit, as in the case at bar, leaving no
doubt as to the intention of the drafters thereof, the courts may not read
into it any other intention that would contradict its plain import.28
Furthermore and most importantly, petitioner did not question the
competency of Dr. Pidlaoan and his assessment when the latter
declared him as fit for duty or fit to work.
Additionally, petitioner, instead of questioning the assessment of the
company-designated doctor, executed a release and quitclaim in favor
ofrespondents, around three months after the assessment. In executing
the said document, petitioner thus impliedly admitted the correctness
of the assessment of the company-designated physician, and
acknowledged that he could no longer claim for disability benefits.
While petitioner may be correct in stating that quitclaims are frowned
upon for being contrary to public policy, the Court has, likewise,
recognized legitimate waivers that represent a voluntary and
reasonable settlement of a worker's claim which should be respected as
the law between the parties. Where the person making the waiver has
done so voluntarily, with a full understanding thereof, and the
consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as being a valid and binding
undertaking.29
In the instant case, petitioner, by his own hand, wrote the following in
the March 20, 2001 release and quitclaim:
That I have read this paper from beginning to and [sic] and understand
the contents thereof.
That I know this paper that I am signing.
That I know that signing this paper settles and ends every right or
claim I have for all damages including but not limited to loss of
earning capacity [sic] of past and future maintenance. [sic] support
[sic] suffering [sic] mental anguish. [sic] serious anxiety and similar
injury.
That I have received the amount of US$405 or ₱18,630.
That I know that upon receipt of the above amount I waive all claims I
may have for damage against the vessel's owners and her agents,
insurers, charterers, operators [sic] underwriters, p.i. clube [sic],
shipper and all other persons in interest therein or thereon, under all
and all other countries.30chanroblesvirtuallawlibrary
From the document itself, the element of voluntariness in its execution
is evident. Petitioner also appears to have fully understood the contents
of the document he was signing, as the important provision thereof had
been relayed to him in Filipino. Thus, the document also states:
Na alam ko na pagkatanggap ko nang halagang ito ay pinawawalang
bisa at iniuurong ko nang lahat [ng] aking interes, karapatan, at
anumang reklamo o damyos laban sa barko, may-ari nito, mga ahente,
seguro at lahat-lahat ng may kinalaman sa barkong ito maging dito sa
Pilipinas o anumang bansa.31chanroblesvirtuallawlibrary
Likewise, the US$405.00 which he received in consideration of the
quitclaim is a credible and reasonable amount. He was truly entitled
thereto, no more and no less, given that he was sick for only less than a
month or from November 15, 2000 to December 13, 2000. The same
would not, therefore, invalidate the said quitclaim. As we held in
Periquet v. National Labor Relations Commission:32
158 | P a g e
Not all waivers and quitclaims are invalid as against public
policy.1âwphi1 If the agreement was voluntarily entered into and
represents a reasonable settlement, it is binding on the parties and may
not later be disowned simply because of a change of mind. It is only
where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are
unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what he was
doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding
undertaking.33chanroblesvirtuallawlibrary
As a final note, let it be emphasized that 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.34
WHEREFORE, premises considered, the petition is hereby DENIED
for lack of merit. The Decision and Resolution of the Court of Appeals
in CA-G.R. SP No. 84883 are AFFIRMED. Costs against the
petitioner.
SO ORDERED.
G.R. No. L-46892 June 28, 1940
ANTAMOK GOLDFIELDS MINING COMPANY, recurrente,
vs.
COURT OF INDUSTRIAL RELATIONS, and NATIONAL
LABOR UNION, INC., recurridos.
Sres. DeWitt, Perkins y Ponce Enrile en representacionde la
recurrente.
Sres. Paguia y Lerum en represetacion de la recurrida, National
Labor Union.
IMPERIAL, J.:
Esta es una apelacion mediante certiorari interpuesta por la recurrente
contra la orden dictada por el Tribunal de Relaciones Industriales el 6
de mayo de 1939 que le obligo a que reponga en sus anteriores
trabajos o en otros substancialmente equivalentes a los 45 obreros
enumerados en la peticion del 31 de marzo de 1939 y a los 10 obreros
encabezados por A. Haber que fueron excluidos indefinidamente,
dentro de 10 dias desde que reciba copia de la orden; que pague a estos
55 obreros los jornales que debieron haber percibido desde la fecha de
su suspension o separacion hasta la de su reposicion; y que pendiente
de resolucion las otras cuestiones que las partes han sometido, la
recurrente se abstenga, bajo pena de desacato, de despedir o excluir,
sin permiso previo del tribunal, a cualquier obrero o empleado que se
hallaba bajo su servicio en la epoca en que surgio la disputa que este
actualmente trabajando en las minas o que sea repuesto en su trabajo
de conformidad con la orden; y contra la resolucion del mismo tribunal
del 17 de agosto de 1939 que denego la mocion de reconsideracion de
la recurrente presentada el 26 de mayo de 1939.
El 12 de diciembrre de 1938 la recurrida National Labor union, Inc.,
en representacion de los obreros y empleados de la recurrente que eran
miembros de dicha union obrera, dirigio una carta a la recurrente
solicitando 21 reclamaciones en favor de sus afiliados. La carta fue
recibida por la oficina de la recurrente en Manila en un sobre timbrado
por la estafeta de Baguio el 30 de mismo mes. Los funcionarios de la
recurrente convocaron a un meeting a sus empleados el 2 de enero de
1939 y en el informaron a todos sus obreros que algunad de las
demandas se habian aceptado y se habian puesto ya en practica, otras
serian consideradas y las restantes iban a ser rechazadas por ser
irrazonables, y se les aconsejo que no recurrieran a la violencia y
observaran metodos legales en el arreglo de sus diferencias con la
recurrentes. En la noche del mismo dia los obreros y empleados de la
recurrente se declararon en huelga y abandonaron sus trabajos. La
recurrnte dio cuenta inmediatamente de esta huelga al Departamento
del Trabajo y solicito su intervencion con el fin de solucionarla. El
Secretario del Trabajo designo a Adolfo Umengan, Investigador
Especial del Departamento, y a Eladio C. Leaño, Defensor Publico de
la Provincia Montañosa, para que intervinieran y vieran la manera de
solucionar la huelga. Estos funcionarios convocaron una conferencia a
la que acudieron funcionarios de la recurrente, representante de los
huelguistas y Luis Lardizabal, Jefe de la Baguio Federation of Labor,
una organizacion obrera afiliada a National Labor Union, Inc. Como
resultado de la conferencia las partes convinieron en el siguiente
arreglo amistoso:
AMICABLE SETTLEMENT
159 | P a g e
In order to have the present strike of the contractors and laborers of the
respondent company who staged a walkout on January 3, 1939,
amicably settled, the parties hereby mutually agree to end the said
strike under the condition that all laborers will be readmitted upon the
execution of this agreement; provided, that all laborers whose services
should be dispensed with due to lack of work in those tunnels where
they are no longer needed will be given not less than fifteen days
employment from the date of this settlement or resumption of work,
and provided, further, that as soon as the stopes in 1360 and 1460
levels are opened and the services of men are needed, the company
will give preference to efficient laborers when reducing the personnel
as above mentioned in those working places and may transfer them to
other division to replace inefficient men.
In witness hereof, the laborers represented by a committee composed
of Messrs. Luis Lardizabal, Tomas Dirige, Victoriano Madayag,
Maximo Conaoi, Daniel Lambinicio, and Juan Cerilo and the Antamok
Goldfields Mining Co. as represented by its President, Mr. Andres
Soriano, have hereunto placed their signatures this 4th day of January,
1939.
El convenio fue firmado por las partes el 4 de enero de 1939, pero los
obreros no se presentaron sino a las 9 de la mañana del 6 del mismo
mes. La gerencia de la recurrente no permitio, sin embargo, a ningun
obrero que entrara en la seccion subterranea conocida como "830
level" por la razon de que el aire se habia viciado con motivo de la
huelga y era necesario renovarlo con aire puro con el fin de evitar
desgracias personales. Esta precaucion la tomaron los obreros como
uan negativa de la recurrente a que ellos trabajaran de nuevo, por lo
que se declararon otra vez en huelga. A los huelguistas se unieron por
simpatia los obreros que trabajaban en la mina denominada "680
division," que es otra mina separada y situada a 3 kilometros de la
fabrica. Otra vez internivo el Departamento del Trabajo y por la
mediacion de Eladio C. Leaño los obreros volvieron al trabajo en la
noche del 6 de enero de 1939 en que los trabajos de mina se
reanudaron paulatinamente.
El 9 de enero de 1939 el Departamento del Trabajo endoso la disputa
al Tribunal de Relaciones Industriales de conformidad con el articulo 4
de la Ley No. 103 del Commonwealth y dicho Tribunal celebro la
primera vista del asunto el 13 del mismo mes en la Ciudad De Baguio.
En esta vista se discutieron una por una las 21 reclamaciones de la
recurrida National Labor Union, Inc., y se llego por las partes a un
acuerdo sobre algunas de ellas, se sometieron otras a la decision del
Triunal y las demas se dejaron pendientes para ser vistas y resueltas
mas tarde.
El 31 de marzo de 1939, hallandose pendiente aun de decision la
mayor parte de las reclamaciones antes mencionadas, la recurrida
National Labor Union, Inc., presento una mocion en que alego que el
capataz A. Haber y otros 9 obreros de la recurrente habian sido
indefinidamente suspendidos el 29 del mismo mes; que estos obreros
habian sido transferidos anteriormente a trabajos exteriores con el fin
de proporcionar a la recurrente una excusa para separarles mas tarde
del servicio; que otro grupo de cerca de 30 obreros fueron despedidos
por la compañia sin motivo alguno y sin autorizacion del tribunal; y
que las suspensiones y separaciones que asi se hicieron eran actos de
venganza y discriminatorios para los obreros, por cuya razon se pidio
que los funcinarios de la recurrente responsables de dichos actos sean
castigados por desacato y que la recurrente sea obligada a reponer a los
obreros en sus primitivos trabajos dentro de las minas y a pagarles sus
salarios correspondientes al periodo en que fueron separados del
sevicio. La recurrente contesto la mocion negando los hechos
imputados y alego que Haber y sus 9 compañeros fueron suspendidos
por su continua holgazaneria durante las horas de trabajo y por haberse
negado constantemente a trabajar, y que los 45 obreros encabezados
por el capataz Victoriano Madayag fueron despedidos por haber
rehusado señalar a los responsables del maltrato del capataz Juan
Moldero en la mañana del 30 de marzo de 1939. La mocion se vio el 3
de abril de 1939 y en la vista las partes presentaron sus testigos. El
tribunal designo a uno de sus agentes especiales para que se constituya
en las minas de la recurrente y practicara una investigacion con el fin
de suplementar los hechos que se probarondurante la vista. Despues de
considerar las pruebas presentadas ante el y los hechos hallados por el
comisionado nombrado, el tribunal en su orden del 6 de mayo de 1939
declaro probados los hechos siguientes:
160 | P a g e
1. The discharges and indefinite suspensions alleged in the motion
were made by the respondent without first securing the consent of the
Court in violation of the order of this Court of January 23, 1939.
2. The discharges and indefinite suspensions were made by the
respondent without just cause.
El la misma orden el Tribunal de Relaciones Industriales hace las
siguientes consideraciones que apoyan las conclusiones a que la
llegado:
In the order of January 23, 1939, the respondent was enjoined to
refrain from discharging any laborer involved in the dispute without
just cause and without previous authority of the Court. It appears and
no denial of the fact is made by the respondent that the dismissal is one
case and alleged suspension for an indefinite time in the other, which
has all the effects of a discharge, were made without seeking the
authority of the Court.
The charge that Haber and the group of nine laborers were indefinitely
suspended of continuous loafing and refusal to work was not
established. The real motive behind the lay was the completion of their
work "outside." Under the circumstances, the provision of the order of
March 21, to the effect that these men should be returned to their work
underground after the completion of their work "outside" should have
been observed. The respondent instead of complying with the order
laid off the men.
The discharge of Victoriano Madayag and his forty-four companions
as a result of the Moldero incident also lacks justification. In the case
of Madayag, although he was present with Haber when Moldero was
attacked, neither one is accused of the aggression. The two of them
were conversing with Moldero with the latter was stoned from behind
without anybody apparently being able to point out the aggressor. Less
justification can be found for the discharge of the forty-four men as a
result of the incident. The investigation disclosed that at the time of the
assault, they were at the Creek busy with their work. Both the distance
and the topographical situation of the place where the men were
working, which is far and well below the bank of the place of the
incident, precluded their hearing of seeing clearly what transpired
above them in the place where Moldero was assaulted. An ocular
inspection of the premises made by the investigator confirmed this
view. So far as is known, despite the investigations conducted by the
officials of the company and the policeman of the camp and by the
constabulary authorities in Baguio, the person or persons responsible
for the stoning has not been determined. The precipitate and
unwarranted dismissal of the forty-five men after the incident seems to
have been spurred by an over anxious desire on the part of the
company to get rid of these men.
As previously found, in the order of this Court of March 21, 1939,
about 134 underground laborers of the respondent were transferred and
made to work 'outside of the mines' or surface work. The majority of
these men were muckers, miners, timbermen, trammers, and mine
helpers and had to their favor from 6 months to 5 years service in the
mines of the company and not a few of them have done underground
work in several capacities and in different tunnels and divisions of the
mine. Among them are found leaders of the movement of the laborers
for higher pay and better working conditions which culminated in the
strike called on January 3, 1939. These leaders have been prominent in
the formation of the union its activities and in connection with the
strike. The temporary transfer of these men to "outside" work was
authorized by the Court in said order on the strength of the assurance
of the respondent that no more work suited for them inside the mines
existed. It was directed, however, in the aforesaid order that as soon as
their outside was completed the laborers should be immediately
returned to their respective work inside the mines. Subsequent events
and acts of the officials of the respondent in charge of the mines have
convinced the Court work existed and exists for the men inside the
tunnels and their transfers were made to provide an opportunity to the
company to dispense with their services as soon as the work is
completed. The unwarranted discharges of Haber and nine others and
those of Victoriano Madayag and his forty-four companions amply
demonstrated this conclusion. Upon the company's own admission, as
shown in its reports in the records and upon the findings of the
investigator of the Court, more than four hundred (400) workers of
different classes among them, muckers, miners, timbermen, trammers
and capataces coming from different mines in the region have been
employed by the respondent as fresh laborers. Almost all, if not all, of
161 | P a g e
these men are not members of the petitioner, the National Laborer
Union, Inc.
At the same time the work in different tunnels and division in the
mines are allegedly being completed, the old workers are being laid
off. Although a small number of the men found transfer to other
divisions being operated, the majority are being left without work.
Instead of laying hands on the old men laid off and making them work
in the tunnels needing hands and reinstating in the tunnel work those
laborers transferred to the 'outside' department, the respondent
preferred to take in and hire other workers coming from different
places because evidently they are not members of the union.
There is no doubt in the mind of the Court that a good number of the
position given of the men who were employed after the strike
numbering more than four hundred to date could have been offered to
the strikes who are now doing work "outside" and other who have
been laid off on the allegation that the underground work in which
they were engaged had been completed. To believe that not a single
man or say a few among the latter could have met the requirements set
by the technical men of the company to perform the different classes
of work for which the fresh men were engaged because they lack the
required efficiency, experience, physique. intelligence and skill of the
four hundred fresh laborers would be shutting the eyes of the court to
realities. These men prior to the occurence of the dispute, had worked
for months and many for years in the mines of the respondent and it
can not be easily accepted that their experience gained in their
particular lines in the very property of the respondent would be
inferior to that attained by the other workmen in other mines in the
district for an equal period of time. Their inefficiency as a whole group
can not be successfully sustained now because they were not
transferred to surface work for this reason but because of the alleged
lack of work or completion of their work underground. Had any of
them been inefficient in the past, it can not be explained why the
company laborer continued in the service as the records of the
company abound with instance of discharges made in the past of
laborers who were found either inefficient or incompetent or whose
services were unsatisfactory.
The company asserts ignorance of the union affiliations of the men in
the mine but the evidence stands uncontradicted that before the strike
was called a petition was presented by the men to the management
carrying the signatures of about eight hundred (800) worker
demanding higher pay and better working conditions. When the men
struck, the operation of the mine was completely paralyzed and there is
a strong indication that a great majority of the workers joined openly
the strike. It would not have been difficult for the respondent, with the
means at its command, to find for itself the employees and laborers
who remained loyal to the company and to consider those who struck
as either members of the union or its sympathizer.
The respondent's claim as to the motive for the suspension and
discharges lacks substance and support in the evidence and the
inferences to be drawn from it. From all what appears, it is inferred
that the respondent desire to discourage membership in the union and
to rout it if possible. The wholesale discharges were the expression of
such desire. The acts in the mind of the Court, are calculated to have
two effects. They will not only immediately affect the discharged
laborers but would also discourage other laborers from joining or
remaining members of the union.
The allegation that it has always been policy to consider the laborer's
connection with the company terminated upon termination of the
working place in which he is employed is not supported by the facts. It
has been shown that as a general rule when work in a place is
completed, workers are transferred to another working place in one
level or to another level, although in some instances days may elapse
before all the men in a bunch can be absorbed in different levels.
It is alleged that mining operations in the property vary and involve
several types, and that a miner, for example, may be good in one type,
but that it does not necessarily follow that he can do good work in
another type. And that the employment of men in particular jobs not
suitable for them increased the cost of production as a result of lower
output. Consequently, the respondent vehemently insists in its right of
selecting the men that it should employ and that in the exercise of this
right it should not be restrained or interfered with by the Court. It
contends that as to fitness of a laborer to do a particular type of work
the opinion of the management or its technical men should be
162 | P a g e
respected. But all these arguments are meaningless in the face of the
finding of the Court that the underground laborers transferred to the
'outside' work are not wanting in experience, efficiency and other
conditions alleged to be found among the fresh laborers. The special
qualifications to do particular work can not rightly be invoked in favor
of the employment of new laborers most specially in those cases of
common or unskilled labor like muckers, trammers, helpers, etc.
Under normal circumstances, the exercise of judgment of the employer
in selecting men he is to employ should not be interfered with. But
when such judgment is arbitrarily exercised to the prejudice of
members of a labor union whose rights should be safeguarded in
consonance with the policies of the law, the Court not only feels it
justified but rightly its duty to interfere to afford protection to the
laborers affected.
La recurrente presento una extensa mocion de reconsideracion de la
indicada orden, mocion que fue denegada por la resolucion del 17 de
agosto de 1939. La orden del 6 de mayo de 1939 y la resolucion del 17
de agosto del mismo año son las que dieron lugar a la apelacion
interpuesta por la recurrente.
La recurrente sostiene que la Ley No. 103 del Commonwealth,
conforme ha sido enmendada por las leyes Nos. 254 y 355, es
anticonstitucional (1) porque infringe el principio de separacion de
poderes; (2) porque por ella la Asamblea Nacional abdico de su
facultad legislativa violando la doctrina sobre delegacion de poderes;
(3) porque las facultades judiciales que la ley confiere al Tribunal de
Relaciones Industriales, consideradas separadamente, son arbitrarias e
irrazonables y permiten la privacion de la libertad y propiedad sin el
debido proceso de ley; y (4) porque suponiendo que la ley es valida y
constitucional en su totalidad, la porcion, por lo menos, del articulo 20
que dispone que el Tribunal de Relaciones Industriales "adoptara sus
reglamentos de procedimiento" debe declararse nula e invalida porque
infringe el articulo 13 del Titulo VIII de la Constitucion de Filipinas
que obliga al Tribunal de Relaciones Industriales a observar las reglas
generales de procedimiento aplicables a los tribunales de justicia. La
recurrente alega en este respecto que como a ella se le ha sometido a
un procedimiento arbitrario y distinto del que se aplica a los demas
litigantes en los tribunales de Filipinas, se le ha negado el debido
proceso de ley y el principio de igual proteccion ante las leyes.
La Ley No. 103 del Commonwealth que, como su titulo indica, provee
a la proteccion del obrero, creando un Tribunal de Relaciones
Industriales facultado para fijar un jornal minimo para los obreros y la
renta maxima que se ha de pagar por los inquilinos; para poner en
vigor el arbitraje obligatorio entre patronos o propietarios y empleados
o inquilinos, respectivamente, y prescribe penas por la infraccion de
sus decretos, se ha promulgado por la Asamblea Nacional en virtud de
los preceptos contenidos en el articulo 5, Titulo II; articulo 6, Titulo
XIII; y articulos 1 y 2, Titulo VIII, de la Constitucion de Filipinas que
disponen:
ART. 5. El Estado cuidara de promover la justicia social a fin de
asegurar el bienestar y la estabilidad economica de todo el pueblo.
ART. 6. El Estado debera proteger a todos los trabajadores,
especialmente a las mujeres y a los menores de edad, y debera regular
las relaciones entre propietarios e inquilinos, y entre el trabajo y el
capital en la industria y la agricultura. El Estado podra establecer el
arbitraje obligatorio.
ART. 1. El Poder Judicial estara investido en un Tribunal Supremo y
en otros tribunales inferiores que se establezcan por ley.
ART. 2. La Asamblea Nacional tendra la facultad de definir, prescribir
y distribuir la jurisdiccion de los varios tribunales, . . .
En cumplimiento de los preceptos constitucionales transcritos, la
Asamblea Nacional promulgo la Ley No. 103 del Commonwealth que
crea el Tribunal de Relaciones Industriales que es un tribunal especial
con facultades judiciales (Pambusco Employees Union vs. Court of
Industrial Relations et al., G.R. No. 46727; Ang Tibay et al. vs. Court
of Industrial Relations et al., G.R. No. 46496, opinion concurrente del
Magistrado Jose P. Laurel). El articulo 1 de dicha ley provee que el
Tribunal de Relaciones Industriales ejercera jurisdiccion para
considerar, investigar, decidir y zanjar toda cuestion, asunto, conflicto
o disputa que afecte o surja entre patronos y empleados u obreros, y
entre propietarios e inquilinos o aparceros, y para regular las
relaciones entre los mismos, con arreglo y sujecion a las disposiciones
de la ley. El articulo 4 dispone que el tribunal tomara conocimiento,
para fines de prevencion, arbitraje, decision y ajuste, de cualquier
163 | P a g e
conflicto agrario o industrial que motive o de lugar a una huelga o paro
a causa de diferencias que surjan en la cuestion de jornales,
participacion o compensacion, horas de trabajo o condiciones de
aparceria o empleo, entre patronos y empleados u obreros, y entre
propietarios e inquilinos o aparceros, siempre que el numero de
empleados, obreros, inquilinos o aparceros afectados exceda de treinta,
y que el conflicto agrario o industrial se someta al tribunal por el
Secretario del Trabajo, o por una o ambas partes interesadas, cuando el
referido Secretario del Trabajo certifique en cuanto a su existencia y la
conveniencia de la intervencion del tribunal en bien del interes
publico. Y el articulo 20 preceptua que en la vista, investigacion y
resolucion de cualquier cuestion o conflicto, y en el ejercicio de
cualquiera de sus deberes y facultades, el tribunal actuara de acuerdo
con la justicia y la equidad y los meritos substanciales de la causa, sin
consideracion a los tecnicismos y formulismos legales, y no estara
sujeto a cualesquier reglas tecnicas de prueba legal, sino que formara
juicio de la manera que crea justa y equitativo. La Ley No. 103
confiere al Tribunal de Relaciones Industriales plena facultad
disrecional para resolver y decidir las disputas agrarias e industriales
de la manera que crea justo e equitativo, prescindiendo de los
tecnicismos y formulismos legales, y la facultad asi concedida es
judicial y no legislativa, por lo que no infringe el principio de
separacion de poderes, la prohibicion sobre delegacion de facultades
legislativas ni la proteccion igualitaria ante la ley. Como se ha dicho
en el asunto de Cincinnati, W. & Z. R. Co. vs. Comm'rs, of Clinton
County '1852), 1 Ohio St., 88, citado en el asunto de Rubi et
al. contra La Junta Provincial de Mindoro, 39 Jur. Fil., 675, "Existe
una verdadera diferencia entre delegar la facultad para dictar leyes, lo
cual supone necesariamente discrecion en cuanto a lo que hayan de ser
aquellas, y conferir atribucion o discrecion para hacerlas cumplir,
discrecion que debe ejecitarse con arreglo a la ley. La primera no
puede hacerse en modo alguno; contra la segunda no cabe interponer
objecion alguna."
Para reforzar los argumentos en favor de la anticonstitucionalidad de la
Ley No. 103 la recurrente hace hincapie en lo resuelto en el asunto de
Schechter vs. United States (1935), 295 U. S., 496, 79 Law. ed. 270,
en que el Tribunal Supremo de los Estados Unidos declaro
anticonstitucional la National Recovery Act. Existe, sin embargo, una
marcada diferencia entre dicho asunto y el que se considera porque la
National Recovery Act en vez de crear un tribunal de justicia, creo
juntas con facultades legislativas y autorizo al Presidente de los
Estados Unidos a promulgar codigos que prescriban las reglas de
precedimiento con el fin de realizar los propositos de la ley.
El ultimo fundamento que se alega en contra de la validez de la Ley
No. 103 se hace consistir en que las facultades judiciales que concede
al Tribunal de Relaciones Industriales son tan artibrarias e irrazonables
que permiten la privacion de la libertad y la propiedad sin el debido
proceso de ley; y que se articulo 20, por lo menos, adolece de este
defecto fundamental porque confiere al Tribunal de Relaciones
Industriales la facultad de dictar sus propias reglas de procedimiento,
lo cual contraviene el articulo 13, Titulo VIII, de la Constitucion que
prescribe que el Tribunal Supremo dictara reglas concernientes a los
escritos de alegaciones, practica y procedimiento uniformes para todos
los tribunales de la misma categoria.
El articulo 20 de la Ley No. 103 se lee asi:
ART. 20. Reglamentos del Tribunal. — El Tribunal de Relaciones
Industriales promulgara sus reglas de procedimiento y tendra las
demas atribuciones que en general corresponden a un tribunal de
justicia: Entendiendose, sin embargo, Que en la vista, investigacion y
resolucion de cualquier cuestion o conflicto, y en el ejercicio de
cualquier de sus deberes y faculades en virtud de esta Ley, el Tribunal
actuara de acuerdo con la justicia y la equidad y los meritos
substanciales de la causa, sin consideracion a los tecnicismos o
formulismos legales, y no estara sujeto a cualquiera reglas, tecnicas de
prueba legal, sino que formara juicio de la manera que crea justo y
equitativo.
Una simple lectura de dicho articulo demuestra que la ley no ha
facultado al Tribunal de Relaciones Industriales a investigar y resolver
las cuestiones y conflictos entre obreros y patronos, e inquilinos y
propietarios, de una manera arbitraria y caprichosa sin someterse a una
norma de conducta determinada. El articulo dispone claramente que
las reglas de procedimiento que adopte, a las cuales debera ajustarse el
tribunal, deberan insperarse en la justicia y la equidad, y prescribe que
el criterio que se forma debera fundarse en los meritos substanciales de
164 | P a g e
la causa sin consideracion a los tecnicismos o formulismos legales. La
Ley No. 103 que crea un tribunal especial denominado Tribunal de
Relaciones Industriales con facultad para dictar sus propios
reglamentos y para resolver y decidir los conflictos agrarios e
industriales de acuerdo con los dictados de la justicia y equidad, no
puede ser impugnada bajo el fundamento de que auoriza la privacion
de la libertad y propiedad sin el debido proceso de ley; ni pugna con el
precepto del articulo 13, Titulo VIII, de la Constitucion porque el
Tribunal de Relacines Industriales no es de la misma categoria que los
juzgados municipales, juzgados de paz y juzgados de primera instancia
para los cuales se han dictado los reglamenos de los tribunales por el
Tribunal Supremo.
En relacion con la validez y constitucionalidad de la Ley No. 103 y sus
enmiendas, insertamos a continuacion la opinion concurrente del
Magistrado Lauren en el asunto de Ang Tibay, supra, cuyas
observaciones serviran para rebustecer la proposicion sentada de que
la referida ley y sus enmiendas es valida y no infringe la Constitucion.
It should be observed at the outset that our Constitutionwas adopted in
the midst of surging unrest and dissatisfaction resulting from economic
and social distresswhich was threatening the stability of governments
theworld over. Alive to the social and economic forces atwork, the
farmers of our Constitution boldly met the problems and difficulties
which faced them and endeavored to crystallize, with more or less
fidelity, the political, social; and economic proposition of their age,
and this they did, with the consciousness that the political and
philosophicalaphorism of their generation will, in the language of a
great jurist, "be doubted by the next and perhaps entirely discarded by
the third." (Chief Justice Winslow in Gorgnis v. Falk Co., 147 Wis.,
327; 133 N. W., 209.) Embodying the spirit of the present epoch,
general provisions were inserted in the Constitution which are
intended to bring about the needed social and economic equilibrium
between component elements of society through the application of
what may be termed as the justitia communis advocated by Grotius
and Leibnits many years ago to be secured through the
counterbalancing of economic and social forces and opportunities
which should be regulated, if not controlled, by the State or placed, as
it were, in custodia societatis. "The promotion of social justice to
insure the well-being and economic security of all the people' was thus
inserted as vital principle in our Constitution. (Sec. 5, Art. II,
Constitution.) And in order that this declaration of principle may not
just be an empty medley of words, the Constitution in various sections
thereof has provided the means towards its realization. For instance,
section 6 of Articles XIII declares that the State "shall afford
protection to labor, especially to working women and minors, and shall
regulated the relations between landowner and tenant, and between
labor and capital in industry and in agriculture." The same section also
states that "the State may provide for compulsory arbitration." In
extraordinary cases mentioned in section 16, Articles VI, of the
Constitution, the President of the Philippines may be authorized by
law, for a limited period and subject to such restrictions as the
National Assembly may prescribed, to "promulgate rules and
regulations to carry out a declared national policy." Albeit, almost at
the same time the Congress of the United States approved the National
Labor Regulations Act (49 Stat., 449) on July 5, 1935, commonly
known as the Wagner Act, we were in the Philippines headway
towards the adoption of our fundamental law, pursuant to
congressional authority given in the Tydings-McDuffie Independence
Act, approved March 24, 1934. In our Bill of Rights we now find the
following provision "The right to form associations or societies for
purposes not contrary to law shall not be abridged." (Par. 6, section 1,
art. III, Constitution.) What was an agitation in the United States
which brought about the recommendation by the Commission on
Industrial Relations created by an Act of Congress in 1912 for the
adoption of a Labor Bill of Rights as an amendment to the United
States Constitution is, in our case, virtually an accepted principle,
which may be expanded and vitalized by legislation to keep pace with
the development of time and circumstances.
By and large, these provisions in our Constitution all evince and
express the need of shifting emphasis to community interest with a
view to affirmative enhancement of human values. In conformity with
the constitutional objective and cognizant of the historical fact that
industrial and agricultural disputes had given rise to disquietude,
bloodshed and revolution in our country, the National Assembly
enacted Commonwealth Act No. 103, entitled "An Act to afford
165 | P a g e
protection of labor by creating a Court of Industrial Relations
empowered to fix minimum wages for laborers and maximum rental to
be paid tenants, and to enforce compulsory arbitration between
employers or landlords, and employees or tenants, respectively; and by
prescribing penalties for the violation of the orders" and, later,
Commonwealth Act. No. 213, entitled, "An Act to define and regulate
legitimate labor organizations." (Asto this last act, vide "finding and
policy," preamble [sec. 1]of the Wagner Act [49 Sta., 449]).
Commonwealth Act No. 103, approved October 29, 1936, was
originally Bill No. 700 of the National Assembly. More light is shed
by the explanatory statement of the Bill than by what transpired in the
course of the deliberation of the measure in the legislative chamber.
"El presente proyecto de ley," thus the explanatory statement of Bill
No. 700, 'crea una Junta de Relaciones Industriales . . . y provee el
arbitraje obligatorio. . . de acuerdo con el Articulo 6, Titulo XIII de la
Constitucion, el provee que "El Estado podrs establacerel arbitraje
obligatorio." "Incorporating the conclusion reached by a committee
appointed, a year or so before it was observed that 'bajo la legislacion
actual' " — evidently referring to Act No. 4055 — "no existe
instrumento adecuado para evitar las huelgas. El Departamentode
Trabajo desempeña maramente el papel de pacificadorentre las partes
en controversia y sus decisiones no sonobligatorias ni para los
patronos ni para los obreros. El pueblo la allegado a un grado de
desarrollo industrial, quehace imperiosa el que la intervencion del
gobierno en estosconflictos sea mas efectiva . . . ." The creation of a
Court of Industrial Relations was thus proposed, endowed "no
solamente del poder de arbitrar sino tambien del deberde investigar,
decidir, y hacer recomendaciones sobre las cuestiones en conflicto y
los problem as que afectan al Capitaly al Trabajo en la Industria y la
Agricultuta bajola direccion del Presidente de la Mancomunidad de
Filipinaso a peticion del Secretario del Trabajo.
xxx xxx xxx
From what has been stated, it appears that the legislation which are
now called upon to construe was enacted in pursuance of what appears
to be deliberate embodiment of a new social policy, founded on the
conception of a society integrated not by independent individuals
dealing at arms' length, but by interdependent members of a
consolidated whole whose interests must be protected against mutual
aggression and warfare among and between divers and diverse units
which are impelled by counter vailing and opposite individual and
group interests, and this is particularly true in the relationship between
labor and capital. Social and industrial disturbances which fifty years
ago were feudal-like and of isolated importance may now well result
in a serious strain upon the entire economic organism of the nation . In
the United States labor legislation has undergone a long process of
development too long to nature here, culminating in the enactments of
what were commonly known as the Clayton Act, the Norris-La
Guardia Act, and finally, the Wagner Act and the Fair Labor Standards
Act of 1938. The Wagner Act created the National Labor Relations
Board as an instrumentality of the Federal Government in the
settlement of labor disputes, which device is aimed at the avoidance of
unnecessary friction between labor and capital and the establishment
of industrial peace. Scrutiny of legislation in that country and of
pronouncement made by its Supreme Court reveals a continuous
renovation and change made necessary by the impact of changing
needs and economic pressure brought about by the irresistible
momentum of new social and economic forces developed there. In the
light of changes that have occured, it is doubted if the pronouncement
made by the said Supreme Court in 1905 (Lochner v. New York, 198,
U.S., 45) or in 1908 (Adair v. U.S., 52 Law. ed. 430, 208 U.S., 161,
and Coppage v. Kansas, 236 U.S., 1) — cases which are relied upon
by the petitioner in its printed memorandum — still retain their
virtuality at the present time. In the Philippines, social legislation has
had a similar development although of course to a much smaller
degree and of different adaptation giving rise to several attempts at
meeting and solving our peculiar social and economic problems. (See
Commonwealth to the National Assembly, September 2,1936;
Executive Order No. 49, S. 1936). The system of voluntary arbitration
devised by Act No. 4055 of the defunct Philippine Legislature has
apparently been abandoned by the enactment of the aforementioned
Commonwealth Acts Nos. 103 and 213. In the midst of changes that
have taken place, it may likewise be doubted if the pronouncement
made by this court in the case of People vs. Pomar (46 Phil., 440) —
also relied upon by the petitioner in its printed memorandum — still
166 | P a g e
retains its virtually as a living principle. The policy of laissez faire has
to some extent given way the assumption by the government of the
right of intervention even in contractual relations affected with public
interests.
xxx xxx xxx
In Commonwealth Act No. 103, and it, our Government no longer
performs the role of a mere mediator or intervenor but that of the
supreme arbiter.
En su siguiente senalmiento de error la recurrentealega que la conducta
del investigador, la investigacion quepracticio y la manera como
conocio del asunto el Tribunalde Relaciobes Industriales le privaron de
una vista i,parcialy justa, y constituyen privacion de supropiedad sinel
debido proceso de ley. Para demostrar la carencia de fundamento del
senalmiento de error, creemos suficientereproducir a continuacion la
forma como se practicio la investigacion por el comisionado nombrado
por el Tribunal de Relacionbes Industriales y la manera como
secelebro la vista por dicho tribunal, tal como se expone en laorden del
6 de mayo de 1939.
Hearing was held on April 3, 1939, where witnessesfor both the
petitioners and the respondent testified. To supplement the facts
brought out at the hearing, the Court ordered one of its Special Agents
to proceed to the premises of the mines to conduct a further
investigation.
El comisionado fue nombrado por el Tribumal de
RelacionesIndustriales en el su facultad conferidapor el articulo 10 de
la ley No. 103 de Commonwealth yel la inspeccion y vistas que
celebraron el comisionado y eltribunal, respectivamente, las partes
estuvieron representadasdebidamente, fueron oidas y presentaron las
pruebasque tenian disponibles y creyeron conveniente ofrecerTales
inspeccion y vistas tenian el caracter de una vistajudicial imparcial y
justa y constituyen el debido procesode ley que garantiza la
Constitucion.
Sostiene igualmente la recurrente que la orden del 6 demayo de 1939
es arbitraria porque no existen pruebassubstanciales ni competentes
que la sostengan. Sobre esteextremo, las conclusiones de hecho que ha
sentado el Tribunalde Relaciones Industriales demuestran que la
ordenimpugnada esta sostenida por el resultado de la investigacion
practicada por el comisionado y las pruebas que laspartes presentaron
directamente ante el Tribunal. Endichas conclusiones se han
considerado y analizado por elTribunal de Relaciones Industriales
todas las pruebas quelas partes presentaron y resulta inevitable la
conclusionde que la orden no es arbitraria y esta justificada y sotenida
por los hechos probados.
El ultimo senalmiento de error guarda relacion conla parte de la orden
del 6 mayo de 1939 que disponeque la recurrente pague a los 55
obreros repustos losjornales que dejaron de percibir durante su
separaciondel servicio. La recurrente sostiene que esta parte dela orden
equivale a una sentencia por danos y perjuiciosque el Tribunal de
Relaciones Industriales no puede pronunciar por carecer de
jurisdiccion. La pretension noes meritoria. El Tribunal de Relaciones
Industriales,conforme ya se ha dicho, es un tribunal especial y comotal
tiene facultad para disponer que la recurrente paguelos jornales de sus
empleados y obreros que han sido repuestos.Los articulos 1 y 4 de la
Ley No. 103 de Commonwealth,segun ha sido enmendado el primero
por elarticulo 1 de la Ley No. 254, confieren facultad y jurisdiccion al
tribunal de Relaciones Inbdustriales para conocer, resolver y decidir
todas las cuestiones, controversiasy disputas entre patronos y obreros y
propietarios y terratenientes, y los jornales de los obreros repuestos,
duranteel tiempo en que fueron separados del servicio,esteban
incluidos en las controverias y disputas sometidasal Departamento del
Trabajo y certificados por este al Tribunal de Relaciones Industriales.
Se deniega el recurso de certiorari y se confiman laorden del 6 de
mayo de 1939 y la resolucion del 17 deagosto del mismo ano, con las
costas a la recurrente. Asise ordena.
Avanceña, Diaz, Laurel y Moran, MM., estan conformes.
G.R. No. 77875 February 4, 1993
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.
167 | P a g e
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.
168 | P a g e
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
169 | P a g e
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.
On this score, respondent NLRC aptly ruled:
. . . Based on the facts heretofore narrated, division head Reynaldo
Abad 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 will necessarily be at the mercy of their
employer. That could not have been the intendment 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.
SO ORDERED.
170 | P a g e
G.R. No. 81958 June 30, 1988
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS,
INC., petitioner,
vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and
Employment, and TOMAS D. ACHACOSO, as
Administrator of the Philippine Overseas Employment
Administration, respondents.
Gutierrez & Alo Law Offices for petitioner.
SARMIENTO, J.:
The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm "engaged
principally in the recruitment of Filipino workers, male and female, for overseas
placement," 1 challenges the Constitutional validity of Department Order No. 1, Series of 1988, of the
Department of Labor and Employment, in the character of "GUIDELINES GOVERNING THE
TEMPORARY SUSPENSION OF DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD
WORKERS," in this petition for certiorari and prohibition. Specifically, the measure is assailed for
"discrimination against males or females;" 2 that it "does not apply to all Filipino workers but only to
domestic helpers and females with similar skills;" 3 and that it is violative of the right to travel. It is held
likewise to be an invalid exercise of the lawmaking power, police power being legislative, and not
executive, in character.
In its supplement to the petition, PASEI invokes Section 3,
of Article XIII, of the Constitution, providing for worker
participation "in policy and decision-making processes
affecting their rights and benefits as may be provided by
law." 4 Department Order No. 1, it is contended, was
passed in the absence of prior consultations. It is claimed,
finally, to be in violation of the Charter's non-impairment
clause, in addition to the "great and irreparable injury" that
PASEI members face should the Order be further enforced.
On May 25, 1988, the Solicitor General, on behalf of the
respondents Secretary of Labor and Administrator of the
Philippine Overseas Employment Administration, filed a
Comment informing the Court that on March 8, 1988, the
respondent Labor Secretary lifted the deployment ban in
the states of Iraq, Jordan, Qatar, Canada, Hongkong,
United States, Italy, Norway, Austria, and Switzerland. * In
submitting the validity of the challenged "guidelines," the Solicitor General invokes the police power of
the Philippine State.
It is admitted that Department Order No. 1 is in the nature
of a police power measure. The only question is whether or
not it is valid under the Constitution.
The concept of police power is well-established in this
jurisdiction. It has been defined as the "state authority to
enact legislation that may interfere with personal liberty or
property in order to promote the general welfare." 5 As
defined, it consists of (1) an imposition of restraint upon
liberty or property, (2) in order to foster the common good.
It is not capable of an exact definition but has been,
purposely, veiled in general terms to underscore its all-
comprehensive embrace.
"Its scope, ever-expanding to meet the exigencies of the
times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response
to conditions and circumstances thus assuring the greatest
benefits." 6
It finds no specific Constitutional grant for the plain reason
that it does not owe its origin to the Charter. Along with the
taxing power and eminent domain, it is inborn in the very
fact of statehood and sovereignty. It is a fundamental
attribute of government that has enabled it to perform the
171 | P a g e
most vital functions of governance. Marshall, to whom the
expression has been credited, 7 refers to it succinctly as the
plenary power of the State "to govern its citizens." 8
"The police power of the State ... is a power coextensive
with self- protection, and it is not inaptly termed the "law of
overwhelming necessity." It may be said to be that inherent
and plenary power in the State which enables it to prohibit
all things hurtful to the comfort, safety, and welfare of
society." 9
It constitutes an implied limitation on the Bill of Rights.
According to Fernando, it is "rooted in the conception that
men in organizing the state and imposing upon its
government limitations to safeguard constitutional rights did
not intend thereby to enable an individual citizen or a group
of citizens to obstruct unreasonably the enactment of such
salutary measures calculated to ensure communal peace,
safety, good order, and welfare." 10 Significantly, the Bill of
Rights itself does not purport to be an absolute guaranty of
individual rights and liberties "Even liberty itself, the
greatest of all rights, is not unrestricted license to act
according to one's will." 11 It is subject to the far more
overriding demands and requirements of the greater
number.
Notwithstanding its extensive sweep, police power is not
without its own limitations. For all its awesome
consequences, it may not be exercised arbitrarily or
unreasonably. Otherwise, and in that event, it defeats the
purpose for which it is exercised, that is, to advance the
public good. Thus, when the power is used to further
private interests at the expense of the citizenry, there is a
clear misuse of the power. 12
In the light of the foregoing, the petition must be dismissed.
As a general rule, official acts enjoy a presumed
vahdity. 13 In the absence of clear and convincing evidence
to the contrary, the presumption logically stands.
The petitioner has shown no satisfactory reason why the
contested measure should be nullified. There is no
question that Department Order No. 1 applies only to
"female contract workers," 14 but it does not thereby make
an undue discrimination between the sexes. It is well-
settled that "equality before the law" under the
Constitution 15does not import a perfect Identity of rights
among all men and women. It admits of classifications,
provided that (1) such classifications rest on substantial
distinctions; (2) they are germane to the purposes of the
law; (3) they are not confined to existing conditions; and (4)
they apply equally to all members of the same class. 16
The Court is satisfied that the classification made-the
preference for female workers — rests on substantial
distinctions.
As a matter of judicial notice, the Court is well aware of the
unhappy plight that has befallen our female labor force
abroad, especially domestic servants, amid exploitative
working conditions marked by, in not a few cases, physical
and personal abuse. The sordid tales of maltreatment
suffered by migrant Filipina workers, even rape and various
forms of torture, confirmed by testimonies of returning
workers, are compelling motives for urgent Government
action. As precisely the caretaker of Constitutional rights,
the Court is called upon to protect victims of exploitation. In
172 | P a g e
fulfilling that duty, the Court sustains the Government's
efforts.
The same, however, cannot be said of our male workers. In
the first place, there is no evidence that, except perhaps for
isolated instances, our men abroad have been afflicted with
an Identical predicament. The petitioner has proffered no
argument that the Government should act similarly with
respect to male workers. The Court, of course, is not
impressing some male chauvinistic notion that men are
superior to women. What the Court is saying is that it was
largely a matter of evidence (that women domestic workers
are being ill-treated abroad in massive instances) and not
upon some fanciful or arbitrary yardstick that the
Government acted in this case. It is evidence capable
indeed of unquestionable demonstration and evidence this
Court accepts. The Court cannot, however, say the same
thing as far as men are concerned. There is simply no
evidence to justify such an inference. Suffice it to state,
then, that insofar as classifications are concerned, this
Court is content that distinctions are borne by the evidence.
Discrimination in this case is justified.
As we have furthermore indicated, executive
determinations are generally final on the Court. Under a
republican regime, it is the executive branch that enforces
policy. For their part, the courts decide, in the proper
cases, whether that policy, or the manner by which it is
implemented, agrees with the Constitution or the laws, but
it is not for them to question its wisdom. As a co-equal
body, the judiciary has great respect for determinations of
the Chief Executive or his subalterns, especially when the
legislature itself has specifically given them enough room
on how the law should be effectively enforced. In the case
at bar, there is no gainsaying the fact, and the Court will
deal with this at greater length shortly, that Department
Order No. 1 implements the rule-making powers granted by
the Labor Code. But what should be noted is the fact that in
spite of such a fiction of finality, the Court is on its own
persuaded that prevailing conditions indeed call for a
deployment ban.
There is likewise no doubt that such a classification is
germane to the purpose behind the measure.
Unquestionably, it is the avowed objective of Department
Order No. 1 to "enhance the protection for Filipino female
overseas workers" 17 this Court has no quarrel that in the
midst of the terrible mistreatment Filipina workers have
suffered abroad, a ban on deployment will be for their own
good and welfare.
The Order does not narrowly apply to existing conditions.
Rather, it is intended to apply indefinitely so long as those
conditions exist. This is clear from the Order itself
("Pending review of the administrative and legal measures,
in the Philippines and in the host countries . . ."18), meaning
to say that should the authorities arrive at a means
impressed with a greater degree of permanency, the ban
shall be lifted. As a stop-gap measure, it is possessed of a
necessary malleability, depending on the circumstances of
each case. Accordingly, it provides:
9. LIFTING OF SUSPENSION. — The
Secretary of Labor and Employment (DOLE)
may, upon recommendation of the Philippine
Overseas Employment Administration (POEA),
lift the suspension in countries where there
are:
173 | P a g e
1. Bilateral agreements or understanding with
the Philippines, and/or,
2. Existing mechanisms providing for sufficient
safeguards to ensure the welfare and
protection of Filipino workers. 19
The Court finds, finally, the impugned guidelines to be
applicable to all female domestic overseas workers. That it
does not apply to "all Filipina workers" 20 is not an argument
for unconstitutionality. Had the ban been given universal
applicability, then it would have been unreasonable and
arbitrary. For obvious reasons, not all of them are similarly
circumstanced. What the Constitution prohibits is the
singling out of a select person or group of persons within
an existing class, to the prejudice of such a person or
group or resulting in an unfair advantage to another person
or group of persons. To apply the ban, say exclusively to
workers deployed by A, but not to those recruited by B,
would obviously clash with the equal protection clause of
the Charter. It would be a classic case of what Chase
refers to as a law that "takes property from A and gives it to
B." 21 It would be an unlawful invasion of property rights and
freedom of contract and needless to state, an invalid
act. 22 (Fernando says: "Where the classification is based
on such distinctions that make a real difference as infancy,
sex, and stage of civilization of minority groups, the better
rule, it would seem, is to recognize its validity only if the
young, the women, and the cultural minorities are singled
out for favorable treatment. There would be an element of
unreasonableness if on the contrary their status that calls
for the law ministering to their needs is made the basis of
discriminatory legislation against them. If such be the case,
it would be difficult to refute the assertion of denial of equal
protection." 23 In the case at bar, the assailed Order clearly
accords protection to certain women workers, and not the
contrary.)
It is incorrect to say that Department Order No. 1
prescribes a total ban on overseas deployment. From
scattered provisions of the Order, it is evident that such a
total ban has hot been contemplated. We quote:
5. AUTHORIZED DEPLOYMENT-The
deployment of domestic helpers and workers
of similar skills defined herein to the following
[sic] are authorized under these guidelines and
are exempted from the suspension.
5.1 Hirings by immediate
members of the family of Heads of
State and Government;
5.2 Hirings by Minister, Deputy
Minister and the other senior
government officials; and
5.3 Hirings by senior officials of
the diplomatic corps and duly
accredited international
organizations.
5.4 Hirings by employers in
countries with whom the
Philippines have [sic] bilateral
labor agreements or
understanding.
174 | P a g e
xxx xxx xxx
7. VACATIONING DOMESTIC HELPERS
AND WORKERS OF SIMILAR SKILLS--
Vacationing domestic helpers and/or workers
of similar skills shall be allowed to process
with the POEA and leave for worksite only if
they are returning to the same employer to
finish an existing or partially served
employment contract. Those workers returning
to worksite to serve a new employer shall be
covered by the suspension and the provision
of these guidelines.
xxx xxx xxx
9. LIFTING OF SUSPENSION-The Secretary
of Labor and Employment (DOLE) may, upon
recommendation of the Philippine Overseas
Employment Administration (POEA), lift the
suspension in countries where there are:
1. Bilateral agreements or
understanding with the
Philippines, and/or,
2. Existing mechanisms providing
for sufficient safeguards to ensure
the welfare and protection of
Filipino workers. 24
xxx xxx xxx
The consequence the deployment ban has on the right to
travel does not impair the right. The right to travel is
subject, among other things, to the requirements of "public
safety," "as may be provided by law." 25 Department Order
No. 1 is a valid implementation of the Labor Code, in
particular, its basic policy to "afford protection to
labor," 26 pursuant to the respondent Department of Labor's
rule-making authority vested in it by the Labor Code. 27 The
petitioner assumes that it is unreasonable simply because
of its impact on the right to travel, but as we have stated,
the right itself is not absolute. The disputed Order is a valid
qualification thereto.
Neither is there merit in the contention that Department
Order No. 1 constitutes an invalid exercise of legislative
power. It is true that police power is the domain of the
legislature, but it does not mean that such an authority may
not be lawfully delegated. As we have mentioned, the
Labor Code itself vests the Department of Labor and
Employment with rulemaking powers in the enforcement
whereof. 28
The petitioners's reliance on the Constitutional guaranty of
worker participation "in policy and decision-making
processes affecting their rights and benefits" 29 is not well-
taken. The right granted by this provision, again, must
submit to the demands and necessities of the State's
power of regulation.
The Constitution declares that:
Sec. 3. The State shall afford full protection to
labor, local and overseas, organized and
unorganized, and promote full employment
175 | P a g e
and equality of employment opportunities for
all. 30
"Protection to labor" does not signify the promotion of
employment alone. What concerns the Constitution more
paramountly is that such an employment be above all,
decent, just, and humane. It is bad enough that the country
has to send its sons and daughters to strange lands
because it cannot satisfy their employment needs at home.
Under these circumstances, the Government is duty-bound
to insure that our toiling expatriates have adequate
protection, personally and economically, while away from
home. In this case, the Government has evidence, an
evidence the petitioner cannot seriously dispute, of the lack
or inadequacy of such protection, and as part of its duty, it
has precisely ordered an indefinite ban on deployment.
The Court finds furthermore that the Government has not
indiscriminately made use of its authority. It is not
contested that it has in fact removed the prohibition with
respect to certain countries as manifested by the Solicitor
General.
The non-impairment clause of the Constitution, invoked by
the petitioner, must yield to the loftier purposes targetted by
the Government. 31 Freedom of contract and enterprise, like
all other freedoms, is not free from restrictions, more so in
this jurisdiction, where laissez faire has never been fully
accepted as a controlling economic way of life.
This Court understands the grave implications the
questioned Order has on the business of recruitment. The
concern of the Government, however, is not necessarily to
maintain profits of business firms. In the ordinary sequence
of events, it is profits that suffer as a result of Government
regulation. The interest of the State is to provide a decent
living to its citizens. The Government has convinced the
Court in this case that this is its intent. We do not find the
impugned Order to be tainted with a grave abuse of
discretion to warrant the extraordinary relief prayed for.
WHEREFORE, the petition is DISMISSED. No costs.
SO ORDERED.
[G.R. No. 47800. December 2, 1940.]
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
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF
COMMONWEALTH ACT No. 648; DELEGATION OF LEGISLATIVE
POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS AND
SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS TO
PROMULGATE RULES AND REGULATIONS. — The provisions of
section 1 of Commonwealth Act No. 648 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,
176 | P a g e
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
thereon 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.
2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY;
GOVERNMENTAL AUTHORITY. — 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. Gomer 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.
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
177 | P a g e
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 Dasmariñas 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. Comm’rs. 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 l ibra ry
178 | P a g e
Section 1 of Commonwealth Act No. 548 reads as follows: jgc:chanroble s.com.p h
"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 virtua 1aw lib rary
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 Locke’s 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 Osmeña, 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
179 | P a g e
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
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 virtua 1aw lib rary

health and welfare, and be required to yield to the public good."

And in People v. Pomar (46 Phil., 440), it was observed that In view of the foregoing, the writ of prohibition prayed for is
"advancing civilization is bringing within the police power of the hereby denied, with costs against the petitioner. So ordered.
state today things which were not thought of as being within
such power yesterday. The development of civilization, the Avanceña, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.
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 G.R. No. 80609 August 23, 1988
individuals of the state, have brought within the police power
many questions for regulation which formerly were not so
considered." cralaw virt ua1aw lib ra ry
PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, petitioner,
The petitioner finally avers that the rules and regulations vs.
complained of infringe upon the constitutional precept regarding THE NATIONAL LABOR RELATIONS COMMISSION and
the promotion of social justice to insure the well-being and MARILYN ABUCAY, respondents.
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
Nicanor G. Nuevas for petitioner.
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. CRUZ, J.:
Social justice means the promotion of the welfare of all the
people, the adoption by the Government of measures calculated The only issue presented in the case at bar is the legality of the award of financial assistance to an
employee who had been dismissed for cause as found by the public respondent.
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 Marilyn Abucay, a traffic operator of the Philippine Long
community, constitutionally, through the adoption of measures Distance Telephone Company, was accused by two
legally justifiable, or extra-constitutionally, through the exercise complainants of having demanded and received from them
of powers underlying the existence of all governments on the the total amount of P3,800.00 in consideration of her
time-honored principle of salus populi est suprema lex.
promise to facilitate approval of their applications for
180 | P a g e
telephone installation. 1 Investigated and heard, she was
found guilty as charged and accordingly separated from the
service.2 She went to the Ministry of Labor and
Employment claiming she had been illegally removed. After
consideration of the evidence and arguments of the parties,
the company was sustained and the complaint was
dismissed for lack of merit. Nevertheless, the dispositive
portion of labor arbiter's decision declared:
WHEREFORE, the instant complaint is
dismissed for lack of merit.
Considering that Dr. Helen Bangayan and Mrs.
Consolacion Martinez are not totally blameless
in the light of the fact that the deal happened
outhide the premises of respondent company
and that their act of giving P3,800.00 without
any receipt is tantamount to corruption of
public officers, complainant must be given one
month pay for every year of service as
financial assistance. 3
Both the petitioner and the private respondent appealed to
the National Labor Relations Board, which upheld the said
decision in toto and dismissed the appeals. 4 The private
respondent took no further action, thereby impliedly
accepting the validity of her dismissal. The petitioner,
however, is now before us to question the affirmance of the
above- quoted award as having been made with grave
abuse of discretion.
In its challenged resolution of September 22, 1987, the
NLRC said:
181 | P a g e
... Anent the award of separation pay as
financial assistance in complainant's favor, We
find the same to be equitable, taking into
consideration her long years of service to the
company whereby she had undoubtedly
contributed to the success of respondent.
While we do not in any way approve of
complainants (private respondent) mal
feasance, for which she is to suffer the penalty
of dismissal, it is for reasons of equity and
compassion that we resolve to uphold the
award of financial assistance in her favor. 5
The position of the petitioner is simply stated: It is
conceded that an employee illegally dismissed is entitled to
reinstatement and backwages as required by the labor
laws. However, an employee dismissed for cause is
entitled to neither reinstatement nor backwages and is not
allowed any relief at all because his dismissal is in
accordance with law. In the case of the private respondent,
she has been awarded financial assistance equivalent to
ten months pay corresponding to her 10 year service in the
company despite her removal for cause. She is, therefore,
in effect rewarded rather than punished for her dishonesty,
and without any legal authorization or justification. The
award is made on the ground of equity and compassion,
which cannot be a substitute for law. Moreover, such award
puts a premium on dishonesty and encourages instead of
deterring corruption.
For its part, the public respondent claims that the employee
is sufficiently punished with her dismissal. The grant of
financial assistance is not intended as a reward for her
offense but merely to help her for the loss of her
employment after working faithfully with the company for
ten years. In support of this position, the Solicitor General
cites the cases of Firestone Tire and Rubber Company of
the Philippines v. Lariosa 6 and Soco v. Mercantile
Corporation of Davao, 7 where the employees were
dismissed for cause but were nevertheless allowed
separation pay on grounds of social and compassionate
justice. As the Court put it in the Firestone case:
In view of the foregoing, We rule that Firestone
had valid grounds to dispense with the
services of Lariosa and that the NLRC acted
with grave abuse of discretion in ordering his
reinstatement. However, considering that
Lariosa had worked with the company for
eleven years with no known previous bad
record, the ends of social and compassionate
justice would be served if he is paid full
separation pay but not reinstatement without
backwages by the NLRC.
In the said case, the employee was validly dismissed for
theft but the NLRC nevertheless awarded him full
separation pay for his 11 years of service with the
company. In Soco, the employee was also legally
separated for unauthorized use of a company vehicle and
refusal to attend the grievance proceedings but he was just
the same granted one-half month separation pay for every
year of his 18-year service.
Similar action was taken in Filipro, Inc. v. NLRC, 8 where
the employee was validly dismissed for preferring certain
dealers in violation of company policy but was allowed
separation pay for his 2 years of service. In Metro Drug
182 | P a g e
Corporation v. NLRC, 9 the employee was validly removed
for loss of confidence because of her failure to account for
certain funds but she was awarded separation pay
equivalent to one-half month's salary for every year of her
service of 15 years. In Engineering Equipment, Inc. v.
NLRC, 10 the dismissal of the employee was justified
because he had instigated labor unrest among the workers
and had serious differences with them, among other
grounds, but he was still granted three months separation
pay corresponding to his 3-year service. In New Frontier
Mines, Inc. v. NLRC, 11 the employee's 3- year service was
held validly terminated for lack of confidence and
abandonment of work but he was nonetheless granted
three months separation pay. And in San Miguel
Corporation v. Deputy Minister of Labor and Employment,
et al ., 12 full separation pay for 6, 10, and 16 years service,
respectively, was also allowed three employees who had
been dismissed after they were found guilty of
misappropriating company funds.
The rule embodied in the Labor Code is that a person
dismissed for cause as defined therein is not entitled to
separation pay. 13 The cases above cited constitute the
exception, based upon considerations of equity. Equity has
been defined as justice outside law, 14 being ethical rather
than jural and belonging to the sphere of morals than of
law. 15 It is grounded on the precepts of conscience and not
on any sanction of positive law. 16 Hence, it cannot prevail
against the expressed provision of the labor laws allowing
dismissal of employees for cause and without any provision
for separation pay.
Strictly speaking, however, it is not correct to say that there
is no express justification for the grant of separation pay to
lawfully dismissed employees other than the abstract
consideration of equity. The reason is that our Constitution
is replete with positive commands for the promotion of
social justice, and particularly the protection of the rights of
the workers. The enhancement of their welfare is one of
the primary concerns of the present charter. In fact, instead
of confining itself to the general commitment to the cause
of labor in Article II on the Declaration of Principles of State
Policies, the new Constitution contains a separate article
devoted to the promotion of social justice and human rights
with a separate sub- topic for labor. Article XIII expressly
recognizes the vital role of labor, hand in hand with
management, in the advancement of the national economy
and the welfare of the people in general. The categorical
mandates in the Constitution for the improvement of the lot
of the workers are more than sufficient basis to justify the
award of separation pay in proper cases even if the
dismissal be for cause.
The Court notes, however, that where the exception has
been applied, the decisions have not been consistent as to
the justification for the grant of separation pay and the
amount or rate of such award. Thus, the employees
dismissed for theft in the Firestone case and for
animosities with fellow workers in the Engineering
Equipment case were both awarded separation pay
notnvithstanding that the first cause was certainly more
serious than the second. No less curiously, the employee
in the Soco case was allowed only one-half month pay for
every year of his 18 years of service, but in Filipro the
award was two months separation pay for 2 years service.
In Firestone, the emplovee was allowed full separation pay
corresponding to his 11 years of service, but in Metro, the
employee was granted only one-half month separation pay
183 | P a g e
for every year of her 15year service. It would seem then
that length of service is not necessarily a criterion for the
grant of separation pay and neither apparently is the
reason for the dismissal.
The Court feels that distinctions are in order. We note that
heretofore the separation pay, when it was considered
warranted, was required regardless of the nature or degree
of the ground proved, be it mere inefficiency or something
graver like immorality or dishonesty. The benediction of
compassion was made to cover a multitude of sins, as it
were, and to justify the helping hand to the validly
dismissed employee whatever the reason for his dismissal.
This policy should be re-examined. It is time we
rationalized the exception, to make it fair to both labor and
management, especially to labor.
There should be no question that where it comes to such
valid but not iniquitous causes as failure to comply with
work standards, the grant of separation pay to the
dismissed employee may be both just and compassionate,
particularly if he has worked for some time with the
company. For example, a subordinate who has
irreconcilable policy or personal differences with his
employer may be validly dismissed for demonstrated loss
of confidence, which is an allowable ground. A working
mother who has to be frequently absent because she has
also to take care of her child may also be removed
because of her poor attendance, this being another
authorized ground. It is not the employee's fault if he does
not have the necessary aptitude for his work but on the
other hand the company cannot be required to maintain
him just the same at the expense of the efficiency of its
operations. He too may be validly replaced. Under these
and similar circumstances, however, the award to the
employee of separation pay would be sustainable under
the social justice policy even if the separation is for cause.
But where the cause of the separation is more serious than
mere inefficiency, the generosity of the law must be more
discerning. There is no doubt it is compassionate to give
separation pay to a salesman if he is dismissed for his
inability to fill his quota but surely he does not deserve
such generosity if his offense is misappropriation of the
receipts of his sales. This is no longer mere incompetence
but clear dishonesty. A security guard found sleeping on
the job is doubtless subject to dismissal but may be
allowed separation pay since his conduct, while inept, is
not depraved. But if he was in fact not really sleeping but
sleeping with a prostitute during his tour of duty and in the
company premises, the situation is changed completely.
This is not only inefficiency but immorality and the grant of
separation pay would be entirely unjustified.
We hold that henceforth separation pay shall be allowed as
a measure of social justice only in those instances where
the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, for
example, habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the
dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the
ground of social justice.
A contrary rule would, as the petitioner correctly argues,
have the effect, of rewarding rather than punishing the
184 | P a g e
erring employee for his offense. And we do not agree that
the punishment is his dismissal only and that the
separation pay has nothing to do with the wrong he has
committed. Of course it has. Indeed, if the employee who
steals from the company is granted separation pay even as
he is validly dismissed, it is not unlikely that he will commit
a similar offense in his next employment because he thinks
he can expect a like leniency if he is again found out. This
kind of misplaced compassion is not going to do labor in
general any good as it will encourage the infiltration of its
ranks by those who do not deserve the protection and
concern of the Constitution.
The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it
certainly will not condone the offense. Compassion for the
poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be refuge of
scoundrels any more than can equity be an impediment to
the punishment of the guilty. Those who invoke social
justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to
be poor. This great policy of our Constitution is not meant
for the protection of those who have proved they are not
worthy of it, like the workers who have tainted the cause of
labor with the blemishes of their own character.
Applying the above considerations, we hold that the grant
of separation pay in the case at bar is unjustified. The
private respondent has been dismissed for dishonesty, as
found by the labor arbiter and affirmed by the NLRC and as
she herself has impliedly admitted. The fact that she has
worked with the PLDT for more than a decade, if it is to be
considered at all, should be taken against her as it reflects
a regrettable lack of loyalty that she should have
strengthened instead of betraying during all of her 10 years
of service with the company. If regarded as a justification
for moderating the penalty of dismissal, it will actually
become a prize for disloyalty, perverting the meaning of
social justice and undermining the efforts of labor to
cleanse its ranks of all undesirables.
The Court also rules that the separation pay, if found due
under the circumstances of each case, should be
computed at the rate of one month salary for every year of
service, assuming the length of such service is deemed
material. This is without prejudice to the application of
special agreements between the employer and the
employee stipulating a higher rate of computation and
providing for more benefits to the discharged employee. 17
WHEREFORE, the petition is GRANTED. The challenged
resolution of September 22,1987, is AFFIRMED in
toto except for the grant of separation pay in the form of
financial assistance, which is hereby DISALLOWED. The
temporary restraining order dated March 23, 1988, is
LIFTED. It is so ordered.
Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras,
Feliciano, Gancayco, Bidin, Sarmiento, Cortes and
Medialdea, JJ., concur.
185 | P a g e
Separate Opinions
FERNAN, C.J., dissenting:
The majority opinion itself declares that the reason for
granting separation pay to lawfully dismissed employees is
that "our Constitution is replete with positive commands for
the promotion of social justice, and particularly the
protection of the rights of the workers." 1
It is my firm belief that providing a rigid mathematical
formula for determining the amounts of such separation
pay will not be in keeping with these constitutional
directives. By computing the allowable financial assistance
on the formula suggested, we shall be closing our eyes to
the spirit underlying these constitutional mandates that
"those who have less in life should have more in law." It
cannot be denied that a low salaried employee who is
separated from work would suffer more hardship than a
well-compensated one. Yet, if we follow the formula
suggested, we would in effect be favoring the latter instead
of the former, as it would be the low- salaried employee
who would encounter difficulty finding another job.
I am in accord with the opinion of Justice Sarmiento that
we should not rationalize compassion and that of Justice
Padilla that the awards of financial assistance should be
left to the discretion of the National Labor Relations
Commission as may be warranted by the "environmental
facts" of the case.
PADILIA, J., separate opinion
I concur in the decision penned by Mr. Justice Cruz when it
disallows separation pay, as financial assistance, to the
private respondent, since the ground for termination of
employment is dishonesty in the performance of her duties.
I do not, however, subscribe to the view that "the
separation pay, if found due under the circumstances of
each case, should be computed at the rate of one month
salary for every year of service, assuming the length of
such service is deemed material." (p.11, Decision). It is my
considered view that, except for terminations based on
dishonesty and serious misconduct involving moral
turpitude-where no separation pay should be allowed--in
other cases, the grant of separation pay, i.e. the amount
thereof, as financial assistance to the terminated
employee, should be left to the judgment of the
administrative agency concemed which is the NLRC. It is in
such cases- where the termination of employment is for a
valid cause without, however, involving dishonesty or
serious misconduct involving moral turpitude-that the
Constitutional policy of affording protection to labor should
be allowed full play; and this is achieved by leaving to the
NLRC the primary jurisdiction and judgment to determine
the amount of separation pay that should be awarded to
the terminated employee in accordance with the
"environmental facts" of each case.
It is further my view that the Court should not, as a rule,
disturb or alter the amount of separation pay awarded by
the NLRC in such cases of valid termination of employment
but with the financial assistance, in the absence of a
demonstrated grave abuse of discretion on the part of the
NLRC.
186 | P a g e
GRIÑO AQUINO, J., dissent:
We should not rationalize compassion. I vote to affirm the
grant of financial assistance.
Separate Opinions
FERNAN, C.J., dissenting:
The majority opinion itself declares that the reason for
granting separation pay to lawfully dismissed employees is
that "our Constitution is replete with positive commands for
the promotion of social justice, and particularly the
protection of the rights of the workers." 1
It is my firm belief that providing a rigid mathematical
formula for determining the amounts of such separation
pay will not be in keeping with these constitutional
directives. By computing the allowable financial assistance
on the formula suggested, we shall be closing our eyes to
the spirit underlying these constitutional mandates that
"those who have less in life should have more in law." It
cannot be denied that a low salaried employee who is
separated from work would suffer more hardship than a
well-compensated one. Yet, if we follow the formula
suggested, we would in effect be favoring the latter instead
of the former, as it would be the low- salaried employee
who would encounter difficulty finding another job.
I am in accord with the opinion of Justice Sarmiento that the terminated employee in accordance with the
we should not rationalize compassion and that of Justice "environmental facts" of each case.
Padilla that the awards of financial assistance should be
left to the discretion of the National Labor Relations It is further my view that the Court should not, as a rule,
Commission as may be warranted by the "environmental disturb or alter the amount of separation pay awarded by
facts" of the case. the NLRC in such cases of valid termination of employment
but with the financial assistance, in the absence of a
PADILIA, J., separate opinion demonstrated grave abuse of discretion on the part of the
NLRC.
I concur in the decision penned by Mr. Justice Cruz when it
disallows separation pay, as financial assistance, to the GRIÑO AQUINO, J., dissent:
private respondent, since the ground for termination of
employment is dishonesty in the performance of her duties. We should not rationalize compassion. I vote to affirm the
grant of financial assistance.
I do not, however, subscribe to the view that "the
separation pay, if found due under the circumstances of
each case, should be computed at the rate of one month
salary for every year of service, assuming the length of G.R. No. L-48926 December 14, 1987
such service is deemed material." (p.11, Decision). It is my
considered view that, except for terminations based on MANUEL SOSITO, petitioner,
dishonesty and serious misconduct involving moral vs.
turpitude-where no separation pay should be allowed--in AGUINALDO DEVELOPMENT
other cases, the grant of separation pay, i.e. the amount CORPORATION, respondent.
thereof, as financial assistance to the terminated
employee, should be left to the judgment of the
administrative agency concemed which is the NLRC. It is in
such cases- where the termination of employment is for a CRUZ, J.:
valid cause without, however, involving dishonesty or
We gave due course to this petition and required the
serious misconduct involving moral turpitude-that the
parties to file simultaneous memoranda on the sole
Constitutional policy of affording protection to labor should
question of whether or not the petitioner is entitled to
be allowed full play; and this is achieved by leaving to the
separation pay under the retrenchment program of the
NLRC the primary jurisdiction and judgment to determine
private respondent.
the amount of separation pay that should be awarded to

187 | P a g e
The facts are as follows: Re:
RETRENCHMENT
Petitioner Manuel Sosito was employed in 1964 by the PROGRAM
private respondent, a logging company, and was in charge
of logging importation, with a monthly salary of As you are all aware, the operations of wood-
P675.00, 1 when he went on indefinite leave with the consent of the company on January 16, based industries in the Philippines for the last
1976. 2 On July 20, 1976, the private respondent, through its president, announced a retrenchment
program and offered separation pay to employees in the active service as of June 30, 1976, who would
two (2) years were adversely affected by the
tender their resignations not later than July 31, 1976. The petitioner decided to accept this offer and so worldwide decline in the demand for and
submitted his resignation on July 29, 1976, "to avail himself of the gratuity benefits"
promised. 3 However, his resignation was not acted upon and he was never given the separation pay prices of logs and wood products. Our
he expected. The petitioner complained to the Department of Labor, where he was sustained by the
labor arbiter. 4 The company was ordered to pay Sosito the sum of P 4,387.50, representing his salary
company was no exception to this general
for six and a half months. On appeal to the National Labor Relations Commission, this decision was decline in the market, and has suffered
reversed and it was held that the petitioner was not covered by the retrenchment program. 5 The
petitioner then came to us. tremendous losses. In 1975 alone, such
losses amounted to nearly P20,000,000.00.
For a better understanding of this case, the memorandum
of the private respondent on its retrenchment program is The company has made a general review of its
reproduced in full as follows: operations and has come to the unhappy
decision of the need to make adjustments in
its manpower strengthJif it is to survive. This is
indeed an unfortunateuand painful decision to
make, but it leaves thel company no alternative
but to reduce its tremendous
y and excessive
overhead expense in order to prevent an
ultimate closure. 2
0
Although the law allows, the Company, in a
situation such as this, to drastically reduce it
manpower strength without
1 any obligation to
pay separation benefits,
9 we recognize the
need to provide our employees
7 some financial
assistance while they 6 are looking for other
jobs.
Memorandum To: ALL EMPLOYEES
The Company therefore is adopting a
retrenchment program whereby employees
188 | P a g e
 who are in the active service as of June 30,
1976 will be paid separation benefits in an
amount equivalent to the employee's one-half
(1/2) month's basic salary multiplied by his/her
years of service with the Company.
Employees interested in availing of the
separation benefits offered by the Company
must manifest such intention by submitting
written letters of resignation to the
Management not later than July 31, 1976.
Those whose resignations are accepted shall
be informed accordingly and shall be paid their
separation benefits.

After July 31, 1976, this offer of payment of

separation benefits will no longer be available.
Thereafter, the Company shall apply for a
clearance to terminate the services of such
number of employees as may be necessary in
order to reduce the manpower strength to
such desired level as to prevent further losses.

( N.B.
S
G For additional information
D
. and/or resignation forms,
)
please see Mr. Vic Maceda
J
O or Atty. Ben Aritao.
6

S
It is clear E
from the memorandum that the offer of
separation pay was extended only to those who were in the
189 | P a g e
active service of the company as of June 30, 1976. It is
equally clear that the petitioner was not eligible for the
promised gratuity as he was not actually working with the
company as of the said date. Being on indefinite leave, he
was not in the active service of the private respondent
although, if one were to be technical, he was still in its
employ. Even so, during the period of indefinite leave, he
was not entitled to receive any salary or to enjoy any other
benefits available to those in the active service.
It seems to us that the petitioner wants to enjoy the best of
two worlds at the expense of the private respondent. He
has insulated himself from the insecurities of the
floundering firm but at the same time would demand the
benefits it offers. Being on indefinite leave from the
company, he could seek and try other employment and
remain there if he should find it acceptable; but if not, he
could go back to his former work and argue that he still had
the right to return as he was only on leave.
There is no claim that the petitioner was temporarily laid off
or forced to go on leave; on the contrary, the record shows
that he voluntarily sought the indefinite leave which the
private respondent granted. It is strange that the company
should agree to such an open-ended arrangement, which
is obviously one-sided. The company would not be free to
replace the petitioner but the petitioner would have a right
to resume his work as and when he saw fit.
We note that under the law then in force the private
respondent could have validly reduced its work force
because of its financial reverses without the obligation to
grant separation pay. This was permitted under the original
Article 272(a), of the Labor Code, 7 which was in force at
190 | P a g e
the time. To its credit, however, the company voluntarily
offered gratuities to those who would agree to be phased
out pursuant to the terms and conditions of its
retrenchment program, in recognition of their loyalty and to
tide them over their own financial difficulties. The Court
feels that such compassionate measure deserves
commendation and support but at the same time rules that
it should be available only to those who are qualified
therefore. We hold that the petitioner is not one of them.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not
be supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its own
rights which, as such, are entitled to respect and
enforcement in the interest of simple fair play. Out of its
concern for those with less privileges in life, this Court has
inclined more often than not toward the worker and upheld
his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that
justice is in every case for the deserving, to be dispensed
in the light of the established facts and the applicable law
and doctrine.
WHEREFORE, the petition is DISMISSED and the
challenged decision AFFIRMED, with costs against the
petitioner.
SO ORDERED.
JENNY M. AGABON and G.R. No. 158693
VIRGILIO C. AGABON,
Petitioners, Present:
 Garcia, JJ.

Davide, Jr., C.J., NATIONAL LABOR RELATIONS

Puno, COMMISSION (NLRC), RIVIERA

Panganiban, HOME IMPROVEMENTS, INC. Promulgated:

Quisumbing, and VICENTE ANGELES,

Ynares-Santiago, Respondents. November 17, 2004

Sandoval- x -----------------------------------------------------------------------------
Gutierrez,
----------- x
- versus - Carpio,

Austria- DECISION
Martinez,

Corona, YNARES-SANTIAGO, J.:

Carpio-
Morales, This petition for review seeks to reverse the decision[1] of
the Court of Appeals dated January 23, 2003, in CA-G.R. SP
Callejo, Sr.,
No. 63017, modifying the decision of National Labor
Azcuna, Relations Commission (NLRC) in NLRC-NCR Case No.
023442-00.
Tinga,

Chico-Nazario,
and
191 | P a g e
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
192 | P a g e
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 Agabons 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 petitioners 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 Agabons 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]
193 | P a g e
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 respondents 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
194 | P a g e
latters representative in connection with the employees
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.
195 | P a g e
The law imposes many obligations on the employer such as
providing just compensation to workers, observance of the
procedural requirements of notice and hearing in the
termination of employment. On the other hand, the law
also recognizes the right of the employer to expect from its
workers not only good performance, adequate work and
diligence, but also good conduct[19] 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 employees last known
address.
196 | P a g e
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
197 | P a g e
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 employees 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
[22]
Labor Relations Commission.
Prior to 1989, the rule was that a dismissal or termination is
illegal if the employee was not given any notice. In the 1989
case of Wenphil Corp. v. National Labor Relations
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
198 | P a g e
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.
199 | P a g e
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 otherwise known as the Labor Code of the Philippines in
and injustice which elicited strong dissent has prompted us Book VI, Rule I, Sec. 2, as amended by Department Order
to revisit the doctrine. 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.
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 Constitutional due process protects the individual
from the government and assures him of his rights in
feelings of our people as to be deemed fundamental to a
criminal, civil or administrative proceedings; while statutory
civilized society as conceived by our entire history. Due due process found in the Labor Code and Implementing
process is that which comports with the deepest notions of Rules protects employees from being unjustly terminated
without just cause after notice and hearing.
what is fair and right and just.[26] It is a constitutional
restraint on the legislative as well as on the executive and
In Sebuguero v. National Labor Relations
judicial powers of the government provided by the Bill of [28]
Commission, the dismissal was for a just and valid cause
Rights. but the employee was not accorded due process. The
dismissal was upheld by the Court but the employer was
Due process under the Labor Code, like Constitutional sanctioned. The sanction should be in the nature of
due process, has two aspects: substantive, i.e., the valid and indemnification or penalty, and depends on the facts of
authorized causes of employment termination under the each case and the gravity of the omission committed by the
Labor Code; and procedural, i.e., the manner of dismissal. employer.
Procedural due process requirements for dismissal are
found in the Implementing Rules of P.D. 442, as amended,

200 | P a g e
 In Nath v. National Labor Relations Commission,[29] it imprudent to apply the res ipsa loquitur rule and award, in
lieu of separation pay, nominal damages to the employee. x
was ruled that even if the employee was not given due
x x.[31]
process, the failure did not operate to eradicate the just
causes for dismissal. The dismissal being for just
cause, albeit without due process, did not entitle the
After carefully analyzing the consequences of the
employee to reinstatement, backwages, damages and
divergent doctrines in the law on employment termination,
attorneys fees.
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
Mr. Justice Jose C. Vitug, in his separate opinion
and to follow Wenphil by holding that the dismissal was for
in MGG Marine Services, Inc. v. National Labor Relations
just cause but imposing sanctions on the employer. Such
Commission,[30] which opinion he reiterated in Serrano,
sanctions, however, must be stiffer than that imposed
stated:
in Wenphil. By doing so, this Court would be able to achieve
a fair result by dispensing justice not just to employees, but
C. Where there is just cause for dismissal but due to employers as well.
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.
The unfairness of declaring illegal or ineffectual dismissals
In failing, however, to comply with the procedure
prescribed by law in terminating the services of the for valid or authorized causes but not complying with
employee, the employer must be deemed to have opted or, statutory due process may have far-reaching consequences.
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
This would encourage frivolous suits, where even the most
accorded to the employee by the employer. Nevertheless, notorious violators of company policy are rewarded by
peculiar circumstances might obtain in certain situations invoking due process. This also creates absurd situations
where to undertake the above steps would be no more than where there is a just or authorized cause for dismissal but a
a useless formality and where, accordingly, it would not be
201 | P a g e
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]
202 | P a g e
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 economic growth; hence, the need to weigh and balance
the rights and welfare of both the employee and employer.
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
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,

203 | P a g e
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 employees one month salary. This
indemnity is intended not to penalize the employer but to
vindicate or recognize the employees 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
[40]
circumstances. Considering the prevailing circumstances
in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve
to deter employers from future violations of the statutory
due process rights of employees. At the very least, it
204 | P a g e
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
probandithereby making it liable for such claims to the
petitioners.
Anent the deduction of SSS loan and the value of the shoes
from petitioner Virgilio Agabons 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 same[43] 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
205 | P a g e
pay is included in the definition of wage under Article 97(f)
of the Labor Code, to wit:
(f) Wage paid to any employee shall mean the remuneration
or earnings, however designated, capable of being
expressed in terms of money whether fixed or ascertained
on a time, task, piece , or commission basis, or other
method of calculating the same, which is payable by an
employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair
and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee
from which an employer is prohibited under Article
113[45] of the same Code from making any deductions
without the employees 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 Agabons 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
SO ORDERED.
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 PHILIPPINE LONG G.R. No. 157202
Virgilio Agabons thirteenth month pay for 1998 in the DISTANCE
amount of P2,150.00. and TELEPHONE
COMPANY,
INC., Present:
Petitioner,
WHEREFORE, in view of the foregoing, the petition YNARES-
is DENIED. The decision of the Court of Appeals dated SANTIAGO, J.,
January 23, 2003, in CA-G.R. SP No. 63017, finding that Chairperson,
petitioners Jenny and Virgilio Agabon abandoned their - versus - AUSTRIA-MARTINEZ,
work, and ordering private respondent to pay each of the CALLEJO, SR.,
petitioners holiday pay for four regular holidays from 1996 CHICO-NAZARIO, and
AMPARO BALBASTRO NACHURA, JJ.
to 1998, in the amount of P6,520.00, service incentive leave and
pay for the same period in the amount of P3,255.00 and the NATIONAL LABOR
balance of Virgilio Agabons thirteenth month pay for 1998 RELATIONS Promulgated:
in the amount of P2,150.00 is AFFIRMED with COMMISSION,
the MODIFICATION that private respondent Riviera Home Respondents. March 28, 2007
Improvements, Inc. is further ORDERED to pay each of the x-----------------------------------------
-------x
petitioners the amount of P30,000.00 as nominal damages
for non-compliance with statutory due process.
DECISION

No costs.
206 | P a g e
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari filed
by Philippine Long Distance and Telephone Company, Inc.
(petitioner) seeking to annul the Decision[1] dated July 31,
2002 and the Resolution[2]dated February 7, 2003 of the
Court of Appeals (CA) in CA-G.R. SP No. 51060.
Amparo Balbastro (private respondent) was employed by
petitioner in 1978 as its telephone operator until her
questioned dismissal from employment on October 5,
1989. She was dismissed by petitioner for her absences
without authorized leave due to unconfirmed sick leave on
June 28 to July 14, 1989, which constituted her third
offense[3] punishable by dismissal under petitioners rules and
regulations.[4]
On October 28, 1991, private respondent filed a
Complaint[5] with the Labor Arbiter against petitioner and its
President, Antonio Cojuangco, for illegal dismissal, non-
payment of salary wage, premium pay for rest day,
13th month pay, and damages. In her position paper, she
207 | P a g e
alleged that she was dismissed on the ground of
unconfirmed sick leave despite her presentation of medical
certificates from her attending physicians which were not
considered by petitioners medical doctors; and that she has
four minor children and it was not her intention to habitually
absent herself without reason considering that her loss of job
which was based only on opinions of petitioners doctors had
caused her great deprivation and moral suffering. She prayed
for reinstatement, backwages, and damages.
Petitioner filed its position paper with Motion to
Dismiss[6] alleging that private respondents habitual and
unjustified absences was a just and valid cause for her
termination under its rules and regulations; and that her
record of unauthorized absences for 1989 showed the
following:
First unauthorized absences, from March 19 to 29,
1989. Private respondent absented herself from work for
nine days excluding rest days on March 23 to 24,
1989 without notice to petitioner. She gave marital problem
as the reason for her absence. She was penalized with 18
days suspension for violating petitioners rules and
regulations regarding absences.
Second unauthorized absences, from June 11 to 13,
1989. Private respondent called in sick
from Tanauan, Batangas on June 5 that she was suffering
from gastroenteritis. She absented herself from June 5 to 13,
1989. On June 14, 1989, she presented herself to petitioners
doctor, Dr. Melissa Musngi and submitted a medical
certificate where it was stated that she was under treatment
from June 5 to 8, 1989 of
gastroenteritis. Dr. Musngi confirmed private respondents
sick leave from June 5 to 10, 1989 but did not confirm her
absences from June 11 to 13, 1989 because her medical
certificate covered only the period from June 5 to 8,
1989. Furthermore, petitioner reasons out that if she really
had such illness, certain normal logical medical procedures
should have been taken, such as stool examinations and
hospitalization; and she bore no post-illness manifestations
of gastroenteritis. Private respondents unconfirmed leave of
absence was considered by petitioner unauthorized due to
208 | P a g e
her patent abuse of sick leave privileges and treated it as her
second offense and was penalized with 15 days suspension.
Third unauthorized absences, from June 28 to July 14,
1989. On June 25, 1989, private respondent made a sick call
that she had sore eyes and absented herself from June 25
to July 14, 1989. On July 3, 1989, she was outvisited at her
given address in Makati but was not found home. On July
15, 1989, she reported for work and presented herself to the
clinic for confirmation. She had her medical certificate
issued by her attending physician showing that she had been
under his professional treatment from June 25 to July 12,
1989 for systemic viral infection. Petitioners doctor, Dr.
Benito Dungo, confirmed her sick leave from June 25 to 27,
1989 but did not confirm as to the rest of the dates when she
was absent from work. When asked to explain, private
respondent said that she had a viral infection during the said
period; and that she was in Tanauan, Batangas during the
said dates so she was not found
in Makati when outvisited. Petitioners doctor did not
confirm her leave of absence from June 28 to July 14,
1989 on the ground that such illness did not warrant a very
long time of rest; certain laboratory examinations should
have been conducted by her attending physician; and there
was patent abuse of her sick leave privileges.
While private respondents third leave of absence was
being deliberated upon, she absented herself from August 6
to 12, 1989. She called in sick on August 6, 1989 informing
her supervisor that she had a fever. The medical certificate
issued by her attending physician showed that she was under
treatment from August 7 to 10, 1989 for
influenza. Petitioners doctor, Dr. Eduardo Co, confirmed
private respondents leave of absence from August 6 to 8,
1989 but did not confirm the rest because her absences from
August 9 to 12, 1989 were not covered by a medical
certificate; her illness did not warrant prolonged absence;
and it was medically impossible for her to contract the same
illness which she contracted the previous month since it is a
medical fact that there is no such thing as an immediately
recurrent viral infection.
209 | P a g e
In view of her repeated absences without authorized
leave for the third time, petitioner terminated private
respondents service effective October 5, 1989.
The Labor Arbiter conducted a hearing where private
respondent testified on her behalf, while petitioner presented
the three medical doctors who did not confirm portions of
private respondents leave of absence, and its Employee
Relations and Service Department Manager.
On May 30, 1994, the Labor Arbiter issued its
Decision,[7] the dispositive portion of which reads:
WHEREFORE, all the foregoing premises
being considered, judgment is hereby rendered
ordering the respondent Philippine Long Distance
[and] Telephone Co. to reinstate the complainant
to her former position as telephone operator with
all the rights, privileges and benefits appertaining
thereto, including seniority,
plus backwages equivalent to one (1) year salary
in the sum of P78,000.00 (P6,500.00/mo. x 12
mos.).
SO ORDRED.[8]
 The Labor Arbiter held that private respondents first
incident of absence from March 19 to 29, 1989 were
unauthorized but not as to the other succeeding absences. It
found that private respondent, on her first day of absence,
called in sick and when she reported for work, she went to
petitioners clinic for check-up and submitted her medical
certificates, thus she complied with the standard
requirements on matters of sick leave; that petitioners
doctors did not confirm some portions of private
respondents leave of absence based merely on their medical
opinions; that such justification was not warranted under
Department Order No. ADM-79-02 wherein absences due to
illness were considered unauthorized and without pay when
the attending doctors signature is forged, there is alteration
as to the date and contents of the medical certificate, the
certificate is false as to the facts alleged therein, the doctor
issuing the medical certificate is not qualified to attend to
the illness, there are falsities and misrepresentations, and
when there is patent abuse of sick leave privileges; and that
these circumstances were not proven in this case.
210 | P a g e
The Labor Arbiter gave more credence to the doctor
who actually attended to private respondent rather than to
the medical opinion of petitioners doctors. It concluded that
petitioners doctors should have coordinated with private
respondents attending physicians to settle any doubts as to
the medical certificates.
Petitioner filed its appeal with the National Labor
Relations
Commission (NLRC).[9] On January 19, 1996, the NLRC iss
ued a
Resolution[10] affirming the decision of the Labor Arbiter.
The NLRC found that company practice allows leave
of absence due to sickness if supported by a medical
certificate issued by the attending physician; that a
difference in opinion by the Medical Director from that of
the attending physician should not prejudice private
respondent since the Medical Director can consider absences
unauthorized only in cases of forgery and patent abuse of
sick leave privileges which were not proven in this case; that
if the Medical Director entertained doubts as to the medical
certificate, he should have asked the attending physician to
submit himself for cross-examination and then present an
independent physician for an expert opinion on the matter.
Petitioners Motion for Reconsideration was denied in
a Resolution[11] dated March 14, 1996.
Undaunted, petitioner filed with us a Petition
for Certiorari with prayer for the issuance of a Temporary
Restraining Order (TRO). A TRO was issued to enjoin the
enforcement of the NLRC Resolution until further orders.[12]
In a Resolution dated December 7, 1998,[13] we
referred the petition to
the CA in accordance with the St. Martin Funeral Home v.
National Labor Relations Commission[14] ruling.
On July 31, 2002, the CA issued its assailed Decision
which dismissed the petition and affirmed the NLRC
Decision. The CA held that as long as the medical certificate
presented did not fall under any of the infirmities set forth in
petitioners rules and regulations, the unconfirmed leave
211 | P a g e
should be treated merely as absence without leave and was
not subject to disciplinary action; that petitioner may not
rely on the previous absences of respondents in 1978 and
1982 to show abuse of sick leave privileges because
petitioner had acknowledged that respondent had already
been penalized with suspension, and those absences were
committed beyond the three-year period mentioned in their
rules and regulations; that in its desire to clothe private
respondents dismissal with a semblance of legality,
petitioner points to private respondents fourth unauthorized
leave of absence committed in August 1989 while the third
unauthorized leave of absence was being deliberated upon;
and that the notice of dismissal referred only to her third
unauthorized leave, thus she could not be faulted for an
infraction for which she was not charged.
Petitioners Motion for Reconsideration was denied in
a Resolution dated February 7, 2003.
Hence, petitioner filed the instant Petition for Review
on Certiorari alleging the following grounds:

I SPEAK OF, AND THE EXISTENCE THEREOF
WITH ALL DUE RESPECT, THE
HONORABLE COURT FAILED TO
CONSIDER THAT THE PETITION HEREIN
DOES NOT MERELY INQUIRE UPON THE
RELATIVE WEIGHT OF THE EVIDENCE
PRESENTED BY THE PARTIES, BUT IS
ANCHORED ON MANIFESTLY
ERRONEOUS CONCLUSIONS ON THE PART
OF THE NLRC ARISING FROM GROSS
MISAPPREHENSION OF THE FACTS
OBTAINING IN THE CASE. AMONG
OTHERS, IT WAS GRAVE ERROR TO
CONCLUDE THAT THERE WAS NO
PATENT ABUSE OF THE SICK LEAVE
PRIVILEGE ON THE PART OF THE
PRIVATE RESPONDENT BECAUSE THE
MEDICAL CERTIFICATES SHE PRESENTED
WERE NOT FALSE, FORGED, OR ALTERED
TOTALLY DISREGARDING THE FACT
THAT ABUSE OF SICK LEAVE PRIVILEGE
IS A CAUSE SEPARATELY ENUMERATED
UNDER THE RULES AS A GROUND FOR
DISCIPLINARY ACTION.
II
WITH ALL DUE RESPECT, THE
HONORABLE COURT FAILED TO
CONSIDER THAT THE CONCLUSIONS OF
THE NLRC ARE BEREFT OF ANY LEGAL
OR FACTUAL BASES AS THERE WERE
212 | P a g e
LEGALLY NO MEDICAL CERTIFICATES TO
ARE PURE AND SIMPLE HEARSAY, HENCE
COULD NOT BE VALIDLY RELIED UPON
OR INVOKED BY THE PRIVATE
RESPONDENT TO SUPPORT HER DEFENSE
EVEN SUPPOSING TECHNICAL RULES ON
EVIDENCE COULD BE RELAXED IN
LABOR PROCEEDINGS. [15]
Petitioner argues that the NLRCs conclusions that private
respondent had not committed a patent abuse of sick leave
privileges and that her dismissal was illegal are utterly
without any factual or legal basis; that
the NLRCs conclusion that the dismissal was illegal was
merely based: (1) on the evidence of private respondent; (2)
on medical certificates which are clearly hearsay and of no
probative value whatsoever; and (3) on medical certificates
which, even supposing could be considered, simply failed to
cover the period of the leave requested and set forth
implausible diagnoses.
Petitioner claims that the CA as well as the NLRC failed to
resolve the issue of whether or not the medical certificate
should be given any credence at all; that it had presented
four witnesses which included their three medical doctors
who were subjected to cross-examinations, and yet credence
was given to private respondents hearsay evidence
consisting merely of a medical certificate by the latters
attending physician who was not even presented to testify;
that since the content of the medical certificate had been
rebutted and refuted by petitioners witnesses, the burden of
evidence is shifted to private respondent to show that the
medical certificate she submitted was competent, proper,
and sound which she failed to do.
Petitioner further claims that the CA erred in not finding that
private respondent committed a patent abuse of sick leave
privileges which does not arise solely from forgery or
alteration of the medical certificate, but on the fact that an
employee had frequently and incorrigibly absented herself
and then applied for sick leave with absolute impunity
armed with medical certificates which not only failed to
cover the entire length of the leave but also with implausible
diagnoses; that excluding private respondents unauthorized
absences in 1989, she had accumulated 93 days of sick leave
from January to July 1989 and 115 days of sick leave in
1988, thus, how can the conclusion be drawn that there was
213 | P a g e
no patent abuse of sick leave privileges; and that her
unauthorized absence for which she was terminated all
occurred in 1989, thus, the CA erred in saying that petitioner
may not rely on the previous absences of respondent in 1978
and 1982 to justify private respondents dismissal.
We find the petition meritorious. Private respondent
was validly dismissed by petitioner. It must be borne in
mind that the basic principle in termination cases is that the
burden of proof rests upon the employer to show that the
dismissal is for just and valid cause and failure to do so
would necessarily mean that the dismissal was not justified
and, therefore, was illegal.[16] For dismissal to be valid, the
evidence must be substantial and not arbitrary and must be
founded on clearly established facts.[17] We find that
petitioner had discharged this burden.
Under petitioners Department Order No. ADM-79-02,
for the absence due to an alleged illness to be considered
unauthorized, without pay, and subject to disciplinary
action, it must be shown that the medical certificate is
forged, altered as to the date and contents, false as to the
facts stated therein, issued by a doctor not qualified to attend
to the patients illness, and there is patent abuse of sick leave
privileges. The penalty for three offenses of unauthorized
absences committed within the three-year period is
dismissal.
Private respondents unconfirmed absences from June
28 to July 14, 1989 is the crucial period in this particular
case.
The Labor Arbiter and the NLRC found that private
respondent was illegally dismissed by petitioner. Such
finding was affirmed by the CA. They all concluded that the
medical certificate which private respondent presented did
not fall under the circumstances enumerated in Department
Order No. ADM-79-02, and there was no patent abuse of
sick leave privileges, thus, there was no basis for petitioners
doctors not to confirm her sick leave and consider the same
unauthorized.
The jurisdiction of this Court in a petition for review
on certiorari is limited to reviewing only errors of law, not
214 | P a g e
of fact, unless the factual findings being assailed are not
supported by evidence on record or the impugned judgment
is based on a misapprehension of facts.[18] We find that those
exceptions are present in the instant case.
We find that petitioner had sufficiently established
that private respondent committed a patent abuse of her sick
leave privileges which is one of the grounds listed in
Department Order No. ADM-79-02 for disciplinary action.
Private respondent was absent on June 25, 1989 and
the reason given was sore eyes. She was then absent from
June 25 to July 14, 1989. When she reported for work on
July 15, 1989, she went to petitioners doctor, Dr.
Benito Dungo, for confirmation of her leave of absence and
presented a medical certificate[19] from her attending
physician, Dr. Manuel C. Damian of Tanauan Batangas,
who certified that she had been under his professional care
from June 25 to July 12, 1989 for systemic viral disease.
Dr. Dungo confirmed private respondents leave of
absence from June 25 to 27, 1989 only and did not confirm
her leave from June 28 to July 14, 1989 for the following observed by Dr. Dungo, sore eyes was never mentioned
reasons: (a) systemic viral disease indicated in the medical therein.
certificate does not warrant such a very long time of rest and
recuperation; (b) if she really had an infection, the logical Moreover, in the medical progress note[21] of Dr.
recourse is for the attending physician to conduct a chest x- Damian dated October 10, 1989 attached to private
ray and blood examination to determine the cause of the respondents position paper submitted before the Labor
prolonged fever, but such was not made; (c) if she was really Arbiter, it was shown that private respondent was seen by
ill for such a long time, she would have already been Dr. Damian on June 25, 1989 at 9:00 a.m. and her
confined in a hospital for treatment as petitioner has temperature was 40 degrees and she was complaining of
standing agreements with various hospitals to provide severe headache and body pain. It would appear that there
immediate medical assistance free of charge; (d) she was a discrepancy between the reason given when she called
displayed no residue of symptoms of flu, thus casting doubt in sick on June 25, 1989 and her complaints when she
on the veracity of her claim; (e) she called in sick on June consulted Dr. Damian on the same day. In fact, when private
25, 1989 that she was suffering from sore eyes but her respondent was asked on cross-examination why sore eyes
medical certificate made no mention of such condition; and was never mentioned in her medical certificate, all that she
(f) her medical records reveal a pattern of abuse of sick could say was the diagnosis was systemic viral
leave privileges.[20] disease, sama-sama na lahat.[22]

Private respondents reason for her absence on June The medical certificate issued by Dr. Damian showed
25, 1989 was sore eyes, however the medical certificate that that private respondent was under his professional care from
she presented for her prolonged absence from June 25 June 25 to July 12, 1989. However, the medical progress
to July 14, 1989 was systemic viral disease and as correctly note dated October 10, 1989of the same doctor showed that

215 | P a g e
private respondent consulted him only on June 25, 27, and
29, 1989. It was never mentioned that Dr. Damian had seen
private respondent after June 29, 1989. Thus, there was even
a discrepancy between the medical certificate dated July 13,
1989 and the medical progress note as to the time frame that
private respondent was seen by Dr. Damian. The medical
certificate did not cover private respondents absences
from July 13 to 14, 1989 and she only reported for work
on July 15, 1989.
It bears stressing that from the time private respondent
called in sick on June 25, 1989 due to sore eyes, she never
called up petitioner again until she reported for work on July
15, 1989. She never went to petitioners doctors for them to
verify her sickness.
Private respondent had committed the first two
offenses of unauthorized absences in the same year. First,
she did not report for work from March 19 to 29,
1989 without notice to petitioner, thus her absence was
treated as unauthorized and considered her first offense for
which she was penalized with suspension. Second, she again
216 | P a g e
did not report for work from June 5 to 13, 1989 and when
she reported for work and presented her medical certificate,
it covered the period from June 5 to 8, 1989 only but she did
not report for work until June 14, 1989. Petitioners doctor
did not confirm her absences from June 11 to 13, 1989, thus,
the same was considered unauthorized and her second
offense for which she was penalized again with
suspension. These two unauthorized absences together with
her third unauthorized absences committed from June 28
to July 14, 1989 are sufficient bases for petitioners finding
that private respondent patently abused her sick leave
privileges.
Previous infractions may be used as justification for
an employees dismissal from work in connection with a
subsequent similar offense.[23] Moreover, it is in petitioners
rules and regulations that the same offense committed within
the three-year period merits the penalty of dismissal. The
CAs finding that petitioner may not rely on the previous
absences of private respondent in 1978 and 1982 to show
abuse of sick leave privileges has no basis since private
respondent was dismissed for committing her three
unauthorized absences all in 1989.
It had also been established by Dr. Dungos testimony
that private respondents medical record showed that she did
not go to the clinic for consultation as she would only
present a medical certificate and get a clearance for her sick
leave;[24] that the same medical record showed her absences
in 1989 as follows: (1) From April 27 to May 4 due to
urinary tract infection and she submitted a medical
certificate;[25] (2) From May 5 to 14 due to back pain;[26] (3)
From May 20 to 21 due to migraine;[27] (4) June 5 to 13 due
to gastroenteritis (penalized as her second offense); (5) June
15 to 24 due to conjunctivitis and submitted a medical
certificate;[28] and (6) June 25 to July 14, 1989 due to
systemic viral disease with medical certificate (her third
offense penalized with dismissal). Private respondent had
incurred a total absence of 85 days from January to October
1989;[29] and 115 days in 1988.[30] It had also been
established that petitioners doctors confirmed most of her
sick leave out of compassion[31] and that her medical records
217 | P a g e
showed that there were several warnings given her regarding
her unconfirmed sick leave.[32]
As petitioner stated in its pleadings, it is a
telecommunication service company which provides the
country with various telecommunication services and
facilities. Its operations are a vital part to many transactions
all over the country and abroad, and private respondent was
one of its telephone operators who used to connect all these
calls. Thus, her patent abuse of her sick leave privileges is
detrimental to petitioners business.
While it is true that compassion and human
consideration should guide the disposition of cases involving
termination of employment since it affects one's source or
means of livelihood, it should not be overlooked that the
benefits accorded to labor do not include compelling an
employer to retain the services of an employee who has been
shown to be a gross liability to the employer. The law in
protecting the rights of the employees authorizes neither
oppression nor self-destruction of the employer.[33] It should
be made clear that when the law tilts the scale of justice in
 [G.R. No 140692. November 20, 2001]
favor of labor, it is but a recognition of the inherent
economic inequality between labor and management. The
intent is to balance the scale of justice; to put the two parties ROGELIO C. DAYAN, petitioner, vs. BANK OF THE
PHILIPPINE ISLANDS, XAVIER LOINAZ,
on relatively equal positions. There may be cases where the
OSCAR CONTRERAS, and GERLANDA DE
circumstances warrant favoring labor over the interests of CASTRO, respondents.
management but never should the scale be so tilted if the
DECISION
result is an injustice to the
VITUG, J.:
employer. Justitia nemini neganda est (Justice is to be
The petition for review seeks the reversal of the decision and
denied to none).[34] resolution, dated 30 April 1999 and 30 August 1999, respectively, of
the Court of Appeals in CA-G.R. SP No. 51421 reversing the
resolution of 30 August 1996 of the National Labor Relations
WHEREFORE, the instant petition Commission ("NLRC").
is GRANTED. The Decision dated July 31, 2002 and the Petitioner Rogelio C. Dayan started his employment on 30 June
1956 with the Commercial Bank and Trust Company. He rose from the
Resolution dated February 7, 2003 of the Court of Appeals ranks from that of a mere clerk to FX clerk in 1957, FX Bookkeeper in
in CA-G.R. SP No. 51060 are herebyREVERSED and SET 1959, Chief Bookkeeper in 1964, Supervisor of the Administrative
Department in 1969, and Supervisor of the Reconciliation Department
ASIDE. The complaint in 1978, which latter position he continuously occupied until
respondent Bank of the Philippine Islands acquired and absorbed the
of Amparo Balbastro is DISMISSED. Commercial Bank and Trust Company. In 1981, Dayan was promoted
Administrative Assistant by respondent bank in its centralized
accounting office. He held several positions thereafter - Assistant
No costs. Manager of Internal Operations in 1983, Assistant Manager of
Correspondent Bank in 1988, Assistant Manager of Branch Operations
in 1990, Assistant Manager of the Supplies Inventory in 1991, and
then Senior Assistant Manager of the Supplies Inventory in 1991-
SO ORDERED. 1992. In addition to the series of promotions, Dayan was the recipient
of various commendations.
Sometime in December 1991, the post of Purchasing Officer
became vacant as its former occupant had retired. The vacated position
218 | P a g e
was offered to Dayan which he initially declined but, due to the
insistence of his superiors, he later accepted on a temporary basis in
February 1993.
On 10 June 1993, Assistant Vice President Gerlanda E. De Castro
of the bank, in a memorandum of even date, placed petitioner under
suspension. The full text of the communication read:
"Date : June 10, 1993
For : SAM Rogelio C. Dayan
RE : SUSPENSION
----------------------------------------------------------------------------
------------------------------------
"This is to advice that you are placed under suspension effective
immediately, until further notice, due to matters/issues presented to
you during our meeting this morning with SVP OL Contreras, VP EO
Adre, SM VGuillermo and myself."[1]
It would appear that respondent bank had earlier conducted interviews
and took statements given by bank suppliers, forwarders and bank
employees regarding certain supposed malpractices committed by
petitioner during his term as a purchasing officer of the bank. The
report,[2] dated 07 July 1993, signed and noted by Rodolfo D. Bernejo
and Victor M. Guillermo, Manager and Senior Manager, respectively,
contained the alleged misconduct committed by petitioner, such as in
asking for a 5% commission on purchase orders, "donations totaling
P5K" to pay off his medical bills, and a bottle of cognac from Alta
Printing Services, as well as for overpricing the BPI Family Bank's
passbook, soliciting a gift (refrigerator) for his daughter's wedding
from Bind Master Enterprises and JLI Transport, and obtaining gifts
from suppliers on the occasion of his birthday in March 1993. The
219 | P a g e
report also made negative findings and observations about his work
performance.
On 14 June 1993, petitioner wrote a memorandum to the bank
narrating what had transpired in his meeting with the bank on 10 June
1993 where he denied all the accusations against him and contested his
preventive suspension. In another 11-page letter of 20 August 1993 to
the Bank, he refuted, point by point, the charges leveled against
him. His denials and plea for compassion notwithstanding, petitioner
was dismissed by respondent bank via a notice of termination, dated
25 October 1993, signed by AVP Gerlanda de Castro.[3] In a letter of
confession, dated 28 October 1993, petitioner ultimately admitted his
infractions and instead asked for financial assistance.[4] He, at the same
time, executed an undated "Release Waiver and Quitclaim"
acknowledging receipt of P400,000.00 financial assistance from the
bank and thereby releasing and discharging it, as well as its officers,
stockholders and directors, including the bank "Retirement Plan," from
any action or claim arising from his employment with the bank and
membership in the retirement plan.[5]
Subsequently, however, petitioner claimed that the letter and the
quitclaim were signed by him under duress. On 14 February 1994, he
filed a case for Illegal Dismissal and Illegal Suspension, with a prayer
for an award of retirement benefits, before the Labor Arbiter.
In his decision of 30 June 1995, the Labor Arbiter upheld the
validity of the dismissal of petitioner based on loss of trust and
confidence and denied his claim for retirement benefits and damages;
thus:
"All told, in the light of a justifiable cause for dismissal,
complainant as supervisory/managerial employee, having
breached the trust and confidence reposed on him by
respondent and substantial compliance to due process,
complainant's dismissal is deemed valid and legal.
"Consequently, his claim for retirement benefits and damages
having no factual or legal leg to stand on, must and is hereby
DENIED.
"ACCORDINGLY, premises considered, the instant case is
hereby DISMISSED for lack of merit."[6]
On appeal, the NLRC reversed the decision of the labor arbiter
and declared the dismissal to be illegal on the ground that petitioner
was denied due process ratiocinating that a hearing should have been
afforded petitioner for a chance to confront the witnesses against
him. In its ruling of 30 August 1996, the NLRC concluded:
"IN VIEW OF THE FOREGOING, respondent is hereby
ordered to reinstate complainant Rogelio Dayan to his former
position without loss of seniority rights and other privileges
appurtenant thereto with full backwages from the time his
salary was withheld from him up to [the] time of his
retirement, less the amount already received by him."[7]
Respondent bank filed with this Court, docketed G.R. No.
127115, a petition for certiorari questioning the NLRC decision. The
Court referred the petition to the Court of Appeals. The appellate court
rendered its decision on 30 April 1999 and resolution of 30 August
1999, reversing the judgment of the NLRC.
In its petition for review before this Court, petitioner argues that
the Court of Appeals has wrongly relied on unsworn statements taken
by the bank from its contractual employees. Petitioner believes that the
factual conclusions of the NLRC which has acquired expertise on the
matters entrusted to it should have instead been respected by the
appellate court.
The Court is not convinced that the Court of Appeals has
committed an error in holding to be justifiable the dismissal of
petitioner from respondent bank. The pieces of evidence on the
220 | P a g e
malpractices attributed to petitioner are simply too numerous to be
ignored.
Contrary to petitioner's claim, the suppliers who complained about
the mulcting activities did, in fact, execute affidavits, such as the
sworn statements of Alberto Tadeo, owner of Alta Printing Services,
and Jesus Ibe, owner of JLI Transport, which formed part of the
records of his case.[8] Alfredo Baldonado, an employee under the
supervision of petitioner, himself affirmed under oath the veracity of
the suppliers' complaint and narrated still other incidents of
irregularities which had come to his personal knowledge during the
time he worked as a purchasing clerk under petitioner. The charges
against petitioner were supported and backed up by an audit report
conducted by the bank's audit team.
Petitioner bewails his preventive suspension. The policy of
preventively suspending an employee under investigation for charges
involving dishonesty is an acceptable precautionary measure in order
to preserve the integrity of vital papers and documents that may be
material and relevant to the case and to which he, otherwise, would
have access by virtue of his position.[9]
It would appear that it was only after an exhaustive investigation
that respondent bank finally decided to terminate the services of
petitioner on 25 October 1993 via a "Notice of Termination."
The Court of Appeals was convinced that petitioner's dismissal
had been justified under Article 282 of the Labor Code. It held:
"`(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative.'
"x x x x x x x x x
"The statements of witnesses against respondent amply
established that respondent was guilty of malfeasance against
his employer. Thus, Alberto Tadeo, a supplier of printing
materials for the company, attested that respondent demanded
a 5% commission, a `donation' of P2,000.00 and a bottle of
cognac for his birthday. Witness Jesus Ibe further testified that
respondent demanded a refrigerator for his daughter's wedding
and that when Ibe declined, respondent offered to shoulder half
of the cost which he proposed to pay in installments to
Ibe. Witness George Chee, another supplier, testified that
respondent also asked for a refrigerator for his daughter's
wedding. These statements are apart from the verbal
complaints of other suppliers against respondent for extortion
of a P5,000.00 to P7,000.00 commission.
"The suppliers' accounts have been substantially corroborated
by respondent's own subordinates who directly observed his
dealings with petitioner's suppliers. Among these are
petitioner's purchasing clerk, Alfredo Baldonado, respondent's
own secretary Sharon Lopez, and typist Joel Lim, all of whom
testified that respondent asked for gifts from suppliers. The
bank's janitor also testified that respondent deliberately
delayed the facilitation of the documents of suppliers, by
among others, asking for a massage while suppliers waited for
the signing of vouchers.
"These sworn statements are replete with details, which to the
mind of this court, are clear indications of the veracity of the
witness' statements. They evince substantive and reasonable
causes that would justify dismissal on the ground of loss of
trust and confidence.
"Juxtaposed with respondent's sweeping denials and
imputations of evil motives against these witnesses on the
theory that the suppliers, his subordinates and even the audit
team which conducted the investigation were all engaged in a
221 | P a g e
grand conspiracy to bring him down, the witnesses' statements
are certainly more believable. Viewed together with
respondent's own letter admitting his liability, it is easy to see
that petitioner had reasonable basis to lose confidence in
respondent."[10]
Petitioner was not just a rank and file employee. He held the
critical posts of Senior Assistant Manager of the Supplies Inventory
and Purchasing Officer of the bank at the time of his dismissal,
handling fiduciary accounts and transactions and dealing with the
bank's suppliers. His positions carried authority for the exercise of
independent judgment and discretion[11]characteristic of sensitive posts
in corporate hierarchy where a wide latitude could be supposed in
setting up stringent standards for continued employment.
A bank, its operation being essentially imbued with public
interest, owes great fidelity to the public it deals with. In turn, it cannot
be compelled to continue in its employ a person in whom it has lost
trust and confidence and whose continued employment would patently
be inimical to the bank interest. The law, in protecting the rights of
labor, authorized neither oppression nor self-destruction of an
employer company which itself is possessed of rights that must be
entitled to recognition and respect.[12]
The Court of Appeals, in addressing the issue of lack of due
process raised by petitioner, ruled:
"Instead, what he vigorously protests is the alleged lack of due
process which attended his dismissal. He asserts that he was
not fully given the chance to air his side.
"We rule in favor of respondent on this point.
"The law requires that the employer must furnish the worker
sought to be dismissed with two written notices before
termination of an employee can be legally effected: (1) notice
which apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) the
subsequent notice which informs the employee of the
employer's decision to dismiss him. (International
Pharmaceuticals, Inc. v. National Labor Relations
Commission, 287 SCRA 213 [1998]) Apart from this, a
hearing where the employee can explain his side is also
necessary.
"In the case at bench, it may be recalled that after complaints
were received by the management, respondent was called to a
meeting on June 10, 1993, where he denied charges against
him. Right after the meeting, he was given a notice of
preventive suspension. During the period of his suspension, the
bank's audit team conducted an investigation and took
statements of witnesses against respondent. Respondent also
filed his written explanation. After the investigation,
respondent was given a notice of dismissal.
"From this sequence of events, it is clear that petitioner failed
to comply with the notice and hearing requirement of the
law. The preliminary meeting between respondent and his
superiors is not sufficient compliance with these requirements,
as it was, as observed by the NLRC, merely exploratory and
no witnesses were presented against him. It is doctrinal that a
consultation or conference with the employee is not a
substitute for the actual observance of notice and
hearing. (Pepsi Cola Bottling Co. v. National Labor Relations
Commission, 210 SCRA 276 [1992]; Equitable Banking
Corporation v. National Labor Relations Commission, supra.)
Moreover, where the employee denies charges against him, a
hearing is necessary to thresh out any doubt. (Roche
222 | P a g e
[Philippines] v. National Labor Relations Commission, 178
SCRA 386 [1989])
"Settled is the rule that the twin requirements of notice and
hearing are indispensable for a dismissal to be validly
effected. (Falguera v. Linsangan, 251 SCRA 365
[1995] However, when the dismissal is effected for a just and
valid cause, as in this case, the failure to observe procedural
requirements does not invalidate or nullify the dismissal of an
employee. Hence, if the dismissal of an employee is for a just
and valid cause but he is not accorded due process, the
dismissal shall be upheld but the employer must be sanctioned
for non-compliance with the requirements of due
process. (Agao v. National Labor Relations
Commission, supra.)
"The dismissal of an employee must be for a just or authorized
cause and after due process. Petitioner failed to comply with
the second requirement. For such omission, an appropriate
sanction should be imposed which generally varies depending
upon the facts of each case and gravity of the
omission. (Mabaylan v. National Labor Relations Commission,
203 SCRA 570 [1991]; Wenphil Corporation v. National
Labor Relations Commission, 170 SCRA 69 [1994] In the case
at bench, we rule that the amount of P5,000.00 is ample
indemnity under the circumstances."[13]
The now prevailing rule has recently been handed down in Ruben
Serrano vs. NLRC.[14] The Court has there clarified that -
"Even in cases of dismissal under Art. 282, the purpose for the
requirement of notice and hearing is not to comply with Due
Process Clause of the Constitution. The time for notice and
hearing is at the trial stage. Then that is the time we speak of
notice and hearing as the essence of procedural due
process. Thus, compliance by the employer with the notice
requirement before he dismisses an employee does not
foreclose the right of the latter to question the legality of his
dismissal. As Art. 277(b) provides, `Any decision taken by the
employer shall be without prejudice to the right of the worker
to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor
Relations Commission.'
"Indeed, to contend that the notice requirement in the Labor
Code is an aspect of due process is to overlook the fact that
Art. 283 had its origin in Art. 302 of the Spanish Code of
Commerce of 1882 which gave either party to the employer-
employee relationship the right to terminate their relationship
by giving notice to the other one month in advance. In lieu of
notice, an employee could be laid off by paying him
a mesada equivalent to his salary for one month. This
provision was repealed by Art. 2270 of the Civil Code, which
took effect on August 30, 1950. But on June 12, 1954, R.A.
No. 1052, otherwise known as the Termination Pay Law, was
enacted reviving the mesada. On June 21, 1957, the law was
amended by R.A. No. 1787 providing for the giving of
advance notice or the payment of compensation at the rate of
one-half month for every year of service.
"The Termination Pay Law was held not to be a substantive
law but a regulatory measure, the purpose of which was to give
the employer the opportunity to find a replacement or
substitute, and the employee the equal opportunity to look for
another job or source of employment. Where the termination
of employment was for a just cause, no notice was required to
223 | P a g e
be given to the employee. It was only on September 4, 1981
that notice was required to be given even where the dismissal
or termination of an employee was for cause. This was made in
the rules issued by the then Minister of Labor and Employment
to implement B.P. Blg. 130 which amended the Labor
Code. And it was still much later when the notice requirement
was embodied in the law with the amendment of Art. 277(b)
by R.A. No. 6715 on March 2, 1989. It cannot be that the
former regime denied due process to the employee. Otherwise,
there should now likewise be a rule that, in case an employee
leaves his job without cause and without prior notice to his
employer, his act should be void instead of simply making him
liable for damages.
"The third reason why the notice requirement under Art. 283
can not be considered a requirement of the Due Process Clause
is that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in
termination of employment for a just cause under Art. 282
(i.e., serious misconduct or willful disobedience by the
employee of the lawful orders of the employer, gross and
habitual neglect of duties, fraud or willful breach of trust of the
employer, commission of crime against the employer or the
latter's immediate family or duly authorized representatives, or
other analogous cases)."[15]
In fine, the lack of notice and hearing is considered as being a
mere failure to observe a procedure for the termination of employment
which makes the dismissal ineffectual but not necessarily illegal. The
procedural infirmity is then remedied by ordering the payment to the
employee his full backwages from the time of his dismissal until the
court finally rules that the dismissal has been for a valid cause. Re-
examining the Wenphil doctrine, the Court has concluded:
"Not all notice requirements are requirements of due
process. Some are simply part of a procedure to be followed
before a right granted to a party can be exercised. Others are
simply an application of the Justinian precept, embodied in the
Civil Code, to act with justice, give everyone his due, and
observe honesty and good faith toward one's fellowmen. Such
is the notice requirement in Arts. 282-283. The consequence of
the failure either of the employer or the employee to live up to
this precept is to make him liable in damages, not to render his
act (dismissal or resignation, as the case may be) void. The
measure of damages is the amount of wages the employee
should have received were it not for the termination of his
employment without prior notice. If warranted, nominal and
moral damages may also be awarded.
"x x x x x x x x x
"In sum, we hold that if in proceedings for reinstatement under
Art. 283, it is shown that the termination of employment was
due to an authorized cause, then the employee concerned
should not be ordered reinstated even though there is failure to
comply with the 30-day notice requirement. Instead, he must
be granted separation pay in accordance with Art. 283, to wit:
"In case of termination due to the installation of labor-
saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one
month for every year of service, whichever is
higher. In case of retrenchment to prevent losses and
in cases of closures or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the separation
224 | P a g e
pay shall be equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six months
shall be considered one (1) whole year.
"If the employee's separation is without cause, instead of being
given separation pay, he should be reinstated. In either case,
whether he is reinstated or only granted separation pay, he
should be paid full backwages if he has been laid off without
written notice at least 30 days in advance.
"On the other hand, with respect to dismissals for cause under
Art. 282, if it is shown that the employee was dismissed for
any of the just causes mentioned in said Art. 282, then, in
accordance with that article, he should not be
reinstated.However, he must be paid backwages from the time
his employment was terminated until it is determined that the
termination of employment is for a just cause because the
failure to hear him before he is dismissed renders the
termination of his employment without legal effect.
"WHEREFORE, the petition is GRANTED and the resolution
of the National Labor Relations Commission is MODIFIED by
ordering private respondent Isetann Department Store, Inc. to
pay petitioner separation pay equivalent to one (1) month pay
for every year of service, his unpaid salary, and his
proportionate 13th month pay, in addition, full backwages
from the time his employment was terminated on October 11,
1991 up to the time the decision herein becomes final. For this
purpose, this case is REMANDED to the Labor Arbiter for
computation of the separation pay, backwages, and other
monetary awards to petitioner."[16]
 Although his reinstatement would then be out of the question,
petitioner could have been entitled, nevertheless, to backwages from
the time of his termination on 25 October 1993 until his retirement on
24 March 1994 or a period of five (5) months had it not been for his
duly executed letter of 28 October 1993 and "Release, Waiver and
Quitclaim," acknowledging receipt of P400,000.00 from the bank,
thereby releasing and discharging it, as well as its officers,
stockholders, directors and the Bank Retirement Plan, from any action
or claim arising from his employment with the bank and membership
in the Retirement Plan. The documents read:
"Dear Sir/Madam:
"I received your letter dated 25 October 1993 terminating my
employment for the reason stated therein. I admit the fault
attributed to me and accept all the consequences of my
infraction, including the forfeiture of whatever benefits and
interests I may have under the Bank's Retirement Plan and
policies, without any reservation.
"I however appeal for humanitarian considerations and request
Management to grant me financial assistance to help me
endure these difficult times. I understand that whatever amount
Management might grant me will be purely out of its
generosity and not because of any legal obligation.
"Thank you."[17]
The document of "Release, Waiver and Quitclaim" reads:
"THAT I, ROGELIO C. DAYAN, of legal age, Filipino citizen
and a resident of 50 Bulusan Street, Quezon City, Metro
Manila, acknowledge that my employment with Bank of the
Philippine Islands (hereinafter called the `Bank') validly
225 | P a g e
ceased effective 25 October 1993, and that I have received a
financial assistance from the Bank in the amount of Four
Hundred Thousand Pesos (P400,000.00), Philippine currency.
"Furthermore, and in consideration of the foregoing
"1. I acknowledge the value of the opportunity afforded to me
to be of service to the Bank.
"2. I release, remise and forever discharge the Bank, its
stockholders, officers, directors, agents or employees, and the
Bank's Retirement Plan and its trustee, from any action, claim
for sum of money, or other obligations arising from all
incidents of my employment with the Bank and membership in
the aforesaid Retirement Plan or the cessation of such
employment or membership.
"3. I acknowledge that I have received all amounts that are
now or in the future may be due me from the Bank.
"4. I will not at any time, in any manner whatsoever, directly
or indirectly engage in any activity prejudicial to the interest of
the Bank, its stockholders, officers, directors, agents or
employees, and will not disclose any confidential information
concerning the business of the Bank.
"5. I acknowledge that I have no cause of action, compliant,
case or grievance whatsoever against the Bank, its
stockholders, officers, directors, agents or employees, nor
against the Bank's Retirement Plan and its trustee, in respect of
any matter incident to or arising out of my employment with
the Bank or membership in the aforesaid Retirement Plan, or
the cessation of such employment or membership. I further
warrant that I will institute no action against the Bank, its
stockholders, officers, directors, agents or employees nor
against the Bank's Retirement Plan and its trustee, and will not
continue to prosecute any pending action which I may have
filed or which may have been filed on my behalf against them.
"6. I manifest that the grant to me by the Bank of the financial
assistance hereinbefore stated shall not be taken by me, my
heirs or assigns as a confession or admission of liability on the
part of the Bank, its stockholders, officers, directors, agents or
employees for any matter, cause, demand or claim for damage
which I may have against any or all of them. I confirm that the
Bank has given to me the aforesaid financial assistance not as
a matter of legal obligation, but as a pure act of generosity.
"7. I agree that the Bank may bring action to seek an award for
damages resulting from my breach of this release, waiver and
quitclaim. Such award shall include but not be limited to the
return of the financial assistance given to me by the Bank.
"8. I finally declare that I have read this entire document, the contents
of which have been explained to me and which I acknowledge to
understand, and that the entire release, waiver and quitclaim hereby
given are made by me willingly, voluntarily and with full knowledge
of my rights under the law."[18]
Petitioner would now claim that the letter and quitclaim,
aforequoted, were obtained through deception and coercion.
The contention hardly persuades.
Far from having been pressured into executing the documents, it
would appear that petitioner even haggled and pled for some
consideration from respondent bank invoking his longevity of service
in the company. Sicangco vs.NLRC[19]explained -
226 | P a g e
"Quitclaims executed by employees are commonly frowned
upon as contrary to public policy and ineffective to bar claims
for the full measure of the worker's legal rights. Neither does
acceptance of benefits estop the employee from prosecuting
his employer for unfair labor practice acts. The reason is
plain. Employer and employee obviously do not stand on the
same footing.
"Nevertheless, the above rule is not without exception, as this
Court held in Periquet v. NLRC:
"`Not all waivers and quitclaims are invalid as against public
policy. If the agreement was voluntarily entered into and
represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of
mind. It is only where there is clear proof that the waiver was
wangled from an unsuspecting or gullible person, or the terms
of settlement are unconscionable on its face, that the law will
step in to annul the questionable transaction. But where it is
shown that the person making the waiver did so voluntarily,
with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding
undertaking."[20]
Petitioner was a managerial employee and held the rank of Senior
Assistant Manager with a vast experience behind him. As so aptly
observed by the Labor Arbiter
"Moreover, we do not believe that a person such as
complainant occupying a sensitive position after rising from
the ranks would be willing to compromise his future by
agreeing to execute a document highly prejudicial to his
interest. It was simply not a question of choosing between the
devil and the deep blue sea, but more of a case of one making
the most of worse situation. Complainant knew and was well
aware of the consequences of his act hence, his act of
repentance at the last moment to save his lost 37 years of
service."[21]
Surely, petitioner cannot now be allowed to renege on the
voluntary settlement of his claim with the bank.
WHEREFORE, the decision of the Court of Appeals reinstating
the decision of the Labor Arbiter and setting aside the NLRC's
decision is AFFIRMED.
SO ORDERED.
[G.R. No. 127598. January 27, 1999]
MANILA ELECTRIC COMPANY, petitioner, vs. THE
HONORABLE SECRETARY OF LABOR
LEONARDO QUISUMBING AND MERALCO
EMPLOYEES AND WORKERS ASSOCIATION
(MEWA), respondents.
DECISION
MARTINEZ, J.:
In this petition for certiorari, the Manila Electric Company
(MERALCO) seeks to annul the orders of the Secretary of labor dated
August 19, 1996 and December 28, 1996, wherein the Secretary
required MERALCO and its rank and file union- the Meralco Workers
Association (MEWA) to execute a collective bargaining agreement
227 | P a g e
(CBA) for the remainder of the parties 1992-1997 CBA cycle, and to
incorporate in this new CBA the Secretarys dispositions on the
disputed economic and non-economic issues.
MEWA is the duly recognized labor organization of the rank-and-
file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its
intention to re-negotiate the terms and conditions of their existing
1992-1997 Collective Bargaining Agreement (CBA) covering the
remaining period of two years starting from December 1, 1995 to
November 30, 1997.[1] MERALCO signified its willingness to re-
negotiate through its letter dated October 17, 1995[2] and formed a
CBA negotiating panel for the purpose. On November 10, 1995,
MEWA submitted its proposal[3] to MERALCO, which, in turn,
presented a counter-proposal. Thereafter, collective bargaining
negotiations proceeded. However, despite the series of meetings
between the negotiating panels of MERALCO and MEWA, the parties
failed to arrive at terms and conditions acceptable to both of them.
On April 23, 1996, MEWA filed a Notice of Strike with the
National Capital Region Branch of the National Conciliation and
Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE) which was docketed as NCMB-NCR-NS-04-
152-96, on the grounds of bargaining deadlock and unfair labor
practices. The NCMB then conducted a series of conciliation meetings
but the parties failed to reach an amicable settlement. Faced with the
imminence of a strike, MERALCO on May 2, 1996, filed an Urgent
Petition[4] with the Department of Labor and Employment which was
docketed as OS-AJ No. 0503[1]96 praying that the Secretary assume
jurisdiction over the labor dispute and to enjoin the striking employees
to go back to work.
The Labor Secretary granted the petition through its Order[5] of
May 8, 1996, the dispositive portion of which reads:
WHEREFORE, premises considered, this Office now assumes
jurisdiction over the labor dispute obtaining between the
parties pursuant to Article 263 (g) of the Labor
Code. Accordingly, the parties are here enjoined from
committing any act that may exacerbate the situation. To speed
up the resolution of the dispute, the parties are also directed to
submit their respective Position Papers within ten (10) days
from receipt.
Undersecretary Jose M. Espanol, Jr. is deputized to conduct
conciliation conferences between the parties to bridge their
differences and eventually hammer out a solution that is
mutually acceptable. He shall be assisted by the Legal Service.
SO ORDERED.
Thereafter, the parties submitted their respective memoranda and
on August 19, 1996, the Secretary resolved the labor dispute through
an Order,[6] containing the following awards:
ECONOMIC DEMANDS
Wage increase - P2,300.00 for the first year covering the
period from December 1, 1995 to November 30, 1996
- P2,200.00 for the second year covering
the period December 1, 1996 to November 30, 1997.
Red Circle Rate (RCR) Allowance- all RCR allowances
(promotional increases that go beyond the maximum range of
a job classification salary) shall be integrated into the basic
salary of employees effective December 1, 1995.
Longevity Allowance- the integration of the longevity
allowance into the basic wage is denied; the present policy is
maintained.
228 | P a g e
Longevity Increase- the present longevity bonus is maintained
but the bonus shall be incorporated into the new CBA.
Sick Leave- MEWAs demand for upgrading is denied; the
companys present policy is maintained. However, those who
have not used the sick leave benefit during a particular year
shall be entitled to a one-day sick leave incentive.
Sick leave reserve- the present reserve of 25 days shall be
reduced to 15 days; the employee has the option either to
convert the excess of 10 days to cash or let it remain as long as
he wants. In case he opts to let it remain, he may later on
convert it to cash at his retirement or separation.
Vacation Leave - MEWAs demand for upgrading denied & the
companys present policy is maintained which must be
incorporated into the new CBA but scheduled vacation leave
may be rounded off to one full day at a time in case of a
benefit involving a fraction of a day.
Union Leave- of MEWAs officers, directors or stewards
assigned to perform union duties or legitimate union activity is
increased from 30 to 40 Mondays per month.
Maternity, Paternity and Funeral leaves- the existing policy is
to be maintained and must be incorporated in the new CBA
unless a new law granting paternity leave benefit is enacted
which is superior to what the company has already granted.
Birthday Leave - unions demand is granted. If birthday falls on
the employees rest day or on a non-working holiday, the
worker shall be entitled to go on leave with pay on the next
working day.
Group Hospitalization & Surgical Insurance Plan (GHSIP) and
Health Maintenance Plan (HMP)- present policy is maintained
insofar as the cost sharing is concerned- 70% for the Company
and 30% for MEWA.
Health Maintenance Plan (HMP) for dependents - subsidized
dependents increased from three to five dependents.
Longevity Bonus- is increased from P140.00 to P200.00 for
every year of service to be received by the employee after
serving the Company for 5 years.
Christmas Bonus and Special Christmas Grant- MEWAs
demand of one month salary as Christmas Bonus and two
months salary as Special Christmas Grant is granted and to be
incorporated in the new CBA.
Midyear Bonus- one months pay to be included in the CBA.
Anniversary Bonus - unions demand is denied.
Christmas Gift Certificate - company has the discretion as to
whether it will give it to its employees.
Retirement Benefits:
a. Full retirement-present policy is maintained;
b. one cavan of rice per month is granted to retirees;
c. special retirement leave and allowance-present policy is
maintained;
229 | P a g e
d. HMP coverage for retirees- HMP coverage is
granted to retirees who have not reached the age
of 70, with MERALCO subsidizing 100% of the
monthly premium; those over 70 are entitled to
not more than 30 days of hospitalization at the
J.F. Cotton Hospital with the company
shouldering the entire cost.
e. HMP coverage for retirees dependents is denied
f. Monthly pension of P3,000.00 for each retiree is denied.
g. Death benefit for retirees beneficiaries is denied.
Optional retirement - unions demand is denied; present policy
is maintained; employee is eligible for optional retirement if he
has rendered at least 18 years of service.
Dental, Medical and Hospitalization Benefits- grant of all the
allowable medical, surgical, dental and annual physical examination
benefits, including free medicine whenever the same is not available at
the JFCH.
Resignation benefits- unions demand is denied.
Night work- union demand is denied but present policy must
be incorporated in CBA.
Shortswing- work in another shift within the same day shall be
considered as the employees work for the following day and
the employee shall be given additional four (4) hours straight
time and the applicable excess time premium if he works
beyond 8 hours in the other shift.
High Voltage allowance- is increased from P45.00 to P55.00
to be given to any employee authorized by the Safety Division
to perform work on or near energized bare lines & bus
including stockman drivers & crane operators and other crew
members on ground.
High Pole Allowance- is increased from P30.00 to P40.00 to
be given to those authorized to climb poles up to at least 60 ft.
from the ground. Members of the team including stockman
drivers, crane operators and other crew members on the
ground, are entitled to this benefit.
Towing Allowance- where stockmen drive tow trailers with
long poles and equipment on board, they shall be entitled to a
towing allowance of P20.00 whether they perform the job on
regular shift or on overtime.
Employees Cooperative- a loan of P3 M seed money is granted
to the proposed establishment of a cooperative, payable in
twenty (20) years starting one year from the start of operations.
Holdup Allowance- the union demand is denied; the present
policy shall be maintained.
Meal and Lodging Allowance- shall be increased effective
December 1, 1995 as follows:
Breakfast - from P25.00 to P35.00
Lunch - from P35.00 to P45.00
Dinner - from P35.00 to P45.00
Lodging - from P135.00 to P180.00 a night in all MERALCO
franchise areas
230 | P a g e
Payroll Treatment for Accident while on Duty- an employee
shall be paid his salary and allowance if any is due plus
average excess time for the past 12 months from the time of
the accident up to the time of full recovery and placing of the
employee back to normal duty or an allowance of P2,000.00,
whichever is higher.
Housing and Equity Assistance Loan- is increased
to P60,000.00; those who have already availed of the privilege
shall be allowed to get the difference.
Benefits for Collectors:
a. Company shall reduce proportionately the quota and
monthly average product level (MAPL) in terms
of equivalent bill assignment when an employee
is on sick leave and paid vacation leave.
b. When required to work on Saturdays, Sundays and
holidays, an employee shall receive P60.00 lunch
allowance and applicable transportation
allowance as determined by the Company and
shall also receive an additional compensation to
one day fixed portion in addition to lunch and
transportation allowance.
c. The collector shall be entitled to an incentive pay
of P25.00 for every delinquent account
disconnected.
d. When a collector voluntarily performs other work
on regular shift or overtime, he shall be entitled
to remuneration based on his computed hourly
 compensation and the reimbursement of actually
incurred transportation expenses.
e. Collectors shall be provided with bobcat belt bags
every year
f. Collectors cash bond shall be deposited under his
capital contribution to MESALA.
g. Collectors quota and MAPL shall be proportionately
reduced during typhoons, floods, earthquakes and
other similar force majeure events when it is
impossible for a collector to perform collection
work.
Political Demands:
a. Scope of the collective bargaining unit- the
collective bargaining unit shall be composed of
all regular rank-and-file employees hired by the
company in all its offices and operative centers
throughout its franchise area and those it may
employ by reason of expansion, reorganization or
as a result of operational exigencies.
b. Union recognition and security -
i. The union shall be recognized by the Company
as sole and exclusive bargaining representative
of the rank-and-file employees included in the
bargaining unit. The Company shall agree to
meet only with Union officers and its
authorized representatives on all matters
231 | P a g e
involving the Union and all issues arising from
the implementation and interpretation of the
new CBA.
ii. The union shall meet with the newly regularized
employees for a period not to exceed four (4)
hours, on company time, to acquaint the new
regular employees of the rights, duties and
benefits of Union membership.
iii. The right of all rank-and-file employees to join
the union shall be recognized in accordance
with the maintenance of membership principle
as a form of union security.
c. Transfer of assignment and job security-
i. No transfer of an employee from one position to
another shall be made if motivated by
considerations of sex, race, creed, political and
religious belief, seniority or union activity.
ii. If the transfer is due to the reorganization or
decentralization, the distance from the
employees residence shall be considered unless
the transfer is accepted by the employee. If the
transfer is extremely necessary, the transfer
shall be made within the offices in the same
district.
iii. Personnel hired through agencies or contractors
to perform the work done by covered
employees shall not exceed one month. If
 extension is necessary, the union shall be
informed. But the Company shall not
permanently contract out regular or permanent
positions that are necessary in the normal
operation of the Company.
d. Check off Union Dues- where the union increases
its dues as approved by the Board of Directors,
the Company shall check off such increase from
the salaries of union members after the union
submits check off authorizations signed by
majority of the members. The Company shall
honor only those individual authorizations signed
by the majority of the union members and
collectively submitted by the union to the
Companys Salary Administration.
e. Payroll Reinstatement- shall be in accordance with
Article 223, p. 3 of the Labor Code.
f. Union Representation in Committees- the union is
allowed to participate in policy formulation and
in the decision-making process on matters
affecting their rights and welfare, particularly in
the Uniform Committee, the Safety Committee
and other committees that may be formed in the
future.
Signing Bonus- P4,000.00 per member of the bargaining unit
for the conclusion of the CBA
Existing benefits already granted by the Company but which
are not expressly or impliedly repealed in the new agreement
232 | P a g e
shall remain subsisting and shall be included in the new
agreement to be signed by the parties effective December 1,
1995.
On August 30, 1996, MERALCO filed a motion for
reconsideration[7] alleging that the Secretary of Labor committed grave
abuse of discretion amounting to lack or excess of jurisdiction:
1. in awarding to MEWA a package that would cost at
least P1.142 billion, a package that is grossly excessive
and exorbitant, would not be affordable to MERALCO
and would imperil its viability as a public utility affected
with national interest.
2. in ordering the grant of a P4,500.00 wage increase, as
well as a new and improved fringe benefits, under the
remaining two (2) years of the CBA for the rank-and-file
employees.
3. in ordering the incorporation into the CBA of all
existing employee benefits, on the one hand, and those that
MERALCO has unilaterally granted to its employees by
virtue of voluntary company policy or practice, on the
other hand.
4. in granting certain political demands presented by the
union.
5. in ordering the CBA to be effective December 1995
instead of August 19, 1996 when he resolved the dispute.
MERALCO filed a supplement to the motion for reconsideration
on September 18, 1995, alleging that the Secretary of Labor did not
properly appreciate the effect of the awarded wages and benefits on
MERALCOs financial viability.
MEWA likewise filed a motion asking the Secretary of Labor to
reconsider its Order on the wage increase, leaves, decentralized filing
of paternity and maternity leaves, bonuses, retirement benefits,
optional retirement, medical, dental and hospitalization benefits, short
swing and payroll treatment. On its political demands, MEWA asked
the Secretary to rule its proposal to institute a Code of Discipline for
its members and the unions representation in the administration of the
Pension Fund.
On December 28, 1996, the Secretary issued an Order[8] resolving
the parties separate motions, the modifications of the August 19, 1996
Order being highlighted hereunder:
1) Effectivity of Agreement - December 1, 1995 to November
30, 1997.
Economic Demands
2) Wage Increase:
First year - P2,200.00 per month;
Second year - P2,200.00 per month.
3) Integration of Red Circle Rate (RCR) and Longevity
Allowance into Basic Salary -the RCR allowance shall be
integrated into the basic salary of employees as of August 19,
1996 (the date of the disputed Order).
4) Longevity Bonus - P170 per year of service starting from
10 years of continuous service.
5) Vacation Leave - The status quo shall be maintained as to
the number of vacation leave but employees scheduled
233 | P a g e
vacation may be taken one day at a time in the manner that
this has been provided in the supervisory CBA.
6) Sick Leave Reserve - is reduced to 15 days, with any excess
payable at the end of the year. The employee has the option to
avail of this cash conversion or to accumulate his sick leave
credits up to 25 days for conversion to cash at retirement or
separation from the service.
7) Birthday Leave - the grant of a day off when an
employees birthday falls on a non-working day is deleted.
8) Retirement Benefits for Retirees - The benefits granted shall
be effective on August 19, 1996, the date of the disputed order
up to November 30, 1997, which is the date the CBA expires
and shall apply to those who are members of the bargaining
unit at the time the award is made.
One sack of rice per quarter of the year shall be given to
those retiring between August 19, 1996 and November 30,
1997.
On HMP Coverage for Retirees- The parties maintain the
status quo, that is, with the Company complying with the
present arrangement and the obligations to retirees as is.
9) Medical, Dental and Hospitalization Benefits - The cost of
medicine unavailable at the J.F. Cotton Hospital shall be in
accordance with MERALCOs Memorandum dated September
14, 1976.
10) GHSIP and HMP for Dependents - The number of
dependents to be subsidized shall be reduced from 5 to 4
provided that their premiums are proportionately increased.
11) Employees Cooperative - The original award of P3
million pesos as seed money for the proposed Cooperative is
reduced to P1.5 million pesos.
12) Shortswing - the original award is deleted.
13) Payroll Treatment for Accident on Duty - Company
ordered to continue its present practice on payroll treatment for
accident on duty without need to pay the excess time the
Union demanded.
Political Demands:
14) Scope of the collective bargaining unit - The bargaining
unit shall be composed of all rank and file employees hired by
the Company in accordance with the original Order.
15) Union recognition and security - The incorporation of a
closed shop form of union security in the CBA; the
Company is prohibited from entertaining individuals or groups
of individuals only on matters that are exclusively within the
domain of the union; the Company shall furnish the union with
a complete list of newly regularized employees within a week
from regularization so that the Union can meet these
employees on the Unions and the employees own time.
16) Transfer of assignment and job security - Transfer is a
prerogative of the Company but the transfer must be for a valid
business reason, made in good faith and must be reasonably
234 | P a g e
exercised. The CBA shall provide that No transfer of an
employee from one position to another, without the employees
written consent, shall be made if motivated by considerations
of sex, race, creed, political and religious belief, age or union
activity.
17) Contracting Out - The Company has the prerogative to
contract out services provided that this move is based on valid
business reasons in accordance with law, is made in good faith,
is reasonably exercised and, provided further that if the
contracting out involves more than six months, the Union must
be consulted before its implementation.
18) Check off of union dues
In any increase of union dues or contributions for mandatory
activities, the union must submit to the Company a copy of its
board resolution increasing the union dues or authorizing such
contributions;
If a board resolution is submitted, the Company shall deduct
union dues from all union members after a majority of the
union members have submitted their individual written
authorizations. Only those check-off authorizations submitted
by the union shall be honored by the Company.
With respect to special assessments, attorneys fees, negotiation
fees or any other extraordinary fees, individual authorizations
shall be necessary before the company may so deduct the
same.
19) Union Representation in Committees - The union is
granted representation in the Safety Committee, the Uniform
Committee and other committees of a similar nature and
purpose involving personnel welfare, rights and benefits as
well as duties.
Dissatisfied, petitioner filed this petition contending that the
Secretary of Labor gravely abused his discretion:
1). . . in awarding wage increases of P2,200.00 for 1996
and P2,200.00 for 1997;
2) . . . in awarding the following economic benefits:
a. Two months Christmas bonus;
b. Rice Subsidy and retirement benefits for retirees;
c. Loan for the employees cooperative;
d. Social benefits such as GHSIP and HMP for
dependents, employees cooperative and
housing equity assistance loan;
e. Signing bonus;
f. Integration of the Red Circle Rate Allowance
g. Sick leave reserve of 15 days
h. The 40-day union leave;
i. High pole/high voltage and towing allowance;
and
j. Benefits for collectors
3) . . . in expanding the scope of the bargaining unit to all
regular rank and file employees hired by the company in all its
offices and operating centers and those it may employ by
reason of expansion, reorganization or as a result of
operational exigencies;
235 | P a g e
4) . . . in ordering for a closed shop when his original order for
a maintenance of membership arrangement was not questioned
by the parties;
5) . . . in ordering that Meralco should consult the union before
any contracting out for more than six months;
6) . . . in decreeing that the union be allowed to have
representation in policy and decision making into matters
affecting personnel welfare, rights and benefits as well as
duties;
7) . . . in ruling for the inclusion of all terms and conditions of
employment in the collective bargaining agreement;
8) . . . in exercising discretion in determining the retroactivity
of the CBA;
Both MEWA and the Solicitor General; on behalf of the Secretary
of Labor, filed their comments to the petition. While the case was also
set for oral argument on Feb 10, 1997, this hearing was cancelled due
to MERALCO not having received the comment of the opposing
parties. The parties were instead required to submit written
memoranda, which they did. Subsequently, both petitioner and private
respondent MEWA also filed replies to the opposing parties
Memoranda, all of which We took into account in the resolution of this
case.
The union disputes the allegation of MERALCO that the
Secretary abused his discretion in issuing the assailed orders arguing
that he acted within the scope of the powers granted him by law and by
the Constitution. The union contends that any judicial review is limited
to an examination of the Secretarys decision-making/discretion -
exercising process to determine if this process was attended by some
capricious or whimsical act that constitutes grave abuse; in the absence
of such abuse, his findings - considering that he has both jurisdiction
and expertise to make them - are valid.
The unions position is anchored on two premises:
First, no reviewable abuse of discretion could have attended the
Secretarys arbitral award because the Secretary complied with
constitutional norms in rendering the dispute award. The union posits
that the yardstick for comparison and for the determination of the
validity of the Secretarys actions should be the specific standards laid
down by the Constitution itself. To the union, these standards include
the State policy on the promotion of workers welfare,[9] the principle of
distributive justice,[10] the right of the State to regulate the use of
property,[11] the obligation of the State to protect workers, both
organized and unorganized, and insure their enjoyment of humane
conditions of work and a living wage, and the right of labor to a just
share in the fruits of production.[12]
Second, no reversible abuse of discretion attended the Secretarys
decision because the Secretary took all the relevant evidence into
account, judiciously weighed them, and rendered a decision based on
the facts and law. Also, the arbitral award should not be reversed given
the Secretarys expertise in his field and the general rule that findings
of fact based on such expertise is generally binding on this Court.
To put matters in proper perspective, we go back to basic
principles. The Secretary of Labors statutory power under Art. 263 (g)
of the Labor Code to assume jurisdiction over a labor dispute in an
industry indispensable to the national interest, and, to render an award
on compulsory arbitration, does not exempt the exercise of this power
from the judicial review that Sec. 1, Art. 8 of the Constitution
mandates. This constitutional provision states:
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not
there has been a grave abuse of discretion amounting to lack or
236 | P a g e
excess of jurisdiction on the part of any branch or
instrumentality of the government.
Under this constitutional mandate, every legal power of the
Secretary of Labor under the Labor Code, or, for that matter, any act of
the Executive, that is attended by grave abuse of discretion is subject
to review by this Court in an appropriate proceeding. To be sure, the
existence of an executive power alone - whether granted by statute or
by the Constitution - cannot exempt the executive action from judicial
oversight, interference or reversal when grave abuse of discretion is, or
is alleged to be, present. This is particularly true when constitutional
norms are cited as the applicable yardsticks since this Court is the final
interpreter of the meaning and intent of the Constitution.[13]
The extent of judicial review over the Secretary of Labors arbitral
award is not limited to a determination of grave abuse in the manner of
the secretarys exercise of his statutory powers. This Court is entitled
to, and must - in the exercise of its judicial power - review the
substance of the Secretarys award when grave abuse of discretion is
alleged to exist in the award, i.e., in the appreciation of and the
conclusions the Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretarys acts is,
of course, the Constitution. And we recognize that indeed the
constitutional provisions the union cited are State policies on labor and
social justice that can serve as standards in assessing the validity of a
Secretary of Labors actions. However, we note that these provisions do
not provide clear, precise and objective standards of conduct that lend
themselves to easy application. We likewise recognize that the
Constitution is not a lopsided document that only recognizes the
interests of the working man; it too protects the interests of the
property owner and employer as well.[14]
For these reasons - and more importantly because a ruling on the
breadth and scope of the suggested constitutional yardsticks is not
absolutely necessary in the disposition of this case - we shall not use
these yardsticks in accordance with the time-honored practice of
avoiding constitutional interpretations when a decision can be reached
using non-constitutional standards. We have repeatedly held that one
of the essential requisites for a successful judicial inquiry into
constitutional questions is that the resolution of the constitutional
question must be necessary in deciding the case.[15]
In this case we believe that the more appropriate and available
standard - and one does not require a constitutional interpretation - is
simply the standard of reasonableness. In laymans terms,
reasonableness implies the absence of arbitrariness;[16] in legal
parlance, this translates into the exercise of proper discretion and to the
observance of due process. Thus, the question we have to answer in
deciding this case is whether the Secretarys actions have been
reasonable in light of the parties positions and the evidence they
presented.
MEWAs second premise - i.e., that the Secretary duly considered
the evidence presented - is the main issue that we shall discuss at
length below. Additionally, MEWA implied that we should take great
care before reading an abuse of discretion on the part of the Secretary
because of his expertise on labor issues and because his findings of
fact deserve the highest respect from this Court.
This Court has recognized the Secretary of Labors distinct
expertise in the study and settlement of labor disputes falling under his
power of compulsory arbitration.[17] It is also well-settled that factual
findings of labor administrative officials, if supported by substantial
evidence, are entitled not only to great respect but even to
finality.[18] We, therefore, have no difficulty in accepting the
unions caveat on how to handle a Secretary of Labors arbitral award.
But at the same time, we also recognize the possibility that abuse
of discretion may attend the exercise of the Secretarys arbitral
functions; his findings in an arbitration case are usually based on
position papers and their supporting documents (as they are in the
present case), and not on the thorough examination of the parties
contending claims that may be present in a court trial and in the face-
to-face adversarial process that better insures the proper presentation
and appreciation of evidence.[19] There may also be grave abuse of
237 | P a g e
discretion where the board, tribunal or officer exercising judicial
function fails to consider evidence adduced by the parties.[20] Given the
parties positions on the justiciability of the issues before us, the
question we have to answer is one that goes into the substance of the
Secretarys disputed orders: Did the Secretary properly consider and
appreciate the evidence presented before him?
We find, based on our consideration of the parties positions and
the evidence on record, that the Secretary of Labor disregarded and
misappreciated evidence, particularly with respect to the wage
award. The Secretary of Labor apparently also acted arbitrarily and
even whimsically in considering a number of legal points; even the
Solicitor General himself considered that the Secretary gravely abused
his discretion on at least three major points: (a) on the signing bonus
issue; (b) on the inclusion of confidential employees in the rank and
file bargaining unit, and (c) in mandating a union security closed-shop
regime in the bargaining unit.
We begin with a discussion on the wages issue. The focal point in
the consideration of the wage award is the projected net income for
1996 which became the basis for the 1996 wage award, which in turn -
by extrapolation - became the basis for the (2nd Year) 1997
award. MERALCO projected that the net operating income for 1996
was 14.7% above the 1999 level or a total net operating income of
4.171 Billion, while the union placed the 1996 net operating income at
5.795 Billion.
MERALCO based its projection on the increase of the income for
the first 6 months of 1996 over the same period in 1995. The union, on
the other hand, projected that the 1996 income would increase by 29%
to 35% because the consumption of electric power is at its highest
during the last two quarters with the advent of the Yuletide
season. The union likewise relied heavily on a newspaper report citing
an estimate by an all Asia capital financial analyst that the net
operating income would amount to 5.795 Billion.[21]
Based essentially on these considerations, the Secretary made the
following computations and ordered his disputed wage award:
 Projected net operating
Income for 1996 5,795,000,000
Principals and interests 1,426,571,703
Dividends at 1995 rate 1,636,949,000
Net amount left with the Company 2,729,479,297
Add: Tax credit equivalent to 35% of labor cost 231,804,940
Companys net operating income 2,961,284,237
For 1997, the projected income is P7,613,612 which can easily
absorb the incremental increase of P2,200 per month or a total
of P4,500 during the last year of the CBA period.
xxxxxxxxx
An overriding aim is to estimate the amount that is left with
the Company after the awarded wages and benefits and the
companys customary obligations are paid. This amount can be
the source of an item not found in the above computations but
which the Company must provide for, that is - the amount the
company can use for expansion.
Considering the expansion plans stated in the Companys
Supplement that calls for capital expenditures of 6 billion,
6.263 billion and 5.802 billion for 1996, 1997 and 1998
respectively, We conclude that our original award of P2,300
per month for the first year and P2,200 for the second year will
still leave much by way of retained income that can be used for
expansion.[22] (Underscoring ours.)
We find after considering the records that the Secretary gravely
abused his discretion in making this wage award because he
disregarded evidence on record. Where he considered MERALCOs
238 | P a g e
evidence at all, he apparently misappreciated this evidence in favor of
claims that do not have evidentiary support. To our mind, the
MERALCO projection had every reason to be reliable because it was
based on actual and undisputed figures for the first six months of
1996.[23] On the other hand, the union projection was based on a
speculation of Yuletide consumption that the union failed to
substantiate. In fact, as against the unions unsubstantiated Yuletide
consumption claim, MERALCO adduced evidence in the form of
historical consumption data showing that a lengthy consumption does
not tend to rise during the Christmas period.[24] Additionally, the All-
Asia Capital Report was nothing more than a newspaper report that did
not show any specific breakdown or computations. While the union
claimed that its cited figure is based on MERALCOs 10-year income
stream,[25] no data or computation of this 10-year stream appear in the
record.
While the Secretary is not expected to accept the company-offered
figures wholesale in determining a wage award, we find it a grave
abuse of discretion to completely disregard data that is based on actual
and undisputed record of financial performance in favor of the third-
hand and unfounded claims the Secretary eventually relied upon. At
the very least, the Secretary should have properly justified his
disregard of the company figures. The Secretary should have also
reasonably insured that the figure that served as the starting point for
his computation had some substantial basis.
Both parties extensely discussed the factors that the decision
maker should consider in making a wage award. While We do not seek
to enumerate in this decision the factors that should affect wage
determination, we must emphasize that a collective bargaining dispute
such as this one requires due consideration and proper balancing of
the interests of the parties to the dispute and of those who might
be affected by the dispute. To our mind, the best way in approaching
this task holistically is to consider the available objective facts,
including, where applicable, factors such as the bargaining history of
the company, the trends and amounts of arbitrated and agreed wage
awards and the companys previous CBAs, and industry trends in
general. As a rule, affordability or capacity to pay should be taken into
account but cannot be the sole yardstick in determining the wage improved their compensation package. For instance, MERALCO has
award, especially in a public utility like MERALCO. In considering a granted salary increases[27] through the collective bargaining agreement
public utility, the decision maker must always take into account the the amount of which since 1980 for both rank-and-file and supervisory
public interest aspects of the case; MERALCOs income and the employees were as follows:
amount of money available for operating expenses - including labor
costs - are subject to State regulation. We must also keep in mind that AMOUNT OF CBA INCREASES DIFFERENC
high operating costs will certainly and eventually be passed on to the E
consuming public as MERALCO has bluntly warned in its pleadings. CBA COVER RANK SUPERVISOR AMOUN PERCEN
AGE -AND- Y T T
We take note of the middle ground approach employed by the FILE
Secretary in this case which we do not necessarily find to be the best 1980 230.00 342.50 112.50 48.91%
method of resolving a wage dispute. Merely finding the midway point 1981 210.00 322.50 112.50 53.57
between the demands of the company and the union, and splitting the 1982 200.00 312.50 112.50 56.25
difference is a simplistic solution that fails to recognize that the parties TOTAL 640.00 977.50 337.50 52.73
may already be at the limits of the wage levels they can afford. It may
1983 320.00 432.50 112.50 35.16
lead to the danger too that neither of the parties will engage in
1984 350.00 462.50 112.50 32.14
principled bargaining; the company may keep its position artificially
low while the union presents an artificially high position, on the fear 1985 370.00 482.50 112.50 30.41
that a Solomonic solution cannot be avoided. Thus, rather than TOTAL 1,040.00 1,377.50 337.50 32.45
encourage agreement, a middle ground approach instead promotes a 1986 860.00 972.50 112.50 13.08
play safe attitude that leads to more deadlocks than to successfully 1987 640.00 752.50 112.50 17.58
negotiated CBAs. 1988 600.00 712.50 112.50 18.75
TOTAL 2,100.00 2,437.50 337.50 16.07
After considering the various factors the parties cited, we believe 1989 1,100.00 1,212.50 112.50 10.23
that the interests of both labor and management are best served by a
1990 1,200.00 1,312.50 112.50 9.38
wage increase of P1,900.00 per month for the first year and
1991 1,300.00 1,412.50 112.50 8.65
another P1,900.00 per month for the second year of the two-year CBA
TOTAL 3,600.00 3,937.50 337.50 9.38
term. Our reason for this is that these increases sufficiently protects the
interest of the worker as they are roughly 15% of the monthly average 1992 1,400.00 1,742.50 342.50 24.46
salary of P11,600.00.[26] They likewise sufficiently consider the 1993 1,350.00 1,682.50 332.50 24.63
employers costs and its overall wage structure, while at the same time, 1994 1,150.00 1,442.50 292.50 25.43
being within the range that will not disrupt the wage trends in TOTAL 3,900.00 4,867.50 967.50 24.81
Philippine industries. Based on the above-quoted table, specifically under the column
The records shows that MERALCO, throughout its long years of RANK-AND-FILE, it is easily discernible that the total wage increase
existence, was never remiss in its obligation towards its employees. In of P3,800.00 for 1996 to 1997 which we are granting in the instant
fact, as a manifestation of its strong commitment to the promotion of case is significantly higher than the total increases given in 1992 to
the welfare and well-being of its employees, it has consistently 1994, or a span of three (3) years, which is only P3,900.00 a
239 | P a g e
month. Thus, the Secretarys grant of P2,200.00 monthly wage increase
in the assailed order is unreasonably high a burden for MERALCO to
shoulder.
We now go to the economic issues.
1. CHRISTMAS BONUS
MERALCO questions the Secretarys award of Christmas bonuses
on the ground that what it had given its employees were special
bonuses to mark or celebrate special occasions, such as when the Asia
Money Magazine recognized MERALCO as the best managed
company in Asia. These grants were given on or about Christmas time,
and the timing of the grant apparently led the Secretary to the
conclusion that what were given were Christmas bonuses given by
way of a company practice on top of the legally required 13th month
pay.
The Secretary in granting the two-month bonus, considered the
following factual finding, to wit:
We note that each of the grant mentioned in the commonly
adopted table of grants has a special description. Christmas
bonuses were given in 1988 and 1989. However, the amounts
of bonuses given differed. In 1988, it was P1,500. In 1989, it
was month salary. The use of Christmas bonus title stopped
after 1989. In 1990, what was given was a cash gift of months
salary. The grants thereafter bore different titles and were for
varying amounts. Significantly, the Company explained the
reason for the 1995 bonuses and this explanation was not
substantially contradicted by the Union.
What comes out from all these is that while the Company has
consistently given some amount by way of bonuses since
1988, these awards were not given uniformly as Christmas
bonuses or special Christmas grants although they may have
been given at or about Christmas time.
240 | P a g e
xxxxxxxxx
The Company is not therefore correct in its position that there
is not established practice of giving Christmas bonuses that has
ripened to the status of being a term and condition of
employment. Regardless of its nomenclature and purpose, the
act of giving this bonus in the spirit of Christmas has ripened
into a Company practice.[28]
It is MERALCOs position that the Secretary erred when he
recognized that there was an established practice of giving a two-
month Christmas bonus based on the fact that bonuses were given on
or about Christmas time. It points out that the established practice
attributed to MERALCO was neither for a considerable period of time
nor identical in either amount or purpose. The purpose and title of the
grants were never the same except for the Christmas bonuses of 1988
and 1989, and were not in the same amounts.
We do not agree.
As a rule, a bonus is not a demandable and enforceable
obligation;[29] it may nevertheless be granted on equitable
consideration[30] as when the giving of such bonus has been the
companys long and regular practice.[31] To be considered a regular
practice, the giving of the bonus should have been done over a long
period of time, and must be shown to have been consistent and
deliberate.[32] Thus we have ruled in National Sugar Refineries
Corporation vs. NLRC:[33]
The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue
giving the benefits knowing fully well that said employees are
not covered by the law requiring payment thereof.
In the case at bar, the record shows the MERALCO, aside from
complying with the regular 13th month bonus, has further been giving
its employees an additional Christmas bonus at the tail-end of the year
since 1988. While the special bonuses differed in amount and bore
different titles, it can not be denied that these were given voluntarily
and continuously on or about Christmas time. The considerable length
of time MERALCO has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part, to continue giving
said benefits knowing that such act was not required by law.
Indeed, a company practice favorable to the employees has been
established and the payments made by MERALCO pursuant thereto
ripened into benefits enjoyed by the employees. Consequently, the
giving of the special bonus can no longer be withdrawn by the
company as this would amount to a diminution of the employees
existing benefits.[34]
We can not, however, affirm the Secretarys award of a two-month
special Christmas bonus to the employees since there was no
recognized company practice of giving a two-month special grant. The
two-month special bonus was given only in 1995 in recognition of the
employees prompt and efficient response during the
calamities. Instead, a one-month special bonus, We believe, is
sufficient, this being merely a generous act on the part of MERALCO.
2. RICE SUBSIDY and RETIREMENT BENEFITS for
RETIREES
It appears that the Secretary of Labor originally ordered the
increase of the retirement pay, rice subsidy and medical benefits of
MERALCO retirees. This ruling was reconsidered based on the
position that retirees are no longer employees of the company and
therefore are no longer bargaining members who can benefit from a
compulsory arbitration award. The Secretary, however, ruled that all
members of the bargaining unit who retire between August 19, 1996
and November 30, 1997 (i.e., the term of the disputed CBA under the
Secretarys disputed orders) are entitled to receive an additional rice
subsidy.
The question squarely brought in this petition is whether the
Secretary can issue an order that binds the retirement fund. The
241 | P a g e
company alleges that a separate and independent trust fund is the
source of retirement benefits for MERALCO retirees, while the union
maintains that MERALCO controls these funds and may therefore be
compelled to improve this benefit in an arbitral award.
The issue requires a finding of fact on the legal personality of the
retirement fund. In the absence of any evidence on record indicating
the nature of the retirement funds legal personality, we rule that the
issue should be remanded to the Secretary for reception of evidence as
whether or not the MERALCO retirement fund is a separate and
independent trust fund. The existence of a separate and independent
juridical entity which controls an irrevocable retirement trust fund
means that these retirement funds are beyond the scope of collective
bargaining: they are administered by an entity not a party to the
collective bargaining and the funds may not be touched without the
trustees conformity.
On the other hand, MERALCO control over these funds means
that MERALCO may be compelled in the compulsory arbitration of a
CBA deadlock where it is the employer, to improve retirement benefits
since retirement is a term or condition of employment that is a
mandatory subject of bargaining.
3. EMPLOYEES COOPERATIVE
The Secretarys disputed ruling requires MERALCO to provide the
employees covered by the bargaining unit with a loan of 1.5 Million as
seed money for the employees formation of a cooperative under the
Cooperative Law, R.A. 6938. We see nothing in this law - whether
expressed or implied - that requires employers to provide funds, by
loan or otherwise, that employees can use to form a cooperative. The
formation of a cooperative is a purely voluntary act under this law, and
no party in any context or relationship is required by law to set up a
cooperative or to provide the funds therefor. In the absence of such
legal requirement, the Secretary has no basis to order the grant of a 1.5
million loan to MERALCO employees for the formation of a
cooperative. Furthermore, we do not see the formation of an
employees cooperative, in the absence of an agreement by the
collective bargaining parties that this is a bargainable term or condition
of employment, to be a term or condition of employment that can be
imposed on the parties on compulsory arbitration.
4. GHSIP, HMP BENEFITS FOR DEPENDENTS and
HOUSING EQUITY LOAN
MERALCO contends that it is not bound to bargain on these
benefits because these do not relate to wages, hours of work and other
terms and conditions of employment hence, the denial of these
demands cannot result in a bargaining impasse.
The GHSIP, HMP benefits for dependents and the housing equity
loan have been the subject of bargaining and arbitral awards in the
past. We do not see any reason why MERALCO should not now
bargain on these benefits. Thus, we agree with the Secretarys ruling:
x x x Additionally and more importantly, GHSIP and HMP,
aside from being contributory plans, have been the subject of
previous rulings from this Office as bargainable matters. At
this point, we cannot do any less and must recognize that
GHSIP and HMP are matters where the union can demand and
negotiate for improvements within the framework of the
collective bargaining system.[35]
Moreover, MERALCO have long been extending these benefits to
the employees and their dependents that they now become part of the
terms and conditions of employment. In fact, MERALCO even
pledged to continue giving these benefits. Hence, these benefits should
be incorporated in the new CBA.
With regard to the increase of the housing equity grant, we
find P60,000.00 reasonable considering the prevailing economic crisis.
5. SIGNING BONUS
On the signing bonus issue, we agree with the positions
commonly taken by MERALCO and by the Office of the Solicitor
General that the signing bonus is a grant motivated by the goodwill
generated when a CBA is successfully negotiated and signed between
242 | P a g e
the employer and the union. In the present case, this goodwill does not
exist. In the words of the Solicitor General:
When negotiations for the last two years of the 1992-1997
CBA broke down and the parties sought the assistance of the
NCMB, but which failed to reconcile their differences, and
when petitioner MERALCO bluntly invoked the jurisdiction of
the Secretary of Labor in the resolution of the labor dispute,
whatever goodwill existed between petitioner MERALCO and
respondent union disappeared. xxx.[36]
In contractual terms, a signing bonus is justified by and is the
consideration paid for the goodwill that existed in the negotiations that
culminated in the signing of a CBA. Without the goodwill, the
payment of a signing bonus cannot be justified and any order for such
payment, to our mind, constitutes grave abuse of discretion. This is
more so where the signing bonus is in the not insignificant total
amount of P16 Million.
6. RED-CIRCLE-RATE ALLOWANCE
An RCR allowance is an amount, not included in the basic salary,
that is granted by the company to an employee who is promoted to a
higher position grade but whose actual basic salary at the time of the
promotion already exceeds the maximum salary for the position to
which he or she is promoted. As an allowance, it applies only to
specifics individuals whose salary levels are unique with respect to
their new and higher positions. It is for these reasons that MERALCO
prays that it be allowed to maintain the RCR allowance as a separate
benefit and not be integrated in the basic salary.
The integration of the RCR allowance in the basic salary of the
employees had consistently been raised in the past CBAs (1989 and
1992) and in those cases, the Secretary decreed the integration of the
RCR allowance in the basic salary. We do not see any reason why it
should not be included in the present CBA. In fact, in the 1995 CBA
between MERALCO and the supervisory union (FLAMES), the
integration of the RCR allowance was recognized. Thus, Sec. 4 of the
CBA provides:
All Red-Circle-Rate Allowance as of December 1, 1995 shall
be integrated in the basic salary of the covered employees who
as of such date are receiving such allowance. Thereafter, the
company rules on RCR allowance shall continue to be
observed/applied.[37]
For purposes of uniformity, we affirm the Secretarys order on the
integration of the RCR allowance in the basic salary of the employees.
7. SICK LEAVE RESERVE OF 15 DAYS
MERALCO assails the Secretarys reduction of the sick leave
reserve benefit from 25 days to 15 days, contending that the sick leave
reserve of 15 days has reached the lowest safe level that should be
maintained to give employees sufficient buffer in the event they fall ill.
We find no compelling reason to deviate from the Secretarys
ruling that the sick leave reserve is reduced to 15 days, with any excess
convertible to cash at the end of the year. The employee has the option
to avail of this cash conversion or to accumulate his sick leave credits
up to 25 days for conversion to cash at his retirement or separation
from the service. This arrangement is, in fact, beneficial to
MERALCO. The latter admits that the diminution of this reserve does
not seriously affect MERALCO because whatever is in reserve are
sick leave credits that are payable to the employee upon separation
from service. In fact, it may be to MERALCOs financial interest to
pay these leave credits now under present salary levels than pay them
at future higher salary levels.[38]
8. 40-DAY UNION LEAVE
MERALCO objects to the demand increase in union leave
because the union leave granted to the union is already substantial. It
argues that the union has not demonstrated any real need for additional
union leave.
243 | P a g e
The thirty (30) days union leave granted by the Secretary, to our
mind, constitute sufficient time within which the union can carry out
its union activities such as but not limited to the election of union
officers, selection or election of appropriate bargaining agents, conduct
referendum on union matters and other union-related matters in
furtherance of union objectives. Furthermore, the union already enjoys
a special union leave with pay for union authorized representatives to
attend work education seminars, meetings, conventions and
conferences where union representation is required or necessary, and
Paid-Time-off for union officers, stewards and representatives for
purpose of handling or processing grievances.
9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE
MERALCO argues that there is no justification for the increase of
these allowances. The personnel concerned will not receive any
additional risk during the life of the current CBA that would justify the
increase demanded by the union. In the absence of such risk, then
these personnel deserve only the same salary increase that all other
members of the bargaining unit will get as a result of the disputed
CBA. MERALCO likewise assails the grant of the high voltage/high
pole allowance to members of the team who are not exposed to the
high voltage/high pole risks. The risks that justify the higher salary and
the added allowance are personal to those who are exposed to those
risks. They are not granted to a team because some members of the
team are exposed to the given risks.
The increase in the high-voltage allowance (from P45.00
to P55.00), high-pole allowance (from P30.00 to P40.00), and towing
allowance is justified considering the heavy risk the employees
concerned are exposed to. The high-voltage allowance is granted to an
employee who is authorized by the company to actually perform work
on or near energized bare lines and bus, while the high-pole allowance
is given to those authorized to climb poles on a height of at least 60
feet from the ground to work thereat. The towing allowance, on the
other hand, is granted to the stockman drivers who tow trailers with
long poles and equipment on board. Based on the nature of the job of
these concerned employees, it is imperative to give them these
additional allowances for taking additional risks. These increases are
not even commensurate to the danger the employees concerned are
subjected to. Besides, no increase has been given by the company
since 1992.[39]
We do not, however, subscribe to the Secretarys order granting
these allowances to the members of the team who are not exposed to
the given risks. The reason is obvious- no risk, no pay. To award them
the said allowances would be manifestly unfair for the company and
even to those who are exposed to the risks, as well as to the other
members of the bargaining unit who do not receive the said
allowances.
10. BENEFITS FOR COLLECTORS
MERALCO opposes the Secretarys grant of benefits for collectors
on the ground that this is grossly unreasonable both in scope and on
the premise it is founded.
We have considered the arguments of the opposing parties
regarding these benefits and find the Secretarys ruling on the (a) lunch
allowance; (b) disconnection fee for delinquent accounts; (c) voluntary
performance of other work at the instance of the Company; (d) bobcat
belt bags; and (e) reduction of quota and MAPL during typhoons and
other force majeure events, reasonable considering the risks taken by
the company personnel involved, the nature of the employees
functions and responsibilities and the prevailing standard of living. We
do not however subscribe to the Secretarys award on the following:
(a) Reduction of quota and MAPL when the collector is on
sick leave because the previous CBA has already
provided for a reduction of this demand. There is no
need to further reduce this.
(b) Deposit of cash bond at MESALA because this is no
longer necessary in view of the fact that collectors are
no longer required to post a bond.
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We shall now resolve the non-economic issues.
1. SCOPE OF THE BARGAINING UNIT
The Secretarys ruling on this issue states that:
a. Scope of the collective bargaining unit. The union is
demanding that the collective bargaining unit shall be
composed of all regular rank and file employees hired by the
company in all its offices and operating centers through its
franchise and those it may employ by reason of expansion,
reorganization or as a result of operational exigencies. The law
is that only managerial employees are excluded from any
collective bargaining unit and supervisors are now allowed to
form their own union (Art. 254 of the Labor Code as amended
by R.A. 6715). We grant the union demand.
Both MERALCO and the Office of the Solicitor General dispute
this ruling because if disregards the rule We have established on the
exclusion of confidential employee from the rank and file bargaining
unit.
In Pier 8 Arrastre vs. Confesor and General Maritime and
Stevedores Union,[40] we ruled that:
Put another way, the confidential employee does not share in
the same community of interest that might otherwise make him
eligible to join his rank and file co-workers, precisely because
of a conflict in those interests.
Thus, in Metrolab Industries vs. Roldan-Confesor,[41] We ruled:
..that the Secretarys order should exclude the confidential
employees from the regular rank and file employees qualified
to become members of the MEWA bargaining unit.
 From the foregoing disquisition, it is clear that employees holding
a confidential position are prohibited from joining the union of the
rank and file employees.
2. ISSUE OF UNION SECURITY
The Secretary in his Order of August 19, 1996,[42] ruled that:
b. Union recognition and security. The union is proposing that
it be recognized by the Company as sole and exclusive
bargaining representative of the rank and file employees
included in the bargaining unit for the purpose of collective
bargaining regarding rates of pay, wages, hours of work and
other terms and conditions of employment. For this reason, the
Company shall agree to meet only with the Union officers and
its authorized representatives on all matters involving the
Union as an organization and all issues arising from the
implementation and interpretation of the new CBA. Towards
this end, the Company shall not entertain any individual or
group of individuals on matters within the exclusive domain of
the Union.
Additionally, the Union is demanding that the right of all rank
and file employees to join the Union shall be recognized by the
Company. Accordingly, all rank and file employees shall join
the union.
xxxxxxxxx
These demands are fairly reasonable. We grant the same in
accordance with the maintenance of membership principle as a
form of union security."
The Secretary reconsidered this portion of his original order when
he said in his December 28, 1996 order that:
245 | P a g e
x x x. when we decreed that all rank and file employees shall
join the Union, we were actually decreeing the incorporation
of a closed shop form of union security in the CBA between
the parties. In Ferrer v. NLRC, 224 SCRA 410, the Supreme
Court ruled that a CBA provision for a closed shop is a valid
form of union security and is not a restriction on the right or
freedom of association guaranteed by the Constitution,
citing Lirag v. Blanco, 109 SCRA 87.
MERALCO objected to this ruling on the grounds that: (a) it was
never questioned by the parties; (b) there is no evidence presented that
would justify the restriction on employee's union membership; and (c)
the Secretary cannot rule on the union security demand because this is
not a mandatory subject for collective bargaining agreement.
We agree with MERALCOs contention.
An examination of the records of the case shows that the union
did not ask for a closed shop security regime; the Secretary in the first
instance expressly stated that a maintenance of membership clause
should govern; neither MERALCO nor MEWA raised the issue of
union security in their respective motions for reconsideration of the
Secretarys first disputed order; and that despite the parties clear
acceptance of the Secretarys first ruling, the Secretary motu
proprio reconsidered his maintenance of membership ruling in favor
of the more stringent union shop regime.
Under these circumstances, it is indubitably clear that the
Secretary gravely abused his discretion when he ordered a union shop
in his order of December 28, 1996. The distinctions between a
maintenance of membership regime from a closed shop and their
consequences in the relationship between the union and the company
are well established and need no further elaboration.
Consequently, We rule that the maintenance of membership
regime should govern at MERALCO in accordance with the
Secretarys order of August 19, 1996 which neither party disputed.
 3. THE CONTRACTING OUT ISSUE
This issue is limited to the validity of the requirement that the
union be consulted before the implementation of any contracting out
that would last for 6 months or more. Proceeding from our ruling
in San Miguel Employees Union-PTGWO vs Bersamina,[43] (where
we recognized that contracting out of work is a proprietary right of the
employer in the exercise of an inherent management prerogative) the
issue we see is whether the Secretarys consultation requirement is
reasonable or unduly restrictive of the companys management
prerogative. We note that the Secretary himself has considered that
management should not be hampered in the operations of its business
when he said that:
We feel that the limitations imposed by the union advocates
are too specific and may not be applicable to the situations that
the company and the union may face in the future. To our
mind, the greater risk with this type of limitation is that it will
tend to curtail rather than allow the business growth that the
company and the union must aspire for. Hence, we are for the
general limitations we have stated above because they will
allow a calibrated response to specific future situations the
company and the union may face.[44]
Additionally, We recognize that contracting out is not unlimited;
rather, it is a prerogative that management enjoys subject to well-
defined legal limitations. As we have previously held, the company
can determine in its best business judgment whether it should contract
out the performance of some of its work for as long as the employer is
motivated by good faith, and the contracting out must not have been
resorted to circumvent the law or must not have been the result of
malicious or arbitrary action.[45] The Labor Code and its implementing
rules also contain specific rules governing contracting out (Department
of Labor Order No. 10, May 30, 1997, Sections. 1-25).
246 | P a g e
Given these realities, we recognize that a balance already exist in
the parties relationship with respect to contracting out; MERALCO
has its legally defined and protected management prerogatives while
workers are guaranteed their own protection through specific labor
provisions and the recognition of limits to the exercise of management
prerogatives. From these premises, we can only conclude that the
Secretarys added requirement only introduces an imbalance in the
parties collective bargaining relationship on a matter that the law
already sufficiently regulates. Hence, we rule that the Secretarys added
requirement, being unreasonable, restrictive and potentially disruptive
should be struck down.
4. UNION REPRESENTATION IN COMMITTEES
As regards this issue, We quote with approval the holding of the
Secretary in his Order of December 28, 1996, to wit:
We see no convincing reason to modify our original Order on
union representation in committees. It reiterates what the
Article 211 (A)(g) of the Labor Codes provides: To ensure the
participation of workers in decision and policy-making
processes affecting their rights, duties and welfare. Denying
this opportunity to the Union is to lay the claim that only
management has the monopoly of ideas that may improve
management strategies in enhancing the Companys
growth. What every company should remember is that there
might be one among the Union members who may offer
productive and viable ideas on expanding the Companys
business horizons. The unions participation in such committees
might just be the opportune time for dormant ideas to come
forward. So, the Company must welcome this development
(see also PAL v. NLRC, et. al., G.R. 85985, August 13,
1995). It must be understood, however, that the committees
referred to here are the Safety Committee, the Uniform
Committee and other committees of a similar nature and
purpose involving personnel welfare, rights and benefits as
well as duties.
We do not find merit in MERALCOs contention that the above-
quoted ruling of the Secretary is an intrusion into the management
prerogatives of MERALCO. It is worthwhile to note that all the Union
demands and what the Secretarys order granted is that the Union be
allowed to participate in policy formulation and decision-making
process on matters affecting the Union members right, duties and
welfare as required in Article 211 (A)(g) of the Labor Code. And
this can only be done when the Union is allowed to have
representatives in the Safety Committee, Uniform Committee and
other committees of a similar nature. Certainly, such participation by
the Union in the said committees is not in the nature of a co-
management control of the business of MERALCO. What is granted
by the Secretary is participation and representation. Thus, there is
no impairment of management prerogatives.
5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE
CBA
MERALCO also decries the Secretarys ruling in both the assailed
Orders that-
All other benefits being enjoyed by the companys employees
but which are not expressly or impliedly repealed in this new
agreement shall remain subsisting and shall likewise be
included in the new collective bargaining agreement to be
signed by the parties effective December 1, 1995.[46]
claiming that the above-quoted ruling intruded into the employers
freedom to contract by ordering the inclusion in the new CBA all other
benefits presently enjoyed by the employees even if they are not
incorporated in the new CBA. This matter of inclusion, MERALCO
argues, was never discussed and agreed upon in the negotiations; nor
presented as issues before the Secretary; nor were part of the previous
CBAs between the parties.
247 | P a g e
We agree with MERALCO.
The Secretary acted in excess of the discretion allowed him by
law when he ordered the inclusion of benefits, terms and conditions
that the law and the parties did not intend to be reflected in their CBA.
To avoid the possible problems that the disputed orders may
bring, we are constrained to rule that only the terms and conditions
already existing in the current CBA and was granted by the Secretary
(subject to the modifications decreed in this decision) should be
incorporated in the CBA, and that the Secretarys disputed orders
should accordingly be modified.
6. RETROACTIVITY OF THE CBA
Finally, MERALCO also assails the Secretarys order that the
effectivity of the new CBA shall retroact to December 1, 1995, the
date of the commencement of the last two years of the effectivity of
the existing CBA. This retroactive date, MERALCO argues, is
contrary to the ruling of this Court in Pier 8 Arrastre and Stevedoring
Services, Inc. vs. Roldan-Confessor[47] which mandates that the
effective date of the new CBA should be the date the Secretary of
Labor has resolved the labor disputes.
On the other hand, MEWA supports the ruling of the Secretary on
the theory that he has plenary power and discretion to fix the date of
effectivity of his arbitral award citing our ruling in St. Lukes Medical
Center, Inc. vs. Torres.[48]MEWA also contends that if the arbitral
award takes effect on the date of the Secretary Labors ruling on the
parties motion for reconsideration (i.e., on December 28, 1996), an
anomaly situation will result when CBA would be more than the 5-
year term mandated by Article 253-A of the Labor Code.
However, neither party took into account the factors necessary for
a proper resolution of this aspect. Pier 8, for instance, does not involve
a mid-term negotiation similar to this case, while St. Lukes does not
take the hold over principle into account, i.e., the rule that although a
CBA has expired, it continues to have legal effects as between the
parties until a new CBA has been entered into.[49]
 Article 253-A serves as the guide in determining when the
effectivity of the CBA at bar is to take effect. It provides that the
representation aspect of the CBA is to be for a term of 5 years, while
x x x [A]ll other provisions of the Collective Bargaining
Agreement shall be re-negotiated not later than 3 years after its
execution. Any agreement on such other provisions of the
Collective Bargaining Agreement entered into within 6 months
from the date of expiry of the term of such other provisions as
fixed in such Collective Bargaining Agreement shall retroact
to the day immediately following such date. If such agreement
is entered into beyond 6 months, the parties shall agree on the
duration of the effectivity thereof. x x x.
Under these terms, it is clear that the 5-year term requirement is
specific to the representation aspect. What the law additionally
requires is that a CBA must be re-negotiated within 3 years after its
execution. It is in this re-negotiation that gives rise to the present CBA
deadlock.
If no agreement is reached within 6 months from the expiry date
of the 3 years that follow the CBA execution, the law expressly gives
the parties - not anybody else - the discretion to fix the effectivity of
the agreement.
Significantly, the law does not specifically cover the situation
where 6 months have elapsed but no agreement has been reached with
respect to effectivity. In this eventuality, we hold that any provision of
law should then apply for the law abhors a vacuum.[50]
One such provision is the principle of hold over, i.e., that in the
absence of a new CBA, the parties must maintain the status quo and
must continue in full force and effect the terms and conditions of the
existing agreement until a new agreement is reached.[51] In this manner,
the law prevents the existence of a gap in the relationship between the
collective bargaining parties. Another legal principle that should apply
is that in the absence of an agreement between the parties, then, an
248 | P a g e
arbitrated CBA takes on the nature of any judicial or quasi-judicial
award; it operates and may be executed only respectively unless there
are legal justifications for its retroactive application.
Consequently, we find no sufficient legal ground on the other
justification for the retroactive application of the disputed CBA, and
therefore hold that the CBA should be effective for a term of 2 years
counted from December 28, 1996 (the date of the Secretary of Labors
disputed order on the parties motion for reconsideration) up to
December 27, 1999.
WHEREFORE, the petition is granted and the orders of public
respondent Secretary of Labor dated August 19, 1996 and December
28, 1996 are set aside to the extent set forth above. The parties are
directed to execute a Collective Bargaining Agreement incorporating
the terms and conditions contained in the unaffected portions of the
Secretary of Labors order of August 19, 1996 and December 28, 1996,
and the modifications set forth above. The retirement fund issue is
remanded to the Secretary of Labor for reception of evidence and
determination of the legal personality of the MERALCO retirement
fund.
SO ORDERED.
JENNY M. AGABON and G.R. No. 158693
VIRGILIO C. AGABON,
Petitioners, Present:
Davide, Jr., C.J.,
Puno,
Panganiban,
Quisumbing,
Ynares-Santiago, Respondents. November 17, 2004

Sandoval- x -----------------------------------------------------------------------------
Gutierrez,
----------- x
- versus - Carpio,

Austria- DECISION
Martinez,

Corona, YNARES-SANTIAGO, J.:

Carpio-
Morales, This petition for review seeks to reverse the decision[1] of
the Court of Appeals dated January 23, 2003, in CA-G.R. SP
Callejo, Sr.,
No. 63017, modifying the decision of National Labor
Azcuna, Relations Commission (NLRC) in NLRC-NCR Case No.
023442-00.
Tinga,

Chico-Nazario,
and Private respondent Riviera Home Improvements, Inc. is
engaged in the business of selling and installing ornamental
Garcia, JJ. and construction materials. It employed petitioners Virgilio
Agabon and Jenny Agabon as gypsum board and cornice
NATIONAL LABOR RELATIONS
installers on January 2, 1992[2] until February 23, 1999 when
COMMISSION (NLRC), RIVIERA they were dismissed for abandonment of work.

HOME IMPROVEMENTS, INC. Promulgated:

and VICENTE ANGELES,

249 | P a g e
 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 Agabons 13th month
250 | P a g e
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 petitioners 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 Agabons 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 respondents 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

251 | P a g e
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
latters representative in connection with the employees
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
252 | P a g e
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 conduct[19] and loyalty. The
employer may not be compelled to continue to employ
253 | P a g e
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;
 reinstatement is no longer possible where the dismissal was
(b) A hearing or conference during which
unjust, separation pay may be granted.
the employee concerned, with the assistance of
counsel if the employee so desires, is given
opportunity to respond to the charge, present Procedurally, (1) if the dismissal is based on a just
his evidence or rebut the evidence presented cause under Article 282, the employer must give the
against him; and employee two written notices and a hearing or opportunity
to be heard if requested by the employee before
(c) A written notice of termination served
terminating the employment: a notice specifying the
on the employee indicating that upon due
consideration of all the circumstances, grounds grounds for which dismissal is sought a hearing or an
have been established to justify his termination. opportunity to be heard and after hearing or opportunity to
be heard, a notice of the decision to dismiss; and (2) if the
In case of termination, the foregoing notices dismissal is based on authorized causes under Articles 283
shall be served on the employees last known
and 284, the employer must give the employee and the
address.
Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
Dismissals based on just causes contemplate acts or
omissions attributable to the employee while dismissals
From the foregoing rules four possible situations may be
based on authorized causes involve grounds under the
derived: (1) the dismissal is for a just cause under Article
Labor Code which allow the employer to terminate
282 of the Labor Code, for an authorized cause under
employees. A termination for an authorized cause requires
Article 283, or for health reasons under Article 284, and due
payment of separation pay. When the termination of
process was observed; (2) the dismissal is without just or
employment is declared illegal, reinstatement and full
authorized cause but due process was observed; (3) the
backwages are mandated under Article 279. If
254 | P a g e
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.
255 | P a g e
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 employees 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
256 | P a g e
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
257 | P a g e
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
258 | P a g e
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
[28]
Commission, the dismissal was for a just and valid cause
but the employee was not accorded due process. The
dismissal was upheld by the Court but the employer was
sanctioned. The sanction should be in the nature of
indemnification or penalty, and depends on the facts of
each case and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,[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, albeit without due process, did not entitle the
employee to reinstatement, backwages, damages and
attorneys 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, just cause but imposing sanctions on the employer. Such
stated: 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
C. Where there is just cause for dismissal but due
to employers as well.
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 The unfairness of declaring illegal or ineffectual dismissals
prescribed by law in terminating the services of the for valid or authorized causes but not complying with
employee, the employer must be deemed to have opted or,
in any case, should be made liable, for the payment of
statutory due process may have far-reaching consequences.
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 This would encourage frivolous suits, where even the most
accorded to the employee by the employer. Nevertheless,
notorious violators of company policy are rewarded by
peculiar circumstances might obtain in certain situations
where to undertake the above steps would be no more than invoking due process. This also creates absurd situations
a useless formality and where, accordingly, it would not be where there is a just or authorized cause for dismissal but a
imprudent to apply the res ipsa loquitur rule and award, in procedural infirmity invalidates the termination. Let us take
lieu of separation pay, nominal damages to the employee. x for example a case where the employee is caught stealing
x x.[31]
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
After carefully analyzing the consequences of the in less than a month. Invalidating the dismissal would not
divergent doctrines in the law on employment termination, serve public interest. It could also discourage investments
we believe that in cases involving dismissals for cause but that can generate employment in the local economy.
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
259 | P a g e
 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
260 | P a g e
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
261 | P a g e
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 employees one month salary. This
indemnity is intended not to penalize the employer but to
vindicate or recognize the employees right to statutory due
We affirm the ruling of the appellate court on
process which was violated by the employer.[39]
petitioners money claims. Private respondent is liable for
petitioners holiday pay, service incentive leave pay and
13th month pay without deductions.
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
As a general rule, one who pleads payment has the burden
such damages is addressed to the sound discretion of the
of proving it. Even where the employee must allege non-
court, taking into account the relevant
[40] payment, the general rule is that the burden rests on the
circumstances. Considering the prevailing circumstances
employer to prove payment, rather than on the employee
in the case at bar, we deem it proper to fix it at
to prove non-payment. The reason for the rule is that the
P30,000.00. We believe this form of damages would serve
pertinent personnel files, payrolls, records, remittances and
to deter employers from future violations of the statutory
other similar documents which will show that overtime,
due process rights of employees. At the very least, it
differentials, service incentive leave and other claims of
provides a vindication or recognition of this fundamental
workers have been paid are not in the possession of the
right granted to the latter under the Labor Code and its
worker but in the custody and absolute control of the
Implementing Rules.
employer.[41]

Private respondent claims that the Court of Appeals erred

In the case at bar, if private respondent indeed paid
in holding that it failed to pay petitioners holiday pay,
petitioners holiday pay and service incentive leave pay, it
service incentive leave pay and 13th month pay.
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
We are not persuaded.
wherein it presented cash vouchers showing payments of
262 | P a g e
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
probandithereby making it liable for such claims to the
petitioners.
Anent the deduction of SSS loan and the value of the shoes
from petitioner Virgilio Agabons 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 same[43] 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
263 | P a g e
Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee
from which an employer is prohibited under Article
113[45] of the same Code from making any deductions
without the employees 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 Agabons 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 Agabons 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 Agabons 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.
G.R. No. 167813 June 27, 2006
BENJAMIN L. SAROCAM, Petitioner,
vs.
INTERORIENT MARITIME ENT., INC., and DEMACO
UNITED LTD., Respondents.
DECISION
264 | P a g e
CALLEJO, SR., J.:
Before the Court is a Petition for Review on certiorari under
Rule 45 of the Rules of Court of the Decision1 of the Court
of Appeals (CA) in CA-G.R. SP No. 84883, which affirmed
the February 19, 20042 and April 27, 20043Resolutions of
the National Labor Relations Commission (NLRC) in NCR
Case No. 01-11-2492-00.
The Antecedents
On June 27, 2000 petitioner Benjamin L. Sarocam was
hired by Interorient Maritime Ent., Inc. and Demaco United
Ltd., for a twelve-month contract as 'bosun on board M/V
Despina. His basic monthly salary was US$450.00 on a 48-
hour work week, with a fixed overtime pay of US$180.00
per month for 105 hours, supplementary wage of
US$70.00, and vacation leave with pay of 2.5 days.4
While the vessel was navigating to China, petitioner
suffered lumbar sprain when he accidentally fell from a
ladder.5On November 15, 2000, he was examined and
found to have neuromyositis with the waist and diabetes.
The examining physician prescribed medicine and
recommended the signing off and hospitalization of
petitioner.6 His employers agreed to repatriate him on
November 30, 2000.
On December 5, 2000, petitioner was referred to the
company-designated physician, Dr. Teodoro F. Pidlaoan,
Medical Director of the Our Lady of Fatima Medical Clinic.
The x-ray of his lumbosacral spine revealed normal results
and his Fasting Blood Sugar test revealed 9.1 (NV 4.1-6.1
umol/l). Petitioner was given Alaxan tablet for his back pain
and Euglocon for his elevated blood sugar. He was also
advised to return for follow-up evaluation. On December
13, 2000, he returned to the clinic with no more complaints
of back pains. His sugar examination likewise revealed
normal results. Petitioner was then declared 'fit for duty
effective on that day.7
On March 20, 2001, or barely three months from being
pronounced fit to work, petitioner executed a release and
quitclaim8 in favor of his employers where he
acknowledged the receipt of US$405.00 as his sickwages
and freed his employers from further liability.
However, on November 27, 2001, petitioner filed a
complaint with the labor arbitration branch of the NLRC for
disability benefit, illness allowance/reimbursement of
medical expenses, damages and attorney's fees.9 To
support his claim, he presented the following: (1) a medical
certificate10 dated July 25, 2001 issued by Dr. Rimando C.
Saguin recommending a Grade VIII disability under the
POEA schedule of disability grading; (2) a medical
certificate11 dated July 27, 2001 issued by Dr. Antonio A.
Pobre, recommending the same Grade VIII disability; and
(3) a medical certificate12 dated August 2, 2001 issued by
Dr. Efren R. Vicaldo recommending a Grade VI disability.
On July 11, 2003, Labor Arbiter Antonio R. Macam
rendered a Decision13 dismissing the complaint, holding
that petitioner was not entitled to disability benefits
because he was declared 'fit for duty. The Labor Arbiter
noted that petitioner had previously executed a release and
quitclaim in favor of his employers and already received his
sickness allowance. Thus, he could not claim for
reimbursement for medical expenses due to lack of
265 | P a g e
pertinent substantiation. Petitioner's claim for moral
damages and attorney's fees were, likewise, not awarded
on the Labor Arbiter's ruling that there was no evidence of
bad faith and malice on the part of the employers.
The fallo of the Labor Arbiter's decision reads:
WHEREFORE, all the foregoing premises considered,
judgment is hereby rendered dismissing the complaint for
lack of merit.
SO ORDERED.14chanroblesvirtuallawlibrary
Petitioner appealed the Decision15 to the NLRC onJuly 31,
2003 which issued its Resolution16 dated February 19,
2004, affirming the decision of the Labor Arbiter, with the
modification that petitioner was entitled to US$1,350.00 or
its peso equivalent, representing his salary for three (3)
months. The NLRC ruled that petitioner should have been
reinstated by respondents considering that when the
former was declared 'fit for duty, his employment contract
had not yet expired. Thus, respondents were liable for his
salary corresponding to the unexpired portion of the
employment contract or three months' salary for every year
of the unexpired term whichever is less, pursuant to
Section 10 of Republic Act No. 8042. The fallo of the
Resolution reads:
WHEREFORE, premises considered, the Appeal is
DENIED. However, for reasons stated above, the Decision
dated 11 July 2003 is hereby MODIFIED, ordering
respondents-appellees to indemnify complainant-appellant
in the amount of US$1,350.00 or its peso equivalent at time
of payment.
SO ORDERED.17chanroblesvirtuallawlibrary
Petitioner filed a Motion for Reconsideration which the
NLRC denied on April 27, 2004.18 He forthwith filed a
Petition for Certiorari19 with the CA, assailing the ruling of
the labor tribunal.
On January 25, 2005, the CA rendered judgment
dismissing the petition.The appellate court declared that
the issues raised by petitioner relating to the credibility and
probative weight of the evidence presented were factual in
nature, hence, proscribed under Rule 65 of the Rules of
Court. The CA noted that petitioner did not even contest
the due execution, voluntariness and veracity of his own
handwritten quitclaim. Thus, he was estopped from
assailing the Deed of Release and Quitclaim he executed
after receiving US$405.00 from respondents.Considering
that petitioner was examined by the company-designated
physician and did not protest the findings thereon and later
received sickwages, the appellate court concluded that the
NLRC was correct in its ruling. The dispositive portion of
the CA decision states:
IN VIEW OF ALL THE FOREGOING, the instant petition is
ordered DISMISSED. No pronouncements as to costs.
SO ORDERED.20chanroblesvirtuallawlibrary
Petitioner's motion for reconsideration was denied by the
CA in its Resolution21 dated April 19, 2005.
Petitioner thus filed the instant petition, raising the following
issues:
266 | P a g e
I.
IN LIGHT OF THE DECISION OF THIS HONORABLE
COURT IN 'GERMAN MARINE AGENCIES, INC. VS.
NLRC, ET AL., 350 SCRA 629, CAN THE
RESPONDENTS' COMPANY-DESIGNATED DOCTOR BE
CONSIDERED COMPETENT AND RELIABLE ENOUGH
TO DECLARE PETITIONER AS FIT TO WORK
CONTRARY TO THE DECLARATIONS OF THREE (3)
INDEPENDENT PHYSICIANS SIMILARLY FINDING HIM
OTHERWISE?
II.
DOES THE EXECUTION BY PETITIONER OF A
RELEASE AND QUITCLAIM ESTOP HIM FROM
CLAIMING DISABILITY BENEFITS UNDER THE POEA
STANDARD EMPLOYMENT CONTRACT?22
The Court's Ruling
As in the CA, the issues raised by the petitioner are
factual.He maintains that the diagnosis of his three (3)
personal doctors declaring him unfit to work is more
accurate and reliable than that of Dr. Pidlaoan, the
company-designated physician. These three physicians,
two of whom are orthopedic surgeons, are likewise in a
better position to determine his fitness or unfitness for
work, unlike Dr. Pidlaoan whose expertise cannot be
ascertained from the medical certificate he issued.
Petitioner thus assails the competence of Dr. Pidlaoan to
assess his fitness to work.
Petitioner avers that the quitclaim he executed is invalid, as
the amount he received as consideration therefor was
much lower than what he should have received under the
POEA Standard Employment Contract. He went on to
argue that quitclaims are frowned upon by this Court as
they are contrary to public policy.
It must be stressed that in a petition for review on certiorari
under Rule 45 of the Rules of Court, only questions of law
may be raised.23 The Court is not a trier of facts and is not
to reassess the credibility and probative weight of the
evidence of the parties and the findings and conclusions of
the Labor Arbiter and the NLRC as affirmed by the
appellate court. Moreover, the factual findings of the Labor
Arbiter and the NLRC are accorded respect and finality
when supported by substantial evidence, which means
suchevidence as that which a reasonable mind might
accept as adequate to support a conclusion. The Court
does not substitute its own judgment for that of the tribunal
in determining where the weight of evidence lies or what
evidence is credible.24
In the instant case, the CA, the NLRC and the Labor
Arbiter are one in their findings that based on the evidence
on record, petitioner is not entitled to disability benefits.
Prescinding from the foregoing, the Court finds and so
rules that under the Standard Terms and Conditions
Governing the Employment of Filipino Seafarers On-Board
Ocean-Going Vessel or the POEA Standard Employment
Contract issued pursuant to DOLE Department Order No.
4, and POEA Memorandum Circular No. 9, both Series of
2000, petitioner is not entitled to disability benefits. Section
267 | P a g e
20-B, paragraph 2 of the POEA Standard Employment
Contract provides:
SECTION 20. COMPENSATION AND BENEFITS
xxxx
B. COMPENSATION AND BENEFITS FOR INJURY OR
ILLNESS
The liabilities of the employer when the seafarer suffers
work-related injury or illness during the term of his contract
are as follows:
xxxx
2. If the injury or illness requires medical and/or dental
treatment in a foreign port, the employer shall be liable for
the full cost of such medical, serious dental, surgical and
hospital treatment as well as board and lodging until the
seafarer is declared fit to work or to be repatriated.
However, if after repatriation, the seafarer still requires
medical attention arising from said injury or illness, he shall
be so provided at cost to the employer until such time he is
declared fit or the degree of his disability has been
established by the company-designated physician.
In the instant case, Dr. Pidlaoan diagnosed petitioner as 'fit
for duty as gleaned from his December 13, 2000 Medical
Report, to wit:
xxxx
Referred and consulted our medical clinic on December 05,
2000 still complaining of on-and-off low back pain
aggravated by movements. X-ray of the lumbosacral spine
revealed normal findings, Fasting Blood Sugar revealed 9.1
(NV 4.1 - 6.1 umol/l). Patient was given Alaxan tablet 2-3x
a day for his back pain and Eugoclon 1 tablet daily for his
elevated blood sugar and advised to come back regularly
for repeat blood sugar and for follow-up evaluation on his
back pain.
Today, December 13, 2000, he came back with no more
complaints of back pain and repeat sugar examination
revealed already normal results.
DIAGNOSIS: Lumbar Strain
Diabetes Mellitus
RECOMMENDATION: Fit for duty effective today,
December 13, 2000.
xxxx
Since he was declared fit for work, petitioner has no more
right to claim disability benefits under the contractual
provisions of the POEA Standard Employment Contract.
Under Section 20-B, paragraph 3 of the said contract,
petitioner is obliged to submit himself to a post-employment
medical examination by a company-designated physician
within three working days upon his return, except when he
is physically incapacitated to do so, in which case, a written
notice to the agency within the same period is deemed as
compliance. Failure to comply with this mandatory
268 | P a g e
reporting requirement shall result in forfeiture of the right to
claim the above benefits.It is likewise provided that if a
doctor appointed by the seafarer disagrees with the
assessment, a third doctor may be agreed jointly between
the employer and the seafarer whose decision shall be final
and binding on both parties.
Petitioner did not question the findings of Dr. Pidlaoan and
his recommendation.He questioned the doctor's
competency and the correctness of his findings only when
he filed the complaint against respondents before the
Labor Arbiter, roughly 11 months after petitioner was
examined by the doctor. Petitioner consulted his personal
doctors only in July and August 2001, long after he had
been examined by the company-designated physician.
Petitioner's invocation of this Court's ruling in German
Marine Agencies v. NLRC25 militates against his claim for
disability benefits. As explicitly laid in the said case, it is the
company-designated physician who should determine the
degree of disability of the seaman or his fitness to work,
thus:
x x x In order to claim disability benefits under the Standard
Employment Contract, it is the company-designated
physician who must proclaim that the seaman suffered a
permanent disability, whether total or partial, due to either
injury or illness, during the term of the latter's employment.
x x x It is a cardinal rule in the interpretation of contracts
that if the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal
meaning of its stipulation shall control.There is no
ambiguity in the wording of the Standard Employment
Contract ' the only qualification prescribed for the physician
entrusted with the task of assessing the seaman's disability
is that he be company-designated.26
Dr. Pidlaoan examined and treated petitioner from the time
he was repatriated up to his recovery and subsequent
assessment as fit for duty on December 13, 2000. As in the
German Marine case, the extensive medical attention
extended by Dr. Pidlaoan enabled the latter to acquire
familiarity, if not detailed knowledge, of petitioner's medical
condition. No doubt such specialized knowledge enabled
Dr. Pidlaoan to arrive at a much more accurate appraisal of
petitioner's condition, as compared to another physician
not privy to petitioner's case from the very
beginning.27Indeed, the assessment of the three other
personal doctors of petitioner could not have been that
reliable considering that they based their conclusions on
the prior findings of Dr. Pidlaoan; moreover, they examined
petitioner 7 or 8 months after he was assessed as fit to
work and treated him for only one day.
The only requirement stated in the POEA Standard
Employment Contract, as explained in the German Marine
case, is that the doctor be company-designated, and no
other. Though it is prudent and advisable to have a doctor
specialized in his field to examine the seafarer's condition
ordegree of illness, the contractual provisions of the parties
only require that the doctor be 'company-designated. When
the language of the contract is explicit, as in the case at
bar, leaving no doubt as to the intention of the drafters
thereof, the courts may not read into it any other intention
that would contradict its plain import.28
Furthermore and most importantly, petitioner did not
question the competency of Dr. Pidlaoan and his
269 | P a g e
assessment when the latter declared him as fit for duty or
fit to work.
Additionally, petitioner, instead of questioning the
assessment of the company-designated doctor, executed a
release and quitclaim in favor ofrespondents, around three
months after the assessment. In executing the said
document, petitioner thus impliedly admitted the
correctness of the assessment of the company-designated
physician, and acknowledged that he could no longer claim
for disability benefits.
While petitioner may be correct in stating that quitclaims
are frowned upon for being contrary to public policy, the
Court has, likewise, recognized legitimate waivers that
represent a voluntary and reasonable settlement of a
worker's claim which should be respected as the law
between the parties. Where the person making the waiver
has done so voluntarily, with a full understanding thereof,
and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as being a
valid and binding undertaking.29
In the instant case, petitioner, by his own hand, wrote the
following in the March 20, 2001 release and quitclaim:
That I have read this paper from beginning to and [sic] and
understand the contents thereof.
That I know this paper that I am signing.
That I know that signing this paper settles and ends every
right or claim I have for all damages including but not
limited to loss of earning capacity [sic] of past and future
maintenance. [sic] support [sic] suffering [sic] mental
anguish. [sic] serious anxiety and similar injury.
That I have received the amount of US$405 or ₱18,630.
That I know that upon receipt of the above amount I waive
all claims I may have for damage against the vessel's
owners and her agents, insurers, charterers, operators [sic]
underwriters, p.i. clube [sic], shipper and all other persons
in interest therein or thereon, under all and all other
countries.30chanroblesvirtuallawlibrary
From the document itself, the element of voluntariness in
its execution is evident. Petitioner also appears to have
fully understood the contents of the document he was
signing, as the important provision thereof had been
relayed to him in Filipino. Thus, the document also states:
Na alam ko na pagkatanggap ko nang halagang ito ay
pinawawalang bisa at iniuurong ko nang lahat [ng] aking
interes, karapatan, at anumang reklamo o damyos laban
sa barko, may-ari nito, mga ahente, seguro at lahat-lahat
ng may kinalaman sa barkong ito maging dito sa Pilipinas o
anumang bansa.31chanroblesvirtuallawlibrary
Likewise, the US$405.00 which he received in
consideration of the quitclaim is a credible and reasonable
amount. He was truly entitled thereto, no more and no less,
given that he was sick for only less than a month or from
November 15, 2000 to December 13, 2000. The same
would not, therefore, invalidate the said quitclaim. As we
held in Periquet v. National Labor Relations Commission:32
270 | P a g e
Not all waivers and quitclaims are invalid as against public
policy. If the agreement was voluntarily entered into and
1âw phi1
represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on
its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what
he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be
recognized as a valid and binding
undertaking.33chanroblesvirtuallawlibrary
As a final note, let it be emphasized that 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.34
WHEREFORE, premises considered, the petition is hereby
DENIED for lack of merit. The Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 84883 are
AFFIRMED. Costs against the petitioner.
SO ORDERED.
G.R. No. 106771 November 18, 1994
ALHAMBRA INDUSTRIES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
DANILO RUPISAN, respondents.
Hofileña, Guingona & Sedigo for petitioner. assistance of his representative if he so
desires in accordance with company rules and
Pedro T. Molo for private respondent. regulations promulgated pursuant to
guidelines set by the Department of Labor and
Employment. Any decision taken by the
employer shall be without prejudice to the right
BELLOSILLO, J.:
of the worker to contest the validity or legality
of his dismissal by filing a complaint with the
TODAY employment is no longer just an ordinary human
regional branch of the National Labor
activity. For most families the main source of their
Relations Commission. The burden of proving
livelihood, employment has now leveled off with property
that the termination was for a valid or
rights which no one may be deprived of without due
authorized cause shall rest on the employer.
process of law.
The Secretary of Labor and Employment may
suspend the effects of the termination pending
Termination of employment is not anymore a mere
resolution of the dispute in the event of
cessation or severance of contractual relationship but an
a prima facie finding by the appropriate official
economic phenomenon affecting members of the family.
of the Department of Labor and Employment
This explains why under the broad principles of social
before whom such dispute is pending that the
justice the dismissal of employees is adequately protected
termination may cause a serious labor dispute
by the laws of the state. Hence, Art. 277, par. (b), of
or is in implementation of a mass lay-off.
the Labor Code of the Philippines, as amended by Sec. 33,
R.A. 6715, provides —
Rule XIV, Book V, of the Omnibus Rules Implementing the
Labor Code outlines the procedure for termination of
Subject to the constitutional right of workers to
employment —
security of tenure and their right to be
protected against dismissal except for a just
Sec. 1. Security of tenure and due process. —
and authorized cause and without prejudice to
No worker shall be dismissed except for a just
the requirement of notice under Article 283 of
or authorized cause provided by law and after
this Code, the employer shall furnish the
due process.
worker whose employment is sought to be
terminated a written notice containing a Sec. 2. Notice of Dismissal. — Any employer
statement of the causes for termination and who seeks to dismiss a worker shall furnish
shall afford the latter ample opportunity to be him a written notice stating the particular acts
heard and to defend himself with the or omissions constituting the grounds for his
271 | P a g e
 dismissal. In cases of abandonment of work,
the notice shall be served at the worker's last
known address.
xxx xxx xxx
Sec. 5. Answer and hearing. — The worker
may answer the allegations stated against him
in the notice of dismissal within a reasonable
period from receipt of such notice. The
employer shall afford the worker ample
opportunity to be heard and to defend himself
with the assistance of his representatives, if he
so desires.
Sec. 6. Decision to dismiss. — The employer
shall immediately notify a worker in writing of a
decision to dismiss him stating clearly the
reasons therefor.
Sec. 7. Right to contest dismissal. — Any
decision taken by the employer shall be
without prejudice to the right of the worker to
contest the validity or legality of his dismissal
by filing a complaint with the Regional Branch
of the Commission.
xxx xxx xxx
Sec. 11. Report on dismissal. — The employer
shall submit a monthly report to the Regional
Office having jurisdiction over the place of
work all dismissals effected by him during the
month, specifying therein the names of the
272 | P a g e
dismissed workers, the reasons for their
dismissal, the dates of commencement and
termination of employment, the positions last
held by them and such other information as
may be required by the Ministry (Department)
for policy guidance and statistical purposes.
We declared in Salaw v. NLRC1 —
Under the Labor Code, as amended, the
requirements for the lawful dismissal of an
employee by his employer are two-fold: the
substantive and the procedural. Not only must
the dismissal be for a valid or authorized
cause as provided by law (Articles 279, 281,
282-284, New Labor Code), but the
rudimentary requirements of due process —
notice and hearing — must also be observed
before an employee may be dismissed. One
does not suffice; without their concurrence, the
termination would, in the eyes of the law, be
illegal (San Miguel Corporation v. NLRC, G.R.
No. 78277, May 12, 1989, 173 SCRA 314).
The inviolability of notice and hearing for a
valid dismissal of an employee can not be
overemphasized. Those twin requirements
constitute essential elements of due process in
cases of employee dismissal. The requirement
of notice is intended to inform the employee
concerned of the employer's intent to dismiss
him and the reason for the proposed
dismissal; on the other hand, the requirement
of hearing affords the employee the
 opportunity to answer his employer's charges
against him and accordingly to defend himself
therefrom before dismissal is effected. Neither
one of these two requirements can be
dispensed with without running afoul of the
due process requirement of the Constitution
(Century Textile Mills, et al. v. NLRC, et al.,
No. 77859, May 25, 1988, 161 SCRA 528).
On 27 June 1987, petitioner Alhambra Industries, Inc.
(ALHAMBRA for brevity), a Filipino cigar and cigarette
manufacturing and distribution company, employed private
respondent Danilo C. Rupisan as salesman on a six-month
probationary basis. From 9-12 December 1989,
ALHAMBRA conducted a surprise audit of the records of
Rupisan. He was then called to the Head Office on 3
January 1990 where alleged violations of company rules
purportedly committed by him were brought to his attention.
On 8 January 1990, Rupisan was placed under a one-
month preventive suspension for serious violations of
company policies, rules and regulations, as reflected in the
results of the surprise audit.
On 22 January 1990, Rupisan protested his suspension,
reiterating vehement denial of the charges against him and
exposing the threat of termination at their meeting of 3
January 1990. He alleges that as of
30 December 1989 the charges against him had become
academic when he was given a clearance of all his
accountabilities.
On 6 February 1990, a day before the end of his
suspension, ALHAMBRA wrote Rupisan terminating his
services effective 8 February 1990.
273 | P a g e
On 23 March 1990, Rupisan sued ALHAMBRA for illegal
dismissal and unpaid wages or commissions. The suit was
later amended on 24 April 1990 to include charges of illegal
suspension and damages.
After trial, Labor Arbiter Donato G. Quinto, Jr., found that
the termination of Rupisan was for a just cause.2 However,
he also ruled that there was a violation of Rupisan's right to
due process, particularly the failure of ALHAMBRA to
furnish him copy of the audit report on which his dismissal
was based. Consequently, judgment was rendered
directing ALHAMBRA to pay Rupisan P23,040.00 in
backwages covering the period 8 February to 19 November
1990, P600.00 in unpaid salary from 1-7 January 1990,
P2,650.00 for separation pay in lieu of reinstatement, and
commissions for the sales generated in the months of
November and December 1989.
Both parties appealed to respondent National Labor
Relations Commission which on 29 May 1992 affirmed the
Labor Arbiter's findings of lack of due process but added
that since Rupisan could have explained fully the charges
against him had he been given the chance to do so, his
reinstatement was instead ordered in lieu of separation
pay.
In this extraordinary recourse under Rule 65 of the Rules of
Court, ALHAMBRA seeks a declaration that Rupisan was
validly dismissed and, in any case, he should no longer be
reinstated but paid separation pay instead. In his comment,
Rupisan also seeks payment of separation pay and no
longer reinstatement.
The crux of the controversy is whether respondent NLRC
committed grave abuse of discretion in sustaining the
finding of the Labor Arbiter that Rupisan was illegally
dismissed but directing at the same time his reinstatement
for the reason that he could have explained the charges
had he been given the opportunity to be heard. NLRC
however appears to have skirted the issue on the existence
of a just cause for dismissal and disposed of the case only
on the basis of absence of due process.
The error is consequential. A termination without just cause
entitles a worker to reinstatement regardless of whether he
was accorded due process. On the other hand, termination
of a worker for cause, even without procedural due
process, does not warrant reinstatement, but the employer
incurs liability for damages.
Since the Labor Arbiter found a valid ground for dismissal,
taking into consideration the controverting evidence of the
parties, which finding was not set aside by NLRC, the latter
was in grave error when it directed reinstatement. Where,
on the basis of the evidence of the opposing parties the
validity of the dismissal is determinable at the level of the
Labor Arbiter, the latter should resolve that issue. And if the
Labor Arbiter finds just cause in the termination,
reinstatement would no longer serve any purpose. After all,
a finding by the Labor Arbiter as to the validity of the
ground for dismissal is much more impartial and
trustworthy than a determination by the employer who
assumes the role of accuser and judge at the same time.
To order reinstatement and compel the parties to start the
procedure from step one would be circuitous because
almost invariably that same issue of validity of the ground
274 | P a g e
of dismissal would be brought back to the Labor Arbiter for
adjudication. To avoid this runabout process, we laid down
in Wenphil Corporation v. NLRC3 that an otherwise justly
grounded termination without procedural due process
would only sanction payment of damages —
The failure of petitioner to give private
respondent the benefit of a hearing before he
was dismissed constitutes an infringement of
his constitutional right to due process of law
and equal protection of the laws (BLTB Bus
Co. v. Court of Appeals, 71 SCRA 470). The
standards of due process in judicial as well as
administrative proceedings have long been
established. In its bare minimum due process
of law simply means giving notice and
opportunity to be heard before judgment is
rendered (Lopez v. Director of Lands, 47 Phil.
23) . . .
However, it is a matter of fact that when the
private respondent
filed a complaint against petitioner he was
afforded the right to an investigation by the
labor arbiter. He presented his position paper
as did the petitioner . . . The labor arbiter
concluded that the dismissal of private
respondent was for just cause . . . The court is
bound by this finding of the labor arbiter . . .
By the same token, the conclusion of the
public respondent NLRC on appeal that
private respondent was not afforded due
process before he was dismissed is binding on
 this Court. Indeed, it is well-taken and
supported by the records. However, it cannot
justify a ruling that private respondent should
be reinstated with backwages as the public
respondent NLRC so decreed. Although
belatedly, private respondent was afforded
due process before the labor arbiter wherein
the just cause of his dismissal had been
established. With such finding, it would be
arbitrary and unfair to order his reinstatement
with backwages.
The Court holds that the policy of ordering the
reinstatement to the service of an employee
without loss of seniority and the payment of his
wages during the period of his separation until
his actual reinstatement . . . when it appears
he was not afforded due process, although his
dismissal was found to be for just and
authorized cause in an appropriate proceeding
in the Ministry of Labor and Employment,
should be reexamined. It will be highly
prejudicial to the interests of the employer to
impose on him the services of an employee
who has been shown to be guilty of the
charges that warranted his dismissal from
employment. Indeed, it will demoralize
the rank and file if the undeserving, if not
undesirable, remains in the service . . .
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
275 | P a g e
above described. The dismissal of an
employee must be for just or authorized cause
and after due process (Section 1, Rule XIV,
Implementing Regulations of the Labor Code).
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 the
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.
In the case at bench, the decision to dismiss Rupisan did
not state the reason for his termination, in disregard of Sec.
6, Rule XIV, Book V, of the Omnibus Rules. But, having
been found guilty of serious misconduct,4 private
respondent cannot demand reinstatement nor separation
pay. However, he is entitled to damages for petitioner's
non-observance of procedural due process which is not
only required by statute but enshrined in the Constitution.
For this purpose, the amount of P10,000.00 is considered
fair, reasonable and realistic.5
WHEREFORE, the petition is GRANTED and the assailed
decision of NLRC dated 29 May 1992 is SET ASIDE. The
decision of Labor Arbiter Donato G. Quinto, Jr., dated 19
November 1990 is REINSTATED except as to the award of
separation pay which is deleted. In addition, petitioner is
ordered to pay private respondent Danilo Rupisan
P10,000.00 for having been denied procedural due
process.
SO ORDERED.
Padilla, Davide, Jr., Quiason and Kapunan, JJ., concur.
[G.R. No. 125735. August 26, 1999]
LORLENE A. GONZALES, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, FIFTH
DIVISION, CAGAYAN DE ORO CITY, and
ATENEO DE DAVAO
UNIVERSITY, respondents.
DECISION
BELLOSILLO, J.:
By way of certiorari under Rule 65 of the Rules of Court
petitioner seeks the nullification of the Decision of public respondent
National Labor Relations Commission, Fifth Division, which reversed
and set aside that of Executive Labor Arbiter Conchita J. Martinez.
Lorlene Gonzales, petitioner, has been a schoolteacher in the
Elementary Department of private respondent Ateneo de Davao
University (hereafter ATENEO) since 1974 assigned to teach Reading,
Mathematics, Language and Pilipino in the Grade VI class, while
ATENEO is an educational institution, a corporation duly organized
under the laws of the Philippines, with principal address at Jacinto St.,
Davao City.
276 | P a g e
Sometime in 1991 Fr. Oscar Millar, S.J., Ateneo Grade School
Headmaster, sent a letter dated 11 April 1991 informing petitioner
Lorlene A. Gonzales of the complaints of two (2) parents for alleged
use of corporal punishment on her students. Petitioner claimed that she
was not informed of the identity of the parents who allegedly
complained of the corporal punishment she purportedly inflicted in
school-year 1990-1991. She likewise claimed that she was not
confronted about it by private respondent ATENEO in 1991 and that it
was only two (2) years after the complaints were made that she
discovered, through her students and their parents, that ATENEO was
soliciting complainants to lodge written complaints against her.
On 31 March 1993 she wrote a letter to Fr. Oscar Millar, S.J.,
demanding that she be formally informed of the complaint and be duly
investigated.
On 9 June 1993 petitioner was informed of the composition of an
investigative committee organized by Fr. Oscar Millar, S.J., to look
into the alleged use of corporal punishment by petitioner in
disciplining her students. It can be gleaned from the records that she
was duly furnished with the rules of procedure, informed of the
schedule of the hearings, and given copies of the affidavits executed
by the students who testified against her.
Petitioner refused to take part in the investigation unless the rules
of procedure laid down by the Committee be revised, contending that
the same were violative of her right to due process. Petitioner
specifically objected to the provision which stated: x x x 3) Counsel
for Ms. Lorlene Gonzales shall not directly participate in the
investigation but will merely advise Ms. Gonzales x x x (par. 3).[1]
But the Committee was steadfast in its resolve to adopt the
aforementioned rules. In its letter dated 9 August 1993, private
respondent informed petitioner that the rules of procedure to be
applied were substantially the same rules that were used in the
investigation of a former Ateneo employee and therefore we are under
legal advice not to change these rules."[2] Over the objection of
petitioner the Committee commenced with its investigation without
petitioners participation. Out of the twenty -two (22) invitations sent
out by ATENEO to petitioners students and their parents to shed light
on the matter of corporal punishment allegedly administered by her,
eleven (11) appeared and testified before the committee. The eleven
(11) witnesses also executed written statements denominated as
affidavits.
On 10 November 1993 private respondent served a Notice of
Termination on petitioner pursuant to the findings and
recommendation of the Committee. Thereafter, petitioner received a
letter from the president of ATENEO demanding her voluntary
resignation a week from receipt of the letter, otherwise, she would be
considered resigned from the service.
On 29 November 1993 petitioner filed a complaint before the
Labor Arbiter for illegal dismissal. After trial, Executive Labor Arbiter
Conchita J. Martinez found her dismissal illegal for lack of factual
basis and ordered ATENEO to award petitioner separation pay, back
wages and 13th month pay. In her decision, the Executive Labor
Arbiter opined that although petitioner was afforded procedural due
process respondent institution failed to establish substantial evidence
as to the guilt of the complainant of the offense charged"[3] thus -
x x x the complainant was afforded procedural due
process. There is convincing and sufficient evidence x x x
showing respondent complied with the notice and hearing
requirement x x x x.[4]
After considering the evidence, arguments and counter-
arguments of the parties, this office finds that the respondent
failed to establish substantial evidence as to the guilt of
complainant of the offense charged x x x x.[5]
Complainant has sufficiently established that she is a very
good teacher. She is equipped with the appropriate educational
qualifications, trainings, seminars and work experiences. Such
277 | P a g e
fact was affirmed by her present and former students, their
parents, colleagues and the former headmaster of the grade
school x x x x[6]
As a matter of fact, six (6) out of the nine (9) students and their
parents/guardians have retracted and withdrawn their
statements x x x x[7]
Both parties appealed to the NLRC which on 25 March 1996
reversed the decision of the Executive Labor Arbiter by declaring
petitioners dismissal valid and legal but added that since ATENEO
offered petitioner her retirement benefits it was but proper that she be
extended said benefits. Petitioner now seeks the reversal of the
decision; hence, this petition.
The crux of the controversy is whether the NLRC committed
grave abuse of discretion in sustaining as valid and legal the dismissal
of petitioner by private respondent ATENEO.
The NLRC, in our view, appears to have skirted several important
issues raised by petitioner foremost of which is the absence of due
process. Upon being notified of her termination, she has the right to
demand compliance with the basic requirements of due
process. Compliance entails the twin requirements of procedural and
substantial due process. Ample opportunity must be afforded the
employee to defend herself either personally and/or with assistance of
a representative; to know the nature of her offense; and, to cross
examine and confront face to face the witnesses against her. Likewise,
due process requires that the decision must be based on established
facts and on a sound legal foundation.
It is precisely to demand compliance with these requirements that
petitioner at the very onset of the investigation demanded the revision
of the rules laid down by the Investigative Committee. The adamant
refusal of the Committee to accede to this demand resulted in her
failure to confront and cross-examine her accusers. This is not harping
at technicalities as wrongfully pointed out by the NLRC but a serious
violation of petitioner's statutory and constitutional right to due WHEREFORE, the assailed Decision of public respondent
process that ultimately vitiated the investigation. National Labor Relations Commission dated 25 March 1996 is
REVERSED and SET ASIDE, and the decision of Executive Labor
Moreover, the failure of ATENEO to refute the contention of
Arbiter Conchita J. Martinez declaring the dismissal of complainant
petitioner that the joint affidavits executed by the students and parents
Lorlene A. Gonzales illegal for lack of factual basis and ordering
were "pre-prepared" raises serious doubts as to the probative value of
respondent Ateneo de Davao University to pay complainant separation
this evidence. As correctly pointed out by the Executive Labor Arbiter,
pay, back wages and 13th month pay in the total amount of TWO
there is more reason to disregard it especially where the same was
HUNDRED SIXTEEN THOUSAND NINE HUNDRED THIRTY-
challenged and has remained unexplained. Hearsay evidence, in the
EIGHT and 70/100 PESOS (P216,938.70) x x x [f]urther, ordering
strict sense, has no probative value whether objected to or not.
respondent to pay 10% of the total monetary award as attorney's fees
In the instant case, ATENEO failed to prove by substantial to counsel for complainant x x x [d]ismissing all other claims for lack
evidence that petitioner had inflicted corporal punishment on her of merit, is REINSTATED, AFFIRMED and ADOPTED herein as the
students. In Ang Tibay v. CIR, the Court set the measure of evidence to decision in the instant case.
be presented in an administrative investigation when it said, substantial
SO ORDERED.
evidence is more than mere scintilla. It means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion.
The evidence of private respondent did not measure up to this
standard. It relied solely on the witnesses affidavits with questionable [G. R. No. 129329. July 31, 2001]
veracity. Moreover, the affidavit of recantation executed by some
students and their parents all the more weakened the case of private
respondent. Failure in this regard negates the very existence of the
ground for dismissal. ESTER M. ASUNCION, petitioner, vs. NATIONAL
On the other hand, petitioner adequately proved, by means of
LABOR RELATIONS COMMISSION, Second
affidavits, letters of petition and manifesto made by her students and Division, MABINI MEDICAL CLINIC and DR.
co-teachers, that she was a competent and dedicated teacher having WILFRIDO JUCO, respondents.
spent seventeen (17) years of her life in the service of the very
institution which is now seeking her dismissal. DECISION
In view of the foregoing, the conclusion of the NLRC is KAPUNAN, J.:
unwarranted. Employment is not merely a contractual relationship; it
has assumed the nature of property right. It may spell the difference In her petition filed before this Court, Ester Asuncion
whether or not a family will have food on their table, roof over their prays that the Decision, dated November 29, 1996, and the
heads and education for their children. It is for this reason that the Resolution, dated February 20,1997, of the public respondent
State has taken up measures to protect employees from unjustified National Labor Relations Commission, Second Division, in
dismissals. It is also because of this that the right to security of tenure NLRC CA. 011188 which reversed the Decision of the Labor
is not only a statutory right but, more so, a constitutional right.
Arbiter, dated May 15, 1996 be set aside.
278 | P a g e
 The antecedents of this case are as follows:
On August 16, 1993, petitioner Ester M. Asuncion was
employed as an accountant/bookkeeper by the respondent
Mabini Medical Clinic. Sometime in May 1994, certain
officials of the NCR-Industrial Relations Division of the
Department of Labor and Employment conducted a routine
inspection of the premises of the respondent company and
discovered upon the disclosure of the petitioner of (documents)
violations of the labor standards law such as the non-coverage
from the SSS of the employees. Consequently, respondent
Company was made to correct these violations.
On August 9, 1994, the private respondent, Medical
Director Wilfrido Juco, issued a memorandum to petitioner
charging her with the following offenses:
1. Chronic Absentism (sic) You have incurred since Aug. 1993 up
to the present 35 absences and 23 half-days.
2. Habitual tardiness You have late (sic) for 108 times. As shown
on the record book.
3. Loitering and wasting of company time on several occasions and
witnessed by several employees.
4. Getting salary of an absent employee without acknowledging or
signing for it.
5. Disobedience and insubordination - continued refusal to sign
memos given to you.[1]
Petitioner was required to explain within two (2) days why
she should not be terminated based on the above charges.
Three days later, in the morning of August 12, 1994,
petitioner submitted her response to the memorandum. On the
same day, respondent Dr. Juco, through a letter dated August
12, 1994, dismissed the petitioner on the ground of
279 | P a g e
disobedience of lawful orders and for her failure to submit her
reply within the two-day period.
This prompted petitioner to file a case for illegal
termination before the NLRC.
In a Decision, dated May 15, 1996, Labor Arbiter Manuel
Caday rendered judgment declaring that the petitioner was
illegally dismissed. The Labor Arbiter found that the private
respondents were unable to prove the allegation of chronic
absenteeism as it failed to present in evidence the time cards,
logbooks or record book which complainant signed recording
her time in reporting for work. These documents, according to
the Labor Arbiter, were in the possession of the private
respondents. In fact, the record book was mentioned in the
notice of termination. Hence, the non-presentation of these
documents gives rise to the presumption that these documents
were intentionally suppressed since they would be adverse to
private respondents claim. Moreover, the Labor Arbiter ruled
that the petitioners absences were with the conformity of the
private respondents as both parties had agreed beforehand that
petitioner would not report to work on Saturdays. The
handwritten listing of the days when complainant was absent
from work or late in reporting for work and even the
computerized print-out, do not suffice to prove that petitioners
absences were unauthorized as they could easily be
manufactured.[2] Accordingly, the dispositive portion of the
decision states, to wit:
WHEREFORE, Premises Considered, judgment is hereby
rendered declaring the dismissal of the complainant as illegal
and ordering the respondent company to immediately reinstate
her to her former position without loss of seniority rights and
to pay the complainants backwages and other benefits, as
follows:
1) P73,500.00 representing backwages as of the date of this
decision until she is actually reinstated in the service;
2) P20,000.00 by way of moral damages and another P20,000.00
representing exemplary damages; and
3) 10% of the recoverable award in this case representing attorneys
fees.
SO ORDERED.[3]
On appeal, public respondent NLRC rendered the assailed
decision which set aside the Labor Arbiters ruling. Insofar as
finding the private respondents as having failed to present
evidence relative to petitioners absences and tardiness, the
NLRC agrees with the Labor Arbiter. However, the NLRC
ruled that petitioner had admitted the tardiness and absences
though offering justifications for the infractions. The decretal
portion of the assailed decision reads:
WHEREFORE, premises considered, the appealed decision is
hereby VACATED and SET ASIDE and a NEW ONE entered
dismissing the complaint for illegal dismissal for lack of merit.
However, respondents Mabini Medical Clinic and Dr. Wilfrido
Juco are jointly and solidarily ordered to pay complainant
Ester Asuncion the equivalent of her three (3) months salary
for and as a penalty for respondents non-observance of
complainants right to due process.
SO ORDERED.[4]
280 | P a g e
Petitioner filed a motion for reconsideration which the
public respondent denied in its Resolution, dated February 19,
1997. Hence, petitioner through a petition for certiorari under
Rule 65 of the Rules of Court seeks recourse to this Court and
raises the following issue:
THE PUBLIC RESPONDENT ERRED IN FINDING THAT
THE PETITIONER WAS DISMISSED BY THE PRIVATE
RESPONDENT FOR A JUST OR AUTHORIZED CAUSE.
The petition is impressed with merit.
Although, it is a legal tenet that factual findings of
administrative bodies are entitled to great weight and respect,
we are constrained to take a second look at the facts before us
because of the diversity in the opinions of the Labor Arbiter
and the NLRC.[5] A disharmony between the factual findings of
the Labor Arbiter and those of the NLRC opens the door to a
review thereof by this Court.[6]
It bears stressing that a workers employment is property in
the constitutional sense. He cannot be deprived of his work
without due process. In order for the dismissal to be valid, not
only must it be based on just cause supported by clear and
convincing evidence,[7] the employee must also be given an
opportunity to be heard and defend himself. [8] It is the
employer who has the burden of proving that the dismissal was
with just or authorized cause.[9] The failure of the employer to
discharge this burden means that the dismissal is not justified
and that the employee is entitled to reinstatement and
backwages.[10]
In the case at bar, there is a paucity of evidence to
establish the charges of absenteeism and tardiness. We note
that the employer company submitted mere handwritten listing
and computer print-outs. The handwritten listing was not
signed by the one who made the same. As regards the print-
outs, while the listing was computer generated, the entries of
time and other annotations were again handwritten and
unsigned.[11]
We find that the handwritten listing and unsigned
computer print-outs were unauthenticated and, hence,
unreliable. Mere self-serving evidence of which the listing and
print-outs are of that nature should be rejected as evidence
without any rational probative value even in administrative
proceedings. For this reason, we find the findings of the Labor
Arbiter to be correct. On this point, the Labor Arbiter ruled, to
wit:
x x x In the instant case, while the Notice of Termination
served on the complainant clearly mentions the record book
upon which her tardiness (and absences) was based, the
respondent (company) failed to establish (through) any of
these documents and the handwritten listing, notwithstanding,
of (sic) the days when complainant was absent from work or
late in reporting for work and even the computerized print-
outs, do not suffice to prove the complainants absences were
unauthorized as they could easily be manufactured. x x x[12]
In IBM Philippines, Inc. v. NLRC,[13] this Court clarified
that the liberality of procedure in administrative actions is not
absolute and does not justify the total disregard of certain
fundamental rules of evidence. Such that evidence without any
rational probative value may not be made the basis of order or
decision of administrative bodies. The Courts ratiocination in
that case is relevant to the propriety of rejecting the unsigned
281 | P a g e
handwritten listings and computer print-outs submitted by
private respondents which we quote, to wit:
However, the liberality of procedure in administrative actions
is subject to limitations imposed by basic requirements of due
process. As this Court said in Ang Tibay v. CIR, the provision
for flexibility in administrative procedure does not go so far as
to justify orders without a basis in evidence having rational
probative value. More specifically, as held in Uichico v.
NLRC:
It is true that administrative and quasi-judicial bodies like the
NLRC are not bound by the technical rules of procedure in the
adjudication of cases. However, this procedural rule should not
be construed as a license to disregard certain fundamental
evidentiary rules. While the rules of evidence prevailing in the
courts of law or equity are not controlling in proceedings
before the NLRC, the evidence presented before it must at
least have a modicum of admissibility for it to begiven some
probative value. The Statement of Profit and Losses submitted
by Crispa, Inc. to prove its alleged losses, without the
accompanying signature of a certified public accountant or
audited by an independent auditor, are nothing but self-serving
documents which ought to be treated as a mere scrap of paper
devoid of any probative value.
The computer print-outs, which constitute the only evidence of
petitioners, afford no assurance of their authenticity because
they are unsigned. The decisions of this Court, while adhering
to a liberal view in the conduct of proceedings before
administrative agencies, have nonetheless consistently required
some proof of authenticity or reliability as condition for the
admission of documents.
 In Jarcia Machine Shop and Auto Supply, Inc. v.
NLRC,[14] this Court held as incompetent unsigned daily time
records presented to prove that the employee was neglectful of
his duties:
Indeed, the DTRs annexed to the present petition would tend
to establish private respondents neglectful attitude towards his
work duties as shown by repeated and habitual absences and
tardiness and propensity for working undertime for the year
1992. But the problem with these DTRs is that they are neither
originals nor certified true copies. They are plain photocopies
of the originals, if the latter do exist. More importantly, they
are not even signed by private respondent nor by any of the
employers representatives. x x x.
In the case at bar, both the handwritten listing and
computer print-outs being unsigned, the authenticity thereof is
highly suspect and devoid of any rational probative value
especially in the light of the existence of the official record
book of the petitioners alleged absences and tardiness in the
possession of the employer company.
Ironically, in the memorandum charging petitioner and
notice of termination, private respondents referred to the
record book as its basis for petitioners alleged absenteeism and
tardiness. Interestingly, however, the record book was never
presented in evidence. Private respondents had possession
thereof and the opportunity to present the same. Being the
basis of the charges against the petitioner, it is without doubt
the best evidence available to substantiate the allegations. The
purpose of the rule requiring the production of the best
evidence is the prevention of fraud, because if a party is in
possession of such evidence and withholds it, and seeks to
282 | P a g e
substitute inferior evidence in its place, the presumption
naturally arises that the better evidence is withheld for
fraudulent purposes which its production would expose and
defeat.[15] Thus, private respondents unexplained and
unjustified non-presentation of the record book, which is the
best evidence in its possession and control of the charges
against the petitioner, casts serious doubts on the factual basis
of the charges of absenteeism and tardiness.
We find that private respondents failed to present a single
piece of credible evidence to serve as the basis for their
charges against petitioner and consequently, failed to fulfill
their burden of proving the facts which constitute the just
cause for the dismissal of the petitioner. However, the NLRC
ruled that despite such absence of evidence, there was an
admission on the part of petitioner in her Letter dated August
11, 1994 wherein she wrote:
I am quite surprised why I have incurred 35 absences since
August 1993 up to the present. I can only surmise
that Saturdays were not included in my work week at your
clinic. If you will please recall, per agreement with you, my
work days at your clinic is from Monday to Friday without
Saturday work. As to my other supposed absences, I believe
that said absences were authorized and therefore cannot be
considered as absences which need not be explained (sic). It is
also extremely difficult to understand why it is only now that I
am charged to explain alleged absences incurred way back
August 1993.[16]
In reversing the decision of the Labor Arbiter, public
respondent NLRC relied upon the supposed admission of the
petitioner of her habitual absenteeism and chronic tardiness.
 We do not subscribe to the findings of the NLRC that the
above quoted letter of petitioner amounted to an admission of
her alleged absences. As explained by petitioner, her alleged
absences were incurred on Saturdays. According to petitioner,
these should not be considered as absences as there was an
arrangement between her and the private respondents that she
would not be required to work on Saturdays. Private
respondents have failed to deny the existence of this
arrangement. Hence, the decision of the NLRC that private
respondent had sufficient grounds to terminate petitioner as
she admitted the charges of habitual absences has no leg to
stand on.
Neither have the private respondents shown by competent
evidence that the petitioner was given any warning or
reprimanded for her alleged absences and tardiness. Private
respondents claimed that they sent several notices to the
petitioner warning her of her absences, however, petitioner
refused to receive the same. On this point, the Labor Arbiter
succinctly observed:
The record is bereft of any showing that complainant was ever
warned of her absences prior to her dismissal on August 9,
1994. The alleged notices of her absences from August 17,
until September 30, 1993, from October until November 27,
1993, from December 1, 1993 up to February 26, 1994 and the
notice dated 31 May 1994 reminding complainant of her five
(5) days absences, four (4) half-days and tardiness for 582
minutes (Annex "1" to "1-D" attached to respondent'
Rejoinder), fail to show that the notices were received by the
complainant. The allegation of the respondents that the
complainant refused to received (sic) the same is self-serving
and merits scant consideration. xxx[17]
283 | P a g e
The Court, likewise, takes note of the fact that the two-day
period given to petitioner to explain and answer the charges
against her was most unreasonable, considering that she was
charged with several offenses and infractions (35 absences, 23
half-days and 108 tardiness), some of which were allegedly
committed almost a year before, not to mention the fact that
the charges leveled against her lacked particularity.
Apart from chronic absenteeism and habitual tardiness,
petitioner was also made to answer for loitering and wasting of
company time, getting salary of an absent employee without
acknowledging or signing for it and disobedience and
insubordination.[18] Thus, the Labor Arbiter found that actually
petitioner tried to submit her explanation on August 11, 1994
or within the two-day period given her, but private respondents
prevented her from doing so by instructing their staff not to
accept complainants explanation, which was the reason why
her explanation was submitted a day later.[19]
The law mandates that every opportunity and assistance
must be accorded to the employee by the management to
enable him to prepare adequately for his defense.[20] In Ruffy v.
NLRC,[21] the Court held that what would qualify as sufficient
or ample opportunity, as required by law, would be every kind
of assistance that management must accord to the employee to
enable him to prepare adequately for his defense. In the case at
bar, private respondents cannot be gainsaid to have given
petitioner the ample opportunity to answer the charges leveled
against her.
From the foregoing, there are serious doubts in the
evidence on record as to the factual basis of the charges
against petitioner. These doubts shall be resolved in her favor
in line with the policy under the Labor Code to afford
protection to labor and construe doubts in favor of labor.[22] The COURT OF APPEALS and ASIAN
consistent rule is that if doubts exist between the evidence RECRUITMENT COUNCIL PHILIPPINE
presented by the employer and the employee, the scales of CHAPTER (ARCO-PHIL.), INC., representing
justice must be tilted in favor of the latter. The employer must its members: Worldcare Services
affirmatively show rationally adequate evidence that the Internationale, Inc., Steadfast International
dismissal was for a justifiable cause.[23] Not having satisfied its Recruitment Corporation, Dragon
burden of proof, we conclude that the employer dismissed the International Manpower Services
petitioner without any just cause. Hence, the termination is Corporation, Verdant Manpower Mobilization
illegal. Corporation, Brent Overseas Personnel, Inc.,
Having found that the petitioner has been illegally ARL Manpower Services, Inc., Dahlzhen
terminated, she is necessarily entitled to reinstatement to her International Services, Inc., Interworld
former previous position without loss of seniority and the Placement Center, Inc., Lakas Tao Contract
payment of backwages.[24] Services, Ltd. Co., and SSC
WHEREFORE, the Decision of the National Labor Multiservices, respondents.
Relations Commission, dated November 29, 1996 and the
Resolution, dated February 20, 1997 are hereby DECISION
REVERSED and SET ASIDE, and the Decision of the Labor CALLEJO, SR., J.:
Arbiter, dated May 15, 1996 REINSTATED.
In this petition for review on certiorari, the Executive
SO ORDERED. Secretary of the President of the Philippines, the
Secretary of Justice, the Secretary of Foreign Affairs, the
Secretary of Labor and Employment, the POEA
[G.R. No. 131719. May 25, 2004] Administrator and the OWWA Administrator, through the
Office of the Solicitor General, assail the Decision of the
[1]

Court of Appeals in CA-G.R. SP No. 38815 affirming the

Order of the Regional Trial Court of Quezon City dated
[2]
THE EXECUTIVE SECRETARY, THE SECRETARY
August 21, 1995 in Civil Case No. Q-95-24401, granting
OF JUSTICE, THE SECRETARY OF LABOR
the plea of the petitioners therein for a writ of preliminary
AND EMPLOYMENT, AND THE SECRETARY
injunction and of the writ of preliminary injunction issued
OF FOREIGN AFFAIRS, OWWA by the trial court on August 24, 1995.
ADMINISTRATOR, and POEA
ADMINISTRATOR, petitioners, vs. THE HON.
284 | P a g e
 The Antecedents
Republic Act No. 8042, otherwise known as the
Migrant Workers and Overseas Filipinos Act of 1995,
took effect on July 15, 1995. The Omnibus Rules and
Regulations Implementing the Migrant Workers and
Overseas Filipino Act of 1995 was, thereafter, published
in the April 7, 1996 issue of the Manila Bulletin. However,
even before the law took effect, the Asian Recruitment
Council Philippine Chapter, Inc. (ARCO-Phil.) filed, on
July 17, 1995, a petition for declaratory relief under Rule
63 of the Rules of Court with the Regional Trial Court of
Quezon City to declare as unconstitutional Section 2,
paragraph (g), Section 6, paragraphs (a) to (j), (l) and
(m), Section 7, paragraphs (a) and (b), and Sections 9
and 10 of the law, with a plea for the issuance of a
temporary restraining order and/or writ of preliminary
injunction enjoining the respondents therein from
enforcing the assailed provisions of the law.
In a supplement to its petition, the ARCO-Phil.
alleged that Rep. Act No. 8042 was self-executory and
that no implementing rules were needed. It prayed that
the court issue a temporary restraining order to enjoin
the enforcement of Section 6, paragraphs (a) to (m) on
illegal recruitment, Section 7 on penalties for illegal
recruitment, and Section 9 on venue of criminal actions
for illegal recruitments, viz:
Viewed in the light of the foregoing discussions, there appears
to be urgent an imperative need for this Honorable Court to
maintain the status quo by enjoining the implementation or
effectivity of the questioned provisions of RA 8042, by way of
285 | P a g e
a restraining order otherwise, the member recruitment agencies
of the petitioner will suffer grave or irreparable damage or
injury. With the effectivity of RA 8042, a great majority of the
duly licensed recruitment agencies have stopped or suspended
their operations for fear of being prosecuted under the
provisions of a law that are unjust and unconstitutional. This
Honorable Court may take judicial notice of the fact that
processing of deployment papers of overseas workers for the
past weeks have come to a standstill at the POEA and this has
affected thousands of workers everyday just because of the
enactment of RA 8042. Indeed, this has far reaching effects not
only to survival of the overseas manpower supply industry and
the active participating recruitment agencies, the countrys
economy which has survived mainly due to the dollar
remittances of the overseas workers but more importantly, to
the poor and the needy who are in dire need of income-
generating jobs which can only be obtained from abroad. The
loss or injury that the recruitment agencies will suffer will then
be immeasurable and irreparable. As of now, even foreign
employers have already reduced their manpower requirements
from the Philippines due to their knowledge that RA 8042
prejudiced and adversely affected the local recruitment
agencies.[3]
On August 1, 1995, the trial court issued a temporary
restraining order effective for a period of only twenty (20)
days therefrom.
After the petitioners filed their comment on the
petition, the ARCO-Phil. filed an amended petition, the
amendments consisting in the inclusion in the caption
thereof eleven (11) other corporations which it alleged
were its members and which it represented in the suit,
and a plea for a temporary restraining order enjoining the contemplated under Article 13(f) of Presidential Decree No.
respondents from enforcing Section 6 subsection (i), 442, as amended, otherwise known as the Labor Code of the
Section 6 subsection (k) and paragraphs 15 and 16 Philippines: Provided, That any such non-licensee or non-
thereof, Section 8, Section 10, paragraphs 1 and 2, and holder who, in any manner, offers or promises for a fee
Sections 11 and 40 of Rep. Act No. 8042. employment abroad to two or more persons shall be deemed so
engaged. It shall, likewise, include the following acts, whether
The respondent ARCO-Phil. assailed Section 2(g)
committed by any person, whether a non-licensee, non-holder,
and (i), Section 6 subsection (a) to (m), Section 7(a) to
licensee or holder of authority:
(b), and Section 10 paragraphs (1) and (2), quoted as
follows: (a) To charge or accept directly or indirectly any amount
greater than that specified in the schedule of allowable fees
(g) THE STATE RECOGNIZES THAT THE ULTIMATE
prescribed by the Secretary of Labor and Employment, or to
PROTECTION TO ALL MIGRANT WORKERS IS THE
make a worker pay any amount greater than that actually
POSSESSION OF SKILLS. PURSUANT TO THIS AND AS
received by him as a loan or advance;
SOON AS PRACTICABLE, THE GOVERNMENT SHALL
DEPLOY AND/OR ALLOW THE DEPLOYMENT ONLY
(b) To furnish or publish any false notice or information or
OF SKILLED FILIPINO WORKERS. [4]
document in relation to recruitment or employment;
Sec. 2 subsection (i, 2nd par.) (c) To give any false notice, testimony, information or
document or commit any act of misrepresentation for the
Nonetheless, the deployment of Filipino overseas workers,
purpose of securing a license or authority under the Labor
whether land-based or sea-based, by local service contractors
Code;
and manning agents employing them shall be encourages
(sic). Appropriate incentives may be extended to them.
(d) To induce or attempt to induce a worker already employed
to quit his employment in order to offer him another unless the
II. ILLEGAL RECRUITMENT
transfer is designed to liberate a worker from oppressive terms
SEC. 6. Definition. For purposes of this Act, illegal and conditions of employment;
recruitment shall mean any act of canvassing, enlisting,
(e) To influence or attempt to influence any person or entity
contracting, transporting, utilizing, hiring, or procuring
not to employ any worker who has not applied for employment
workers and includes referring, contract services, promising or
through his agency;
advertising for employment abroad, whether for profit or not,
when undertaken by a non-licensee or non-holder of authority

286 | P a g e
(f) To engage in the recruitment or placement of workers in
jobs harmful to public health or morality or to the dignity of
the Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the
Secretary of Labor and Employment or by his duly authorized
representative;
(h) To fail to submit reports on the status of employment,
placement vacancies, remittance of foreign exchange earnings,
separation from jobs, departures and such other matters or
information as may be required by the Secretary of Labor and
Employment;
(i) To substitute or alter to the prejudice of the worker,
employment contracts approved and verified by the
Department of Labor and Employment from the time of actual
signing thereof by the parties up to and including the period of
the expiration of the same without the approval of the
Department of Labor and Employment;
(j) For an officer or agent of a recruitment or placement
agency to become an officer or member of the Board of any
corporation engaged in travel agency or to be engaged directly
or indirectly in the management of a travel agency;
(k) To withhold or deny travel documents from applicant
workers before departure for monetary or financial
considerations other than those authorized under the Labor
Code and its implementing rules and regulations;
(l) Failure to actually deploy without valid reason as
determined by the Department of Labor and Employment; and
287 | P a g e
(m) Failure to reimburse expenses incurred by the worker in
connection with his documentation and processing for
purposes of deployment, in cases where the deployment does
not actually take place without the workers fault. Illegal
recruitment when committed by a syndicate or in large scale
shall be considered an offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if
carried out by a group of three (3) or more persons conspiring
or confederating with one another. It is deemed committed in
large scale if committed against three (3) or more persons
individually or as a group.
The persons criminally liable for the above offenses are the
principals, accomplices and accessories. In case of juridical
persons, the officers having control, management or direction
of their business shall be liable.
SEC. 7. Penalties.
(a) Any person found guilty of illegal recruitment shall suffer
the penalty of imprisonment of not less than six (6) years and
one (1) day but not more than twelve (12) years and a fine of
not less than two hundred thousand pesos (P200,000.00) nor
more than five hundred thousand pesos (P500,000.00).
(b) The penalty of life imprisonment and a fine of not less than
five hundred thousand pesos (P500,000.00) nor more than one
million pesos (P1,000,000.00) shall be imposed if illegal
recruitment constitutes economic sabotage as defined herein.
Provided, however, That the maximum penalty shall be
imposed if the person illegally recruited is less than eighteen
(18) years of age or committed by a non-licensee or non-holder
of authority.
Sec. 8.
Prohibition on Officials and Employees. It shall be unlawful
for any official or employee of the Department of Labor and
Employment, the Philippine Overseas Employment
Administration (POEA), or the Overseas Workers Welfare
Administration (OWWA), or the Department of Foreign
Affairs, or other government agencies involved in the
implementation of this Act, or their relatives within the fourth
civil degree of consanguinity or affinity, to engage, directly or
indirectly, in the business of recruiting migrant workers as
defined in this Act. The penalties provided in the immediate
preceding paragraph shall be imposed upon
them. (underscoring supplied)
Sec. 10, pars. 1 & 2.
Money Claims. Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of
an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms
of damages.
The liability of the principal/employer and the
recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be
288 | P a g e
incorporated in the contract for overseas employment and shall
be a condition precedent for its approval. The performance
bond to be filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or
damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may
be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and
damages.
SEC. 11. Mandatory Periods for Resolution of Illegal
Recruitment Cases. The preliminary investigations of cases
under this Act shall be terminated within a period of thirty (30)
calendar days from the date of their filing. Where the
preliminary investigation is conducted by a prosecution officer
and a prima facie case is established, the corresponding
information shall be filed in court within twenty-four (24)
hours from the termination of the investigation. If the
preliminary investigation is conducted by a judge and a prima
facie case is found to exist, the corresponding information
shall be filed by the proper prosecution officer within forty-
eight (48) hours from the date of receipt of the records of the
case.
The respondent averred that the aforequoted
provisions of Rep. Act No. 8042 violate Section 1, Article
III of the Constitution. According to the respondent,
[5]
Section 6(g) and (i) discriminated against unskilled
workers and their families and, as such, violated the
equal protection clause, as well as Article II, Section
12 and Article XV, Sections 1 and 3(3) of the
[6] [7]
Constitution. As the law encouraged the deployment of
[8]
skilled Filipino workers, only overseas skilled workers are
granted rights. The respondent stressed that unskilled
workers also have the right to seek employment
abroad. According to the respondent, the right of
unskilled workers to due process is violated because
they are prevented from finding employment and earning
a living abroad. It cannot be argued that skilled workers
are immune from abuses by employers, while unskilled
workers are merely prone to such abuses. It was pointed
out that both skilled and unskilled workers are subjected
to abuses by foreign employers. Furthermore, the
prohibition of the deployment of unskilled workers abroad
would only encourage fly-by-night illegal recruiters.
According to the respondent, the grant of incentives
to service contractors and manning agencies to the
exclusion of all other licensed and authorized recruiters
is an invalid classification. Licensed and authorized
recruiters are thus deprived of their right to property and
due process and to the equality of the person. It is
understandable for the law to prohibit illegal recruiters,
but to discriminate against licensed and registered
recruiters is unconstitutional.
The respondent, likewise, alleged that Section 6,
subsections (a) to (m) is unconstitutional because
licensed and authorized recruitment agencies are placed
on equal footing with illegal recruiters. It contended that
while the Labor Code distinguished between recruiters
who are holders of licenses and non-holders thereof in
the imposition of penalties, Rep. Act No. 8042 does not
make any distinction. The penalties in Section 7(a) and
(b) being based on an invalid classification are,
therefore, repugnant to the equal protection clause,
289 | P a g e
besides being excessive; hence, such penalties are
violative of Section 19(1), Article III of the Constitution. It
[9]
was also pointed out that the penalty for
officers/officials/employees of recruitment agencies who
are found guilty of economic sabotage or large-scale
illegal recruitment under Rep. Act No. 8042 is life
imprisonment. Since recruitment agencies usually
operate with a manpower of more than three persons,
such agencies are forced to shut down, lest their officers
and/or employees be charged with large scale illegal
recruitment or economic sabotage and sentenced to life
imprisonment. Thus, the penalty imposed by law, being
disproportionate to the prohibited acts, discourages the
business of licensed and registered recruitment
agencies.
The respondent also posited that Section 6(m) and
paragraphs (15) and (16), Sections 8, 9 and 10,
paragraph 2 of the law violate Section 22, Article III of
the Constitution prohibiting ex-post facto laws and bills
[10]
of attainder. This is because the provisions presume that
a licensed and registered recruitment agency is guilty of
illegal recruitment involving economic sabotage, upon a
finding that it committed any of the prohibited acts under
the law. Furthermore, officials, employees and their
relatives are presumed guilty of illegal recruitment
involving economic sabotage upon such finding that they
committed any of the said prohibited acts.
The respondent further argued that the 90-day period
in Section 10, paragraph (1) within which a labor arbiter
should decide a money claim is relatively short, and
could deprive licensed and registered recruiters of their
right to due process. The period within which the
summons and the complaint would be served on foreign
employees and, thereafter, the filing of the answer to the
complaint would take more than 90 days. This would
thereby shift on local licensed and authorized recruiters
the burden of proving the defense of foreign
employers. Furthermore, the respondent asserted,
Section 10, paragraph 2 of the law, which provides for
the joint and several liability of the officers and
employees, is a bill of attainder and a violation of the
right of the said corporate officers and employees to due
process. Considering that such corporate officers and
employees act with prior approval of the board of
directors of such corporation, they should not be liable,
jointly and severally, for such corporate acts.
The respondent asserted that the following provisions
of the law are unconstitutional:
SEC. 9. Venue. A criminal action arising from illegal
recruitment as defined herein shall be filed with the Regional
Trial Court of the province or city where the offense was
committed or where the offended party actually resides at the
time of the commission of the offense: Provided, That the
court where the criminal action is first filed shall acquire
jurisdiction to the exclusion of other courts: Provided,
however, That the aforestated provisions shall also apply to
those criminal actions that have already been filed in court at
the time of the effectivity of this Act.
SEC. 10. Money Claims. Notwithstanding any provision of
law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
290 | P a g e
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and
other forms of damages.
Sec. 40.
The departments and agencies charged with carrying out the
provisions of this Act shall, within ninety (90) days after the
effectiviy of this Act, formulate the necessary rules and
regulations for its effective implementation.
According to the respondent, the said provisions
violate Section 5(5), Article VIII of the
Constitution because they impair the power of the
[11]
Supreme Court to promulgate rules of procedure.
In their answer to the petition, the petitioners
alleged, inter alia, that (a) the respondent has no cause
of action for a declaratory relief; (b) the petition was
premature as the rules implementing Rep. Act No. 8042
not having been released as yet; (c) the assailed
provisions do not violate any provisions of the
Constitution; and, (d) the law was approved by Congress
in the exercise of the police power of the State. In
opposition to the respondents plea for injunctive relief,
the petitioners averred that:
As earlier shown, the amended petition for declaratory relief is
devoid of merit for failure of petitioner to demonstrate
convincingly that the assailed law is unconstitutional, apart
from the defect and impropriety of the petition. One who
attacks a statute, alleging unconstitutionality must prove its
invalidity beyond reasonable doubt (Caleon v. Agus
Development Corporation, 207 SCRA 748). All reasonable
doubts should be resolved in favor of the constitutionality of a
statute (People v. Vera, 65 Phil. 56). This presumption of
constitutionality is based on the doctrine of separation of
powers which enjoin upon each department a becoming
respect for the acts of the other departments (Garcia vs.
Executive Secretary, 204 SCRA 516 [1991]). Necessarily, the
ancillary remedy of a temporary restraining order and/or a writ
of preliminary injunction prayed for must fall. Besides, an act
of legislature approved by the executive is presumed to be
within constitutional bounds (National Press Club v.
Commission on Elections, 207 SCRA 1). [12]
After the respective counsels of the parties were
heard on oral arguments, the trial court issued on August
21, 1995, an order granting the petitioners plea for a writ
of preliminary injunction upon a bond of P50,000. The
petitioner posted the requisite bond and on August 24,
1995, the trial court issued a writ of preliminary injunction
enjoining the enforcement of the following provisions of
Rep. Act No. 8042 pending the termination of the
proceedings:
Section 2, subsections (g) and (i, 2nd par.); Section 6,
subsections (a) to (m), and pars. 15 & 16; Section 7,
subsections (a) & (b); Section 8; Section 9; Section 10; pars. 1
& 2; Section 11; and Section 40 of Republic Act No. 8042,
otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995. [13]
291 | P a g e
The petitioners filed a petition for certiorari with the
Court of Appeals assailing the order and the writ of
preliminary injunction issued by the trial court on the
following grounds:
1. Respondent ARCO-PHIL. had utterly failed to show its
clear right/s or that of its member-agencies to be protected by
the injunctive relief and/or violation of said rights by the
enforcement of the assailed sections of R.A. 8042;
2. Respondent Judge fixed a P50,000 injunction bond which is
grossly inadequate to answer for the damage which petitioner-
officials may sustain, should respondent ARCO-PHIL. be
finally adjudged as not being entitled thereto.
[14]
The petitioners asserted that the respondent is not
the real party-in-interest as petitioner in the trial court. It
is inconceivable how the respondent, a non-stock and
non-profit corporation, could sustain direct injury as a
result of the enforcement of the law. They argued that if,
at all, any damage would result in the implementation of
the law, it is the licensed and registered recruitment
agencies and/or the unskilled Filipino migrant workers
discriminated against who would sustain the said injury
or damage, not the respondent. The respondent, as
petitioner in the trial court, was burdened to adduce
preponderant evidence of such irreparable injury, but
failed to do so. The petitioners further insisted that the
petition a quo was premature since the rules and
regulations implementing the law had yet to be
promulgated when such petition was filed. Finally, the
petitioners averred that the respondent failed to establish
the requisites for the issuance of a writ of preliminary
injunction against the enforcement of the law and the
rules and regulations issued implementing the same.
On December 5, 1997, the appellate court came out
with a four-page decision dismissing the petition and
affirming the assailed order and writ of preliminary
injunction issued by the trial court. The appellate court,
likewise, denied the petitioners motion for
reconsideration of the said decision.
The petitioners now come to this Court in a petition
for review on certiorari on the following grounds:
1. Private respondent ARCO-PHIL. had utterly failed to show
its clear right/s or that of its member-agencies to be protected
by the injunctive relief and/or violation of said rights by the
enforcement of the assailed sections of R.A. 8042;
2. The P50,000 injunction bond fixed by the court a quo and
sustained by the Court of Appeals is grossly inadequate to
answer for the damage which petitioners-officials may sustain,
should private respondent ARCO-PHIL. be finally adjudged as
not being entitled thereto.
[15]
On February 16, 1998, this Court issued a temporary
restraining order enjoining the respondents from
enforcing the assailed order and writ of preliminary
injunction.
The Issues
The core issue in this case is whether or not the trial
court committed grave abuse of its discretion amounting
292 | P a g e
to excess or lack of jurisdiction in issuing the assailed
order and the writ of preliminary injunction on a bond of
only P50,000 and whether or not the appellate court
erred in affirming the trial courts order and the writ of
preliminary injunction issued by it.
The petitioners contend that the respondent has
no locus standi. It is a non-stock, non-profit organization;
hence, not the real party-in-interest as petitioner in the
action. Although the respondent filed the petition in the
Regional Trial Court in behalf of licensed and registered
recruitment agencies, it failed to adduce in evidence a
certified copy of its Articles of Incorporation and the
resolutions of the said members authorizing it to
represent the said agencies in the proceedings. Neither
is the suit of the respondent a class suit so as to vest in it
a personality to assail Rep. Act No. 8042; the respondent
is service-oriented while the recruitment agencies it
purports to represent are profit-oriented. The petitioners
assert that the law is presumed constitutional and, as
such, the respondent was burdened to make a case
strong enough to overcome such presumption and
establish a clear right to injunctive relief.
The petitioners bewail the P50,000 bond fixed by the
trial court for the issuance of a writ of preliminary
injunction and affirmed by the appellate court. They
assert that the amount is grossly inadequate to answer
for any damages that the general public may suffer by
reason of the non-enforcement of the assailed provisions
of the law. The trial court committed a grave abuse of its
discretion in granting the respondents plea for injunctive
relief, and the appellate court erred in affirming the order
and the writ of preliminary injunction issued by the trial
court.
The respondent, for its part, asserts that it has duly
established its locus standi and its right to injunctive
relief as gleaned from its pleadings and the appendages
thereto. Under Section 5, Rule 58 of the Rules of Court,
it was incumbent on the petitioners, as respondents in
the RTC, to show cause why no injunction should
issue. It avers that the injunction bond posted by the
respondent was more than adequate to answer for any
injury or damage the petitioners may suffer, if any, by
reason of the writ of preliminary injunction issued by the
RTC. In any event, the assailed provisions of Rep. Act
No. 8042 exposed its members to the immediate and
irreparable damage of being deprived of their right to a
livelihood without due process, a property right protected
under the Constitution.
The respondent contends that the commendable
purpose of the law to eradicate illegal recruiters should
not be done at the expense and to the prejudice of
licensed and authorized recruitment agencies. The writ
of preliminary injunction was necessitated by the great
number of duly licensed recruitment agencies that had
stopped or suspended their business operations for fear
that their officers and employees would be indicted and
prosecuted under the assailed oppressive penal
provisions of the law, and meted excessive
penalties. The respondent, likewise, urges that the Court
should take judicial notice that the processing of
deployment papers of overseas workers have come to a
virtual standstill at the POEA.
293 | P a g e
The Courts Ruling
The petition is meritorious.
The Respondent Has Locus Standi
To File the Petition in the RTC in
Representation of the Eleven
Licensed and Registered
Recruitment Agencies Impleaded
in the Amended Petition
The modern view is that an association has standing
to complain of injuries to its members. This view fuses
the legal identity of an association with that of its
members. An association has standing to file suit for its
[16]
workers despite its lack of direct interest if its members
are affected by the action. An organization has standing
to assert the concerns of its constituents.
[17]
In Telecommunications and Broadcast Attorneys of
the Philippines v. Commission on Elections, we held
[18]
that standing jus tertii would be recognized only if it can
be shown that the party suing has some substantial
relation to the third party, or that the right of the third
party would be diluted unless the party in court is allowed
to espouse the third partys constitutional claims.
In this case, the respondent filed the petition for
declaratory relief under Rule 64 of the Rules of Court for
and in behalf of its eleven (11) licensed and registered
recruitment agencies which are its members, and which
approved separate resolutions expressly authorizing the
respondent to file the said suit for and in their behalf. We
note that, under its Articles of Incorporation, the
respondent was organized for the purposes inter alia of
promoting and supporting the growth and development
of the manpower recruitment industry, both in the local
and international levels; providing, creating and exploring
employment opportunities for the exclusive benefit of its
general membership; enhancing and promoting the
general welfare and protection of Filipino workers;
and, to act as the representative of any individual,
company, entity or association on matters related to the
manpower recruitment industry, and to perform other
acts and activities necessary to accomplish the purposes
embodied therein. The respondent is, thus, the
appropriate party to assert the rights of its members,
because it and its members are in every practical sense
identical. The respondent asserts that the assailed
provisions violate the constitutional rights of its members
and the officers and employees thereof. The respondent
is but the medium through which its individual members
seek to make more effective the expression of their
voices and the redress of their grievances. [19]
However, the respondent has no locus standi to file
the petition for and in behalf of unskilled workers. We
note that it even failed to implead any unskilled workers
in its petition. Furthermore, in failing to implead, as
parties-petitioners, the eleven licensed and registered
recruitment agencies it claimed to represent, the
respondent failed to comply with Section 2 of Rule 63 of
[20]
the Rules of Court. Nevertheless, since the eleven
licensed and registered recruitment agencies for which
the respondent filed the suit are specifically named in the
294 | P a g e
petition, the amended petition is deemed amended to
avoid multiplicity of suits.
[21]
The Assailed Order and Writ of
Preliminary Injunction Is Mooted
By Case Law
The respondent justified its plea for injunctive relief
on the allegation in its amended petition that its members
are exposed to the immediate and irreparable danger of
being deprived of their right to a livelihood and other
constitutional rights without due process, on its claim that
a great number of duly licensed recruitment agencies
have stopped or suspended their operations for fear that
(a) their officers and employees would be prosecuted
under the unjust and unconstitutional penal provisions of
Rep. Act No. 8042 and meted equally unjust and
excessive penalties, including life imprisonment, for
illegal recruitment and large scale illegal recruitment
without regard to whether the recruitment agencies
involved are licensed and/or authorized; and, (b) if the
members of the respondent, which are licensed and
authorized, decide to continue with their businesses,
they face the stigma and the curse of being labeled
illegal recruiters. In granting the respondents plea for a
writ of preliminary injunction, the trial court held, without
stating the factual and legal basis therefor, that the
enforcement of Rep. Act No. 8042, pendente lite, would
cause grave and irreparable injury to the respondent until
the case is decided on its merits.
 We note, however, that since Rep. Act No. 8042 took
effect on July 15, 1995, the Court had, in a catena of
cases, applied the penal provisions in Section 6,
including paragraph (m) thereof, and the last two
paragraphs therein defining large scale illegal
recruitment committed by officers and/or employees of
recruitment agencies by themselves and in connivance
with private individuals, and imposed the penalties
provided in Section 7 thereof, including the penalty of life
imprisonment. The Informations therein were filed after
[22]
preliminary investigations as provided for in Section 11 of
Rep. Act No. 8042 and in venues as provided for in
Section 9 of the said act. In People v. Chowdury, we [23]
held that illegal recruitment is a crime of economic
sabotage and must be enforced.
In People v. Diaz, we held that Rep. Act No. 8042 is
[24]
but an amendment of the Labor Code of the Philippines
and is not an ex-post facto law because it is not applied
retroactively. In JMM Promotion and Management, Inc.
v. Court of Appeals, the issue of the extent of the police
[25]
power of the State to regulate a business, profession or
calling vis--vis the equal protection clause and the non-
impairment clause of the Constitution were raised and
we held, thus:
A profession, trade or calling is a property right within the
meaning of our constitutional guarantees. One cannot be
deprived of the right to work and the right to make a living
because these rights are property rights, the arbitrary and
unwarranted deprivation of which normally constitutes an
actionable wrong.
295 | P a g e
Nevertheless, no right is absolute, and the proper regulation of
a profession, calling, business or trade has always been upheld
as a legitimate subject of a valid exercise of the police power
by the state particularly when their conduct affects either the
execution of legitimate governmental functions, the
preservation of the State, the public health and welfare and
public morals. According to the maxim, sic utere tuo ut
alienum non laedas, it must of course be within the legitimate
range of legislative action to define the mode and manner in
which every one may so use his own property so as not to pose
injury to himself or others.
In any case, where the liberty curtailed affects at most the
rights of property, the permissible scope of regulatory
measures is certainly much wider. To pretend that licensing or
accreditation requirements violates the due process clause is to
ignore the settled practice, under the mantle of the police
power, of regulating entry to the practice of various trades or
professions. Professionals leaving for abroad are required to
pass rigid written and practical exams before they are deemed
fit to practice their trade. Seamen are required to take tests
determining their seamanship. Locally, the Professional
Regulation Commission has begun to require previously
licensed doctors and other professionals to furnish
documentary proof that they had either re-trained or had
undertaken continuing education courses as a requirement for
renewal of their licenses. It is not claimed that these
requirements pose an unwarranted deprivation of a property
right under the due process clause.So long as professionals and
other workers meet reasonable regulatory standards no such
deprivation exists.
Finally, it is a futile gesture on the part of petitioners to invoke
the non-impairment clause of the Constitution to support their
argument that the government cannot enact the assailed
regulatory measures because they abridge the freedom to
contract. In Philippine Association of Service Exporters, Inc.
vs. Drilon, we held that [t]he non-impairment clause of the
Constitution must yield to the loftier purposes targeted by the
government. Equally important, into every contract is read
provisions of existing law, and always, a reservation of the
police power for so long as the agreement deals with a subject
impressed with the public welfare.
A last point. Petitioners suggest that the singling out of
entertainers and performing artists under the assailed
department orders constitutes class legislation which violates
the equal protection clause of the Constitution. We do not
agree.
The equal protection clause is directed principally against
undue favor and individual or class privilege. It is not intended
to prohibit legislation which is limited to the object to which it
is directed or by the territory in which it is to operate. It does
not require absolute equality, but merely that all persons be
treated alike under like conditions both as to privileges
conferred and liabilities imposed. We have held, time and
again, that the equal protection clause of the Constitution does
not forbid classification for so long as such classification is
based on real and substantial differences having a reasonable
relation to the subject of the particular legislation. If
classification is germane to the purpose of the law, concerns
all members of the class, and applies equally to present and
future conditions, the classification does not violate the equal
protection guarantee. [26]
296 | P a g e
The validity of Section 6 of R.A. No. 8042 which
provides that employees of recruitment agencies may be
criminally liable for illegal recruitment has been upheld
in People v. Chowdury: [27]
As stated in the first sentence of Section 6 of RA 8042, the
persons who may be held liable for illegal recruitment are the
principals, accomplices and accessories. An employee of a
company or corporation engaged in illegal recruitment may be
held liable as principal, together with his employer, if it is
shown that he actively and consciously participated in illegal
recruitment. It has been held that the existence of the corporate
entity does not shield from prosecution the corporate agent
who knowingly and intentionally causes the corporation to
commit a crime. The corporation obviously acts, and can act,
only by and through its human agents, and it is their conduct
which the law must deter. The employee or agent of a
corporation engaged in unlawful business naturally aids and
abets in the carrying on of such business and will be
prosecuted as principal if, with knowledge of the business, its
purpose and effect, he consciously contributes his efforts to its
conduct and promotion, however slight his contribution may
be.[28]
By its rulings, the Court thereby affirmed the validity
of the assailed penal and procedural provisions of Rep.
Act No. 8042, including the imposable penalties
therefor. Until the Court, by final judgment, declares that
the said provisions are unconstitutional, the enforcement
of the said provisions cannot be enjoined.
The RTC Committed Grave Abuse
of Its Discretion Amounting to
Excess or Lack of Jurisdiction in
Issuing the Assailed Order and the
Writ of Preliminary Injunction
The matter of whether to issue a writ of preliminary
injunction or not is addressed to the sound discretion of
the trial court. However, if the court commits grave abuse
of its discretion in issuing the said writ amounting to
excess or lack of jurisdiction, the same may be nullified
via a writ of certiorari and prohibition.
In Social Security Commission v. Judge Bayona, we [29]
ruled that a law is presumed constitutional until otherwise
declared by judicial interpretation. The suspension of the
operation of the law is a matter of extreme delicacy
because it is an interference with the official acts not only
of the duly elected representatives of the people but also
of the highest magistrate of the land.
In Younger v. Harris, Jr., the Supreme Court of the
[30]
United States emphasized, thus:
Federal injunctions against state criminal statutes, either in
their entirety or with respect to their separate and distinct
prohibitions, are not to be granted as a matter of course, even if
such statutes are unconstitutional. No citizen or member of the
community is immune from prosecution, in good faith, for his
alleged criminal acts. The imminence of such a prosecution
even though alleged to be unauthorized and, hence, unlawful is
not alone ground for relief in equity which exerts its
extraordinary powers only to prevent irreparable injury to the
plaintiff who seeks its aid. 752 Beal v. Missouri Pacific
297 | P a g e
Railroad Corp., 312 U.S. 45, 49, 61 S.Ct. 418, 420, 85 L.Ed.
577.
And similarly, in Douglas, supra, we made clear, after
reaffirming this rule, that:
It does not appear from the record that petitioners have been
threatened with any injury other than that incidental to every
criminal proceeding brought lawfully and in good faith 319
U.S., at 164, 63 S.Ct., at 881.
[31]
The possible unconstitutionality of a statute, on its
face, does not of itself justify an injunction against good
faith attempts to enforce it, unless there is a showing of
bad faith, harassment, or any other unusual
circumstance that would call for equitable relief. The on
[32]
its face invalidation of statutes has been described as
manifestly strong medicine, to be employed sparingly
and only as a last resort, and is generally disfavored. [33]
To be entitled to a preliminary injunction to enjoin the
enforcement of a law assailed to be unconstitutional, the
party must establish that it will suffer irreparable harm in
the absence of injunctive relief and must demonstrate
that it is likely to succeed on the merits, or that there are
sufficiently serious questions going to the merits and the
balance of hardships tips decidedly in its favor. The [34]
higher standard reflects judicial deference toward
legislation or regulations developed through
presumptively reasoned democratic processes.
Moreover, an injunction will alter, rather than maintain,
the status quo, or will provide the movant with
substantially all the relief sought and that relief cannot be
undone even if the defendant prevails at a trial on the
merits. Considering that injunction is an exercise of
[35]
equitable relief and authority, in assessing whether to
issue a preliminary injunction, the courts must sensitively
assess all the equities of the situation, including the
public interest. In litigations between governmental and
[36]
private parties, courts go much further both to give and
withhold relief in furtherance of public interest than they
are accustomed to go when only private interests are
involved. Before the plaintiff may be entitled to
[37]
injunction against future enforcement, he is burdened to
show some substantial hardship. [38]
The fear or chilling effect of the assailed penal
provisions of the law on the members of the respondent
does not by itself justify prohibiting the State from
enforcing them against those whom the State believes in
good faith to be punishable under the laws:
Just as the incidental chilling effect of such statutes does not
automatically render them unconstitutional, so the chilling
effect that admittedly can result from the very existence of
certain laws on the statute books does not in itself justify
prohibiting the State from carrying out the important and
necessary task of enforcing these laws against socially harmful
conduct that the State believes in good faith to be punishable
under its laws and the Constitution. [39]
It must be borne in mind that subject to constitutional
limitations, Congress is empowered to define what acts
or omissions shall constitute a crime and to prescribe
punishments therefor. The power is inherent in
[40]
Congress and is part of the sovereign power of the State
298 | P a g e
to maintain peace and order. Whatever views may be
entertained regarding the severity of punishment,
whether one believes in its efficiency or its futility, these
are peculiarly questions of legislative policy. The [41]
comparative gravity of crimes and whether their
consequences are more or less injurious are matters for
the State and Congress itself to
determine. Specification of penalties involves questions
[42]
of legislative policy. [43]
Due process prohibits criminal stability from shifting
the burden of proof to the accused, punishing wholly
passive conduct, defining crimes in vague or overbroad
language and failing to grant fair warning of illegal
conduct. Class legislation is such legislation which
[44]
denies rights to one which are accorded to others, or
inflicts upon one individual a more severe penalty than is
imposed upon another in like case offending. Bills of
[45]
attainder are legislative acts which inflict punishment on
individuals or members of a particular group without a
judicial trial. Essential to a bill of attainder are a
specification of certain individuals or a group of
individuals, the imposition of a punishment, penal or
otherwise, and the lack of judicial trial.
[46]
Penalizing unlicensed and licensed recruitment
agencies and their officers and employees and their
relatives employed in government agencies charged with
the enforcement of the law for illegal recruitment and
imposing life imprisonment for those who commit large
scale illegal recruitment is not offensive to the
Constitution. The accused may be convicted of illegal
recruitment and large scale illegal recruitment only if,
after trial, the prosecution is able to prove all the
elements of the crime charged. [47]
The possibility that the officers and employees of the
recruitment agencies, which are members of the
respondent, and their relatives who are employed in the
government agencies charged in the enforcement of the
law, would be indicted for illegal recruitment and, if
convicted sentenced to life imprisonment for large scale
illegal recruitment, absent proof of irreparable injury, is
not sufficient on which to base the issuance of a writ of
preliminary injunction to suspend the enforcement of the
penal provisions of Rep. Act No. 8042 and avert any
indictments under the law. The normal course of
[48]
criminal prosecutions cannot be blocked on the basis of
allegations which amount to speculations about the
future. [49]
There is no allegation in the amended petition or
evidence adduced by the respondent that the officers
and/or employees of its members had been threatened
with any indictments for violations of the penal provisions
of Rep. Act No. 8042. Neither is there any allegation
therein that any of its members and/or their officers and
employees committed any of the acts enumerated in
Section 6(a) to (m) of the law for which they could be
indicted. Neither did the respondent adduce any
evidence in the RTC that any or all of its members or a
great number of other duly licensed and registered
recruitment agencies had to stop their business
operations because of fear of indictments under Sections
6 and 7 of Rep. Act No. 8042. The respondent merely
speculated and surmised that licensed and registered
recruitment agencies would close shop and stop
299 | P a g e
business operations because of the assailed penal
provisions of the law. A writ of preliminary injunction to
enjoin the enforcement of penal laws cannot be based
on such conjectures or speculations. The Court cannot
take judicial notice that the processing of deployment
papers of overseas workers have come to a virtual
standstill at the POEA because of the assailed provisions
of Rep. Act No. 8042. The respondent must adduce
evidence to prove its allegation, and the petitioners
accorded a chance to adduce controverting evidence.
The respondent even failed to adduce any evidence
to prove irreparable injury because of the enforcement of
Section 10(1)(2) of Rep. Act No. 8042. Its fear or
apprehension that, because of time constraints, its
members would have to defend foreign employees in
cases before the Labor Arbiter is based on
speculations. Even if true, such inconvenience or
difficulty is hardly irreparable injury.
The trial court even ignored the public interest
involved in suspending the enforcement of Rep. Act No.
8042 vis--vis the eleven licensed and registered
recruitment agencies represented by the
respondent. In People v. Gamboa, we emphasized the
[50]
primary aim of Rep. Act No. 8042:
Preliminarily, the proliferation of illegal job recruiters and
syndicates preying on innocent people anxious to obtain
employment abroad is one of the primary considerations that
led to the enactment of The Migrant Workers and Overseas
Filipinos Act of 1995. Aimed at affording greater protection to
overseas Filipino workers, it is a significant improvement on
existing laws in the recruitment and placement of workers for
overseas employment. Otherwise known as the Magna Carta
of OFWs, it broadened the concept of illegal recruitment under
the Labor Code and provided stiffer penalties thereto,
especially those that constitute economic sabotage, i.e., Illegal
Recruitment in Large Scale and Illegal Recruitment Committed
by a Syndicate. [51]
By issuing the writ of preliminary injunction against
the petitioners sans any evidence, the trial court
frustrated, albeit temporarily, the prosecution of illegal
recruiters and allowed them to continue victimizing
hapless and innocent people desiring to obtain
employment abroad as overseas workers, and blocked
the attainment of the salutary policies embedded in
[52]
Rep. Act No. 8042. It bears stressing that overseas
workers, land-based and sea-based, had been remitting
to the Philippines billions of dollars which over the years
had propped the economy.
In issuing the writ of preliminary injunction, the trial
court considered paramount the interests of the eleven
licensed and registered recruitment agencies
represented by the respondent, and capriciously
overturned the presumption of the constitutionality of the
assailed provisions on the barefaced claim of the
respondent that the assailed provisions of Rep. Act No.
8042 are unconstitutional. The trial court committed a
grave abuse of its discretion amounting to excess or lack
of jurisdiction in issuing the assailed order and writ of
preliminary injunction. It is for this reason that the Court
issued a temporary restraining order enjoining the
enforcement of the writ of preliminary injunction issued
by the trial court.
300 | P a g e
IN LIGHT OF ALL THE FOREGOING, the petition is
GRANTED. The assailed decision of the appellate court
is REVERSED AND SET ASIDE. The Order of the
Regional Trial Court dated August 21, 1995 in Civil Case
No. Q-95-24401 and the Writ of Preliminary Injunction
issued by it in the said case on August 24, 1995 are
NULLIFIED. No costs.
SO ORDERED.
[G.R. No. 152039. April 8, 2005]
F.F. MARINE CORPORATION and/or MR. ERIC A.
CRUZ, petitioners, vs. THE HONORABLE
SECOND DIVISION NATIONAL LABOR
RELATIONS COMMISSION and RICARDO M.
MAGNO, respondents.
DECISION
TINGA, J.:
Before this Court is a Rule 45 petition assailing the
Decision dated 31 January 2002 of the Court of Appeals
[1]
which affirmed the Resolution dated 11 October 2000 of
[2]
the National Labor Relations Commission (NLRC) that in
turn reversed the Decision dated 6 August 1999 of
[3]
Labor Arbiter Salimathar V. Nambi. The Labor Arbiter
had upheld the validity of the retrenchment program
undertaken by petitioner corporation.
The factual antecedents of the case follow.
 Petitioner F.F. Marine Corporation (FFMC) is a
corporation duly organized and existing under Philippine
laws, with Eric A. Cruz as its president. It is engaged in
ship-repair, dry-docking and dredging services, and has
a total of 419 employees including private respondent
Ricardo M. Magno (Magno). Magno, who began
[4]
working for FFMC on 7 February 1990, was eventually
assigned as Lead Electrician at the Marine Dredging with
a monthly salary of P8,500.00.
On 26 October 1998, petitioners filed with the
Department of Labor and Employment (DOLE) a notice
that petitioner corporation was undertaking a
retrenchment program to curb the serious business
reverses brought about by the Asian economic
crisis. Petitioners likewise stated in the notice that they
[5]
had already closed down their dry docking and ship
repair division on 30 August 1998 and that their dredging
services were heavily affected by the economic
slowdown being experienced by the construction
industry. They manifested that the retrenchment
[6]
program would start on 1 November 1998. The affected
[7]
employees were to remain employed only until 16
December 1998. [8]
Pursuant to the retrenchment program, petitioners
served the affected employees a personal notice of
retrenchment, stating that their employment would end at
the close of business hours of 16 December 1998.
However, petitioners paid them in advance of their
payroll from 16 November to 16 December 1998 to spare
them from reporting for work during the period. They
were also paid separation pay equivalent to one-half
301 | P a g e
(1/2) month basic pay per year of service, plus the
proportionate 13th month pay.
On 11 December 1998 and in compliance with its
notice to the DOLE dated 26 October 1998, petitioners
filed with the DOLE, an Establishment Termination
Report for the retrenchment of twenty-one (21) affected
employees, including Magno.
In view of the retrenchment, Magno received his
separation pay equivalent to nine (9) years and
proportionate 13th month pay in the total amount
of P46,182.41. After receiving the above separation pay,
Magno executed a release and quitclaim in favor of
petitioners.
[9]
However, on 12 January 1999, Magno filed a
complaint for illegal dismissal, moral and exemplary
damages and attorneys fees, with prayer for
reinstatement and payment of backwages against
petitioners. Magno claimed that he was beguiled into
[10]
accepting the separation pay since petitioners terminated
his services on the pretext that the dredging machine
where he was assigned was temporarily stalled in
Zambales. Magno eventually learned that the company
had been adducing to others a different reason for
retrenchment, primarily the Asian financial crisis.
[11]
On 6 August 1999, after the contending parties
submitted their responsive pleadings, Labor Arbiter
Salimathar V. Nambi promulgated a Decision upholding
the validity of retrenchment. The dispositive portion
[12]
thereof reads:
WHEREFORE, premises considered, the complaint for illegal
dismissal is hereby DISMISSED for lack of merit.
Consequently, complainants claim for backwages, separation
pay differential, damages and attorneys fees [is] likewise
dismissed.
SO ORDERED. [13]
Magno appealed the Labor Arbiters Decision to the
NLRC which, on 11 October 2000, issued
a Resolution reversing the findings and conclusions of
the Labor Arbiter. The NLRC deemed the petitioners as
[14]
having been unable to establish proof of actual losses,
due to the absence of financial reports of independent
external auditors that would confirm the losses sustained
for the years 1996 and 1997. The decretal text of the
[15]
issuance reads:
WHEREFORE, premises considered, Complainants appeal is
GRANTED. The Labor Arbiters decision in the above-entitled
case is hereby ANNULLED and SET ASIDE. A new one is
entered declaring Complainants dismissal as illegal.
Respondent F.F. Marine Corporation is ordered to pay
Complainant:
1. full backwages from December 16, 1998 up to the finality of
this decision;
2. separation pay equivalent to Complainants one (1) month
pay for every year of service, computed from his first day of
employment on February 7, 1990 up to the finality of this
302 | P a g e
decision, the total amount from which shall be deducted his
advanced separation pay of P38,250.00; and
3. attorneys fees equivalent to ten percent (10%) of his total
monetary award.
SO ORDERED. [16]
After the denial of their Motion for Reconsideration,
petitioners elevated the case to the Court of Appeals by
way of Petition for Certiorari. Before the appellate court,
petitioners presented financial reports prepared by
independent external auditors Banaria, Banaria and
Company, auditing FFMCs balance sheets and income
statements for the years 1996 and 1997. Petitioners
alleged that these reports could not be submitted earlier
as they had not been completed during the pendency of
the proceedings before the Labor Arbiter. [17]
The appellate court eventually dismissed the petition
and affirmed the resolution of the NLRC. Material to the
resolution of the case was the issue of admissibility and
competency as evidence of the 31 December 1997 and
1996 Financial Statements of petitioners. The Court of
Appeals noted that these financial statements were
submitted to it only and at that on the pretext that they
had not yet been completed by the independent auditor
when the case was still pending before the Labor Arbiter.
However, the appellate court ruled that a perusal of the
certification issued by Banaria, Banaria and Company
regarding the Financial Statements reveals that the
same were executed on 30 March 1998 or nine (9)
months prior to the filing of the complaint for illegal
dismissal on 12 January 1999. Thus, the financial
statements could have been offered as evidence before
the Labor Arbiter and the NLRC. Thus, the Court of
Appeals reproached petitioners for having suppressed
material evidence.
Accordingly, the appellate court found that petitioners
failed to substantiate the substantive requirements of a
valid retrenchment. The fact that Magno executed a
[18]
quitclaim in favor of petitioners, according to the Court of
Appeals, did not bar him from filing the instant complaint
for illegal dismissal. [19]
Aggrieved by the decision of the appellate court,
petitioners went to this Court via the present petition for
review.
As grounds for appeal, petitioners allege that the
appellate court gravely erred in: (a) finding that
petitioners failed to substantiate the substantive
requirements of a valid retrenchment and (b) affirming
the NLRCs award of separation pay and attorneys fees
to Magno. [20]
Petitioners argue that retrenchment programs
undertaken by corporations are purely business
decisions properly within the reasonable exercise of
management prerogative. As a recognized management
prerogative, petitioners assessment of the necessity of
retrenchment cannot be substituted with the NLRCs own
perception, much less opinion, as to the thrust and
direction of petitioners business. It is only subject to
faithful compliance with the substantive and procedural
requirements laid down by law and jurisprudence. They
[21]
assert that they complied with both the substantive and
303 | P a g e
procedural requirements of a valid retrenchment as they
were able to show that the expected losses were not
merely de minimis but substantial and imminent. They
[22]
point out that in 1994 and 1995, they earned minimal
profits of only P77,609.79 and P155,339.96,
respectively. [23]
They further stress that the corporation had been
beset with financial problems as early as 1996 when the
company had incurred losses in the amount
of P18,005,918.08. On the other hand, the losses for the
years 1997 and 1998 are P21,316,072.89
and P21,234,582.25, respectively. These
[24]
losses
resulted to a total deficit of P39,146,167.82 in 1997 and
continued to increase. Thus, petitioners insist that the
[25]
retrenchment program was necessary to prevent
additional losses. Petitioners also allege that the
corporation initially explored ways of minimizing its
losses by taking necessary measures to cut operational
expenses. [26]
They also contend that the appellate court gravely
erred in placing too much emphasis on the late
presentation of the 1996-1997 Financial Statements so
as to completely disregard other documentary evidence
submitted by petitioners. The documentary evidence
submitted by petitioners before the Labor Arbiter,
consisting of the Statements of Retained Earnings and
Balance Sheets for the periods covering 1993 to 1997,
were sufficient to prove that petitioner corporation was
experiencing losses prior to the retrenchment
program. They also allege that having freely entered
[27]
into the subject quitclaim, Magno was bound by the
terms thereof and may not later be disowned simply
because of change of mind. Thus, they should not be
held liable for the claims of Magno for backwages,
separation pay, damages nor attorneys fees. [28]
The petition suffers from lack of merit.
This Court is not oblivious of the significant role
played by the corporate sector in the countrys economic
and social progress. Implicit in turn in the success of the
corporate form in doing business is the ethos of business
autonomy which allows freedom of business
determination with minimal governmental intrusion to
ensure economic independence and development in
terms defined by businessmen. Yet, this vast expanse of
management choices cannot be an unbridled prerogative
that can rise above the constitutional protection to labor.
Employment is not merely a lifestyle choice to stave off
boredom. Employment to the common man is his very
life and blood which must be protected against
concocted causes to legitimize an otherwise irregular
termination of employment. Imagined or undocumented
business losses present the least propitious scenario to
justify retrenchment.
Retrenchment is the termination of employment
initiated by the employer through no fault of the
employees and without prejudice to the latter, resorted to
by management during periods of business recession,
industrial depression, or seasonal fluctuations or during
lulls occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program or
the introduction of new methods or more efficient
machinery, or of automation. Retrenchment is a valid
[29]
management prerogative. It is, however, subject to
304 | P a g e
faithful compliance with the substantive and procedural
requirements laid down by law and jurisprudence.
There are three (3) basic requisites for a valid
retrenchment to exist, to wit: (a) the retrenchment is
necessary to prevent losses and such losses are proven;
(b) written notice to the employees and to the DOLE at
least one (1) month prior to the intended date of
retrenchment; and (c) payment of separation pay
equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is
higher. [30]
Jurisprudential standards to justify retrenchment
have been reiterated by this Court in a long line of cases
to forestall management abuse of this prerogative, viz:
. . . . Firstly, the losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly sought to
be forestalled by retrenchment is clearly shown to be
insubstantial and inconsequential in character,
the bonafide nature of the retrenchment would appear to be
seriously in question. Secondly, the substantial loss
apprehended must be reasonably imminent, as such imminence
can be perceived objectively and in good faith by the
employer. There should, in other words, be a certain degree of
urgency for the retrenchment, which is after all a drastic
recourse with serious consequences for the livelihood of the
employees retired or otherwise laid-off. Because of the
consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the
expected losses. The employer should have taken other
measures prior or parallel to retrenchment to forestall
losses, i.e., cut other costs than labor costs. An employer who,
for instance, lays off substantial numbers of workers while
continuing to dispense fat executive bonuses and perquisites or
so-called golden parachutes, can scarcely claim to be
retrenching in good faith to avoid losses. To impart operational
meaning to the constitutional policy of providing full
protection to labor, the employers prerogative to bring down
labor costs by retrenching must be exercised essentially as a
measure of last resort, after less drastic meanse.g., reduction
of both management and rank-and-file bonuses and salaries,
going on reduced time, improving manufacturing efficiencies,
trimming of marketing and advertising costs, etc.have been
tried and found wanting.
Lastly, but certainly not the least important, alleged losses if
already realized, and the expected imminent losses sought to
be forestalled, must be proved by sufficient and convincing
evidence. The reason for requiring this quantum of proof is
readily apparent: any less exacting standard of proof would
render too easy the abuse of this ground for termination of
services of employees. (emphasis supplied)
[31]
Retrenchment is one of the economic grounds to
dismiss employees. It is resorted to by an employer
primarily to avoid or minimize business losses. The law
recognizes this under Article 283 of the Labor Code.
[32]
However, the employer bears the burden to prove his
allegation of economic or business reverses. The
employers failure to prove it necessarily means that the
employees dismissal was not justified. [33]
In the case at bar, petitioners seek to justify the
retrenchment on the ground of serious business losses
brought about by the Asian economic crisis. To prove
305 | P a g e
their claim, petitioners adduced before the Labor Arbiter
the 1994 and 1995 Financial Statements. Said Financial
Statements, however, were prepared only by petitioners
accountant, Rosalie Bengzon, and approved by the
manager Bernadette Rosales. They were not audited
[34]
by an independent external auditor. The financial
statements show that in 1994 and 1995, petitioner
corporation earned an income of only P77,609.79
and P155,339.96, respectively. In contrast, the 1996 and
1997 Financial Statements, however, showed
losses of P18,005,918.08,
[35]
and P21,316,072.89,
respectively.
It was only before the Court of Appeals that the
financial statements for the years 1996 and 1997 as
audited by an independent external auditor were
introduced. They were not presented before the Labor
[36]
Arbiter and the NLRC although they were executed on
30 March 1998, several months prior to the filing of the
complaint for illegal dismissal by Magno on 12 January
1999.[37]
Petitioners failure to adduce financial statements duly
audited by independent external auditor casts doubt on
their claim of losses for financial statements are easy
prey to manipulation and concoction. This Court has
ruled that financial statements audited by independent
external auditors constitute the normal method of proof
of the profit and loss performance of a company. Even [38]
this, however, is not a hard and fast rule as the norm
does not compel this Court to accept the contents of the
said documents blindly and without thinking. A careful
[39]
examination of financial statements may be resorted to
especially if on their face relevant facts appear to have
been ignored that will warrant a contrary conclusion.
Petitioners had called upon the Court of Appeals to
consider alleged new evidence not presented before the
Labor Arbiter or the NLRC, a course of action
unmistakably outside the sphere of that courts certiorari
jurisdiction. This Court itself was confronted with the
same situation in Matugas v. Commission on Elections,
et al., as petitioner therein asked the Court to consider
[40]
documents which were not presented in evidence before
the poll body. The Court rejected petitioners stance,
holding that the cause of action sought is clearly beyond
the courts certiorari powers. [41]
In the case at bar, petitioner did not file a motion for
leave to present the alleged new evidence as they simply
attached the additional financial statements to their
petition. Significantly in that regard, the financial
statements do not constitute newly discovered evidence
as they had already been prepared by the independent
auditors eight (8) months before the filing of the case
with the Labor Arbiter. That must have been the reason
why petitioners opted not to avail of the prescribed
manner for introducing newly discovered evidence.
In the Matugas case, this Court pointedly ruled, thus:
The rule in appellate procedure is that a factual question may
not be raised for the first time on appeal, and documents
forming no part of the proofs before the appellate court will
not be considered in disposing of the issues of an action. This
is true whether the decision elevated for review originated
from a regular court or an administrative agency or quasi-
306 | P a g e
judicial body, and whether it was rendered in a civil case, a
special proceeding, or a criminal case. Piecemeal presentation
of evidence is simply not in accord with orderly justice.
The same rules apply with greater force
in certiorari proceedings. Indeed, it would be absurd to hold
public respondent guilty of grave abuse of discretion for not
considering evidence not presented before it. The patent
unfairness of petitioners plea, prejudicing as it would public
and private respondents alike, militates against the admission
and consideration of the subject documents. [42]
Petitioners cite Caete v. NLRC where the Court
[43]
upheld the NLRCs consideration of documents submitted
to it by the respondent therein for the first time on
appeal. The holding is clearly not apropos since the
documents were presented to the NLRC, unlike in this
case where the new financial statements were submitted
for the first time before the Court of Appeals. That was
why this Court in Caete ratiocinated that the petitioner
therein had the opportunity to rebut the truth of the
additional documents. The same cannot be said of the
private respondent in this case.
Considering the foregoing disquisitions, we fail to see
any reason to reverse the legal conclusions made by the
Court of Appeals. It is worthy of note that decisions of the
NLRC are reviewable only by the Court of Appeals via
the special civil action of certiorari under Rule 65 of the
Rules of Court. This mode of review may be availed of
[44]
only in case a tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in excess
of jurisdiction, or with grave abuse of discretion
amounting to a lack or excess of jurisdiction, and there is
no appeal, or any plain, speedy, and adequate remedy in
the ordinary course of law. The sole office of the writ
[45]
of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion
amounting to lack of jurisdiction and does not include
correction of public respondents evaluation of the
evidence and the factual findings based thereon. [46]
The appellate courts affirmance of the decision of the
NLRC is principally anchored on the ground that
petitioners failed to adduce the 1996 and
1997 Financial Statements audited by an independent
external auditor before the Labor Arbiter and the NLRC.
By merely upholding the evidentiary weight accorded to
financial statements duly audited by independent
external auditors, grave abuse of discretion on the part of
the NLRC is hardly imaginable as it is unfounded.
It is essentially required that the alleged losses in
business operations must be proven. Otherwise, said
ground for termination would be susceptible to abuse by
scheming employers who might be merely feigning
business losses or reverses in their business ventures in
order to ease out employees. The employer bears the
[47]
burden of proving the existence or the imminence of
substantial losses with clear and satisfactory evidence
that there are legitimate business reasons justifying a
retrenchment. Should the employer fail to do so, the
dismissal shall be deemed unjustified. [48]
Moreover, petitioners failed to act in consonance with
the rule that retrenchment shall be a remedy of last
resort. Even assuming that the corporation has actually
307 | P a g e
incurred losses by reason of the Asian economic crisis,
the retrenchment is not perfectly justified as there was no
showing that the retrenchment was the last recourse
resorted to by petitioners. Although petitioners allege in
their petition before this Court that they had undertaken
cost-cutting measures before they resorted to
retrenchment, their contention does not inspire belief for
the evidence shows that the petition for certiorari filed by
petitioners with the Court of Appeals is bereft of any
allegation of prior resort to cost-cutting measures other
than retrenchment. Well-established is the rule that
[49]
retrenchment is only a measure of last resort when other
less drastic means have been tried and found to be
inadequate. [50]
Considering that the ground for retrenchment availed
of by petitioners was not sufficiently and convincingly
established, the retrenchment is hereby declared illegal
and of no effect. The quitclaims executed by retrenched
employees in favor of petitioners were therefore not
voluntarily entered into by them. Their consent was
similarly vitiated by mistake or fraud. The law looks with
disfavor upon quitclaims and releases by employees
pressured into signing by unscrupulous employers
minded to evade legal responsibilities. As a rule, deeds
[51]
of release or quitclaim cannot bar employees from
demanding benefits to which they are legally entitled or
from contesting the legality of their dismissal. The
acceptance of those benefits would not amount to
estoppel. The amounts already received by the
retrenched employees as consideration for signing the
quitclaims should, however, be deducted from their
respective monetary awards. Sad to say, among the
[52]
retrenched employees, only Magno filed an action for
illegal dismissal.
Undoubtedly, Magno was illegally dismissed but it
must be emphasized that Magno prayed for the payment
of separation pay in lieu of reinstatement on the ground
of strained relations between him and petitioners.
It is well-settled that when a person is illegally
dismissed, he is entitled to reinstatement without loss of
seniority rights and other privileges and to his full
backwages. In the event, however, that reinstatement is
[54]
no longer feasible, or if the employee decides not to be
reinstated, the employer shall pay him separation pay in
lieu of reinstatement. Such a rule is likewise observed
[55]
in the case of a strained employer-employee relationship
or when the work or position formerly held by the
dismissed employee no longer exists. In sum, an [56]
illegally dismissed employee is entitled to: (1) either
reinstatement if viable or separation pay if reinstatement
is no longer viable, and (2) backwages. [57]
As to the amount of separation pay, this Court has
ruled that separation pay may be computed at one (1)
month pay, or one (1/2) month pay for every year of
service, whichever is higher. It is noteworthy that the
[58]
separation pay being awarded in the instant case is due
to illegal dismissal; hence, it is different from the amount
of separation pay provided for in Article 283 in case of
retrenchment to prevent losses or in case of closure or
cessation of the employers business, in either of which
the separation pay is equivalent to at least one (1) month
or one-half (1/2) month pay for every year of service,
whichever is higher. [59]
308 | P a g e
Evidently, Magno is entitled to (a) full
backwages from 16 December 1998 until the finality of
[60]
this decision; (b) separation pay equivalent to his one (1)
month pay for every year of service, computed from his
first day of employment on 7 February 1990 up to finality
of this decision less the advanced separation pay
[53]
of P38,250.00; and (c) attorneys fees equivalent to ten
percent (10%) of his total monetary award.
WHEREFORE, foregoing premises considered, the
petition is DENIED and the
challenged Decision and Resolution of the Court of
Appeals are AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. L-46496 February 27, 1940
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.
Office of the Solicitor-General Ozaeta and Assistant
Attorney Barcelona for the Court of Industrial Relations.
Antonio D. Paguia for National Labor Unon.
Claro M. Recto for petitioner "Ang Tibay".
Jose M. Casal for National Workers' Brotherhood.
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
309 | P a g e
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
310 | P a g e
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;
311 | P a g e
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
312 | P a g e
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
313 | P a g e
shall not affect the exercise of the Court itself of any
of its powers. (Section 10, ibid.)
(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 accordance with the requirements set forth hereinabove.
scheme adopted to systematically discharged all the So ordered.
members of the National Labor Union Inc., from work" and
this avernment is desired to be proved by the petitioner Avanceña, C. J., Villa-Real, Imperial, Diaz, Concepcion
with the "records of the Bureau of Customs and the Books and Moran, JJ., concur.
of Accounts of native dealers in leather"; that "the National
Workers Brotherhood Union of Ang Tibay is a company or G.R. No. 77859 May 25, 1988
employer union dominated by Toribio Teodoro, the
existence and functions of which are illegal." Petitioner CENTURY TEXTILE MILLS, INC. and ALFREDO T.
further alleges under oath that the exhibits attached to the ESCAÑO, petitioners,
petition to prove his substantial avernments" are so vs.
inaccessible to the respondents that even within the NATIONAL LABOR RELATIONS COMMISSION, HON.
exercise of due diligence they could not be expected to LABOR ARBITER FELIPE P. PATI, and EDUARDO
have obtained them and offered as evidence in the Court of CALANGI, respondents.
Industrial Relations", and that the documents attached to
the petition "are of such far reaching importance and effect Melanio L. Zoreta for petitioners.
that their admission would necessarily mean the
modification and reversal of the judgment rendered herein." The Solicitor General for public respondent.
We have considered the reply of Ang Tibay and its
arguments against the petition. By and large, after Alfonso P. Ancheta, Jr. for private respondent.
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
FELICIANO, J.:
documents referred to in his motion and such other
evidence as may be relevant to the main issue involved. Since 13 December 1974, private respondent Eduardo Calangi had been employed at the factory of
petitioner Century Textile Mills, Inc. where he worked initially as an apprentice and later on as a
The legislation which created the Court of Industrial machine operator in the Finishing Department. Effective 10 June 1983, however, petitioner
Relations and under which it acts is new. The failure to Corporation, acting through its company officers, 1 placed him under preventive suspension and, on 27
July 1983, completely terminated his services with the company. Private respondent Calangi was
grasp the fundamental issue involved is not entirely accused of having masterminded a criminal plot against Melchor Meliton and Antonio Santos, two of
his supervisors at his place of work.
attributable to the parties adversely affected by the result.
Accordingly, the motion for a new trial should be and the
The events that led to private respondent's dismissal are
same is hereby granted, and the entire record of this case
as follows:
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
314 | P a g e
According to Rodolfo Marin (a factory co-worker of private NLRC-NCR-10-4518-83) with the Arbitration Branch,
respondent Calangi), at around 12:15 a.m. on 4 June 1983 National Capital Region, of the then Ministry of Labor and
and within company premises, he chanced upon "Gatchie" Employment. Among other things, private respondent
Torrena (a machine operator at petitioner's factory) and alleged in his complaint that "[p]rior to his preventive
noticed the latter mixing some substance with the drinking suspension neither the company nor any of its officers
water contained in a pitcher from which Meliton and Santos furnished him [with] a copy of their charges, if any, nor
regularly drank. Before anyone could take a drink from the afforded him the opportunity to answer the same and
pitcher, Marin reported what he had observed to Meliton defend himself." Hence, private respondent claimed
who, in turn, informed Santos of the same. Soon after, entitlement to the following:
Meliton and Santos took possession of the pitcher of water
and filed a formal report of the incident with company A. Moral
P50,00
damages
management. 2 The contents of the pitcher were 0.00
subsequently brought to and analyzed by chemists at the
Philippine Constabulary Crime Laboratory at Camp Crame, Actu
Quezon City who found the presence of a toxic chemical al
(formaldehyde) therein. 3 dam
ages
In the police investigation that followed, Torrena confessed
that private respondent Calangi personally instructed him, a) P6,5
and he agreed, to place formaldehyde in the pitcher of Wag 20.8
water. Torrena also admitted that he and private es 0
respondent were then motivated by a desire to avenge for 3
themselves upon Meliton and Santos, both of whom had years
instigated their (i.e., Torrena's and private respondent's)
b) 3,
suspension from work several times in the past. 4 These
ECO 841.
circumstances moved petitioner Corporation preventively to
LA 60
suspend Torrena and private respondent Calangi, and
for 3
eventually to dismiss them from its employ. Additionally,
years
criminal charges for attempted murder were filed against
these two employees with the Office of the Provincial Fiscal c)
of Rizal. 13th
mont
On 11 October 1983, private respondent Calangi filed a h pay
Complaint 5 for illegal dismissal (docketed as Case No.
315 | P a g e
 for Arbiter found that not only was the evidence against private
respondent Calangi "so overwhelming" and "sufficient
3 903. enough" to justify his dismissal, but that private respondent
years 60 had himself failed inexplicably to deny or controvert the
charges against him.
d)
Vaca An appeal was brought by private respondent Calangi
tion before the public respondent National Labor Relations
and Commission, which agency, on 3 December 1985,
Sick rendered a Decision, 7 the dispositive portion of which
reads:
Leav 627. 11,893
e of 00 .00 WHEREFORE, with all the foregoing
15 considerations, let the appealed decision
days dated 27 August 1984 be, as it is hereby
each REVERSED. Accordingly, complainant's
Exe 25,000 dismissal is hereby declared to be illegal, and
mpla .00 consequently, respondents [petitioners] are
ry hereby ordered to reinstate Eduardo Calangi
dam to his former or equivalent position without
ages loss of seniority and other benefits, with full
backwages from 27 July 1983 until he is
Attor 17,398 actually reinstated.
ney's .60
fees SO ORDERED.

TOT P104,2 Petitioner Corporations' Motion for Reconsideration was

AL 91.60
A prayer for "such other reliefs and remedies consequent
upon the premises" was likewise set out in the complaint.
In a Decision 6 dated 16 August 1984, the Labor Arbiter
dismissed private respondent's Complaint. The Labor
316 | P a g e
denied on 4 April 1986. Sometime in November of 1986,
the Labor Arbiter issued a writ of execution directing
petitioners to pay private respondent Calangi the amount
of P54,747.74 representing the latter's backwages, 13th
month pay, living allowance, and vacation and sick leave
— i.e., actual damages.
The present Petition for certiorari with Preliminary
Injunction or Restraining Order was filed with this Court on
3 April 1987. The Court issued a Temporary Restraining
Orders 8 on 8 April 1987 and, on 24 August 1987, issued a
Resolution 9 giving due course to the Petition and directing
the parties to submit their respective memoranda.
silent" all the while. The following Memorandum issued by
petitioner's Personnel Manager on 10 June 1983 (Calangi's
first day of preventive suspension) was cited in this
connection:
MEMO: TO ALL CONCERNED

The Petition at bar raises the following issues for SUBJ.: Under Preventive Suspension
consideration: (1) whether or not private respondent Employees. Please be advised that the
Calangi was illegally dismissed from his job as machine following employees are under preventive
operator; and (2) assuming he was illegally dismissed, suspension (indefinite) namely:
whether or not petitioner Corporation can be ordered
legally (a) to reinstate private respondent Calangi to his 1. Eduardo Calangi--effective June 10, 1983
former position in the company, with full backwages and
without loss of seniority rights and other benefits, 2. Gatchie Torrena--effective June 10, 1983
considering that such relief had not been sought by private
respondent in his complaint, and (b) to pay private GROUND
respondent an amount for actual damages in excess of
what had been claimed by the latter in his Complaint. Policy Instruction No. 10 of the New Labor
Code of the Philippines, Revised Edition 1982.
We sustain the ruling of public respondent Commission
that private respondent Calangi had been dismissed NOTE: Decision about the
without just cause from his employment by petitioner indebtedness suspension of
Corporation. concerned employees was
reached after the meeting
Public respondent Commission found that private between the union and the
respondent Calangi was effectively denied his right to due management.
process in that, prior to his preventive suspension and the
termination of his services, he had not been given the Be guided accordingly.
opportunity either to affirm or refute the charges proferred
against him by petitioner Corporation. Petitioners allege MANAGEMENT
however that private respondent Calangi had been
(SGD.) Jovencio G. Tolentino
previously informed of and given the chance to answer the
company's accusations against him, but that he had "kept
317 | P a g e
 Personnel Manager
Petitioners contend that the above Memorandum "clearly
shows that prior investigation and consultation with the
union was made," and "will therefore negate the theory of
respondents that respondent Calangi was not afforded the
chance to present his side for the memo itself speaks
otherwise."
The procedure that an employer wishing to terminate the
services of an employee must follow, is spelled out in the
Labor Code:
ART. 278. Miscellaneous provisions. —
xxx xxx xxx
However, the employer shall fumish the
worker whose employment is sought to be
terminated a written notice containing a
statement of the causes for termination and
shall afford the latter ample opportunity to be
heard and to defend himself with the
assistance of his representative if he so
desires in accordance with company rules and
regulations promulgated pursuant to
guidelines set by the [Department] of Labor
and Employment. Any decision taken by the
employer shall be without prejudice to the right
of the worker to contest the validity and legality
of his dismissing by filing a complaint with the
regional branch of the National Labor
Relations Commission. The burden of proving
that the termination was for a valid or
318 | P a g e
authorized cause shall rest on the employer.
The [Department] may suspend the effects of
the termination pending resolution of the case
in the event of a prima facie finding by the
Ministry that the termination may cause a
serious labor dispute or is in implementation of
a mass lay-off.
xxx xxx xxx
(Emphasis supplied)
Rule XIV, Book V of the Rules and Regulations
Implementing the Labor Code reiterates the above
requirements:
xxx xxx xxx
Sec. 2. Notice of dismissal. — Any employer
who seeks to dismiss a worker shall furnish
him a written notice stating the particular acts
or omission constituting the grounds for his
dismissal. In case of abandomment of work,
the notice shall be served at the worker's last
known address.
xxx xxx xxx
Sec. 5. Answer and hearing. — The worker
may answer the allegations stated against him
in the notice of dismissal within a reasonable
period from receipt of such notice. The
employer shall afford the worker ample
opportunity to be heard and to defend himself
 with the assistance of his representative, if he
so desires.
SEC. 6. Decision to dismiss. — The employer
shall immediately notify a worker in writing of a
decision to dismiss him stating clearly the
reasons therefor.
xxx xxx xxx
(Emphasis supplied)
The twin requirements of notice and hearing constitute
essential elements of due process in cases of employee
dismissal: the requirement of notice is intended to inform
the employee concerned of the employer's intent to dismiss
and the reason for the proposed dismissal; upon the other
hand, the requirement of hearing affords the employee an
opportunity to answer his employer's charges against him
and accordingly to defend himself therefrom before
dismissal is effected. Neither of these two requirements
can be dispensed with without running afoul of the due
process requirement of the 1987 Constitution.
The record of this case is bereft of any indication that a
hearing or other gathering was in fact held where private
respondent Calangi was given a reasonable opportunity to
confront his accuser(s) and to defend against the charges
made by the latter. Petitioner Corporation's "prior
consultation" with the labor union with which private
respondent Calangi was affiliated, was legally insufficient.
So far as the record shows, neither petitioner nor the labor
union actually advised Calangi of the matters at issue. The
Memorandum of petitioner's Personnel Manager certainly
319 | P a g e
offered no helpful particulars. It is important to stress that
the rights of an employee whose services are sought to be
terminated to be informed beforehand of his proposed
dismissal (or suspension) as well as of the reasons
therefor, and to be afforded an adequate opportunity to
defend himself from the charges levelled against him, are
rights personal to the employee. Those rights were not
satisfied by petitioner Corporation's obtaining the consent
of or consulting with the labor union; such consultation or
consent was not a substitute for actual observance of those
rights of private respondent Calangi. The employee can
waive those rights, if he so chooses, but the union cannot
waive them for him. That the private respondent simply
'kept silent" all the while, is not adequate to show an
effective waiver of his rights. Notice and opportunity to be
heard must be accorded by an employer even though the
employee does not affirmatively demand them.
Investigation of the alleged attempt to poison the drinking
water of the two (2) supervisors of the private respondent
was conducted by the Cainta police authorities. These
authorities interrogated and took the sworn statements of
Messrs. Marin, Torrena, Meliton and Santos who, in one
way or another, had been involved in such incident.
Petitioners argue that the decision to place private
respondent Calangi under preventive suspension and
subsequently to terminate his services was arrived at only
after the incident complained of, and Mr. Calangi, had been
investigated by the company. There is, once again, nothing
in the record to show that private respondent Calangi been
interrogated by the Cainta police authorities or by anyone
else; indeed, it appears that practically everybody, save
Calangi, was so interrogated by the police. If petitioner
Corporation did notify and investigate private respondent
and did hold a hearing, petitioners have succeeded in
keeping such facts off the record. It needs no
documentation, but perhaps it should be stressed, that this
Court can act only on the basis of matters which have been
submitted in evidence and made part of the record.
Additionally, the Court notes that the application filed by
petitioner Corporation with the Ministry of Labor and
Employment for clearance to suspend or terminate the
services of Mr. Calangi, cited as ground therefor
"[Calangi's] frustrated plan to poison Mr. Antonio Santos
and Mr. Melchor Meliton last June 5, 1983." This ground,
so far as can be gathered from the allegations of
petitioners in their pleadings and from the evidence of
record, both in the public respondent Commission and in
this Court, is anchored mainly, if not wholly on Mr.
Torrena's sworn statement, given to the Cainta police
authorities, that both he (Torrena) and private respondent
had conspired with each other to inflict physical harm upon
the persons of Messrs. Meliton and Santos. A finding of
private respondent's participation in the alleged criminal
conspiracy cannot, however, be made to rest solely on the
unilateral declaration of Mr. Torrena himself a confirmed
"co-conspirator." Such declaration must be corroborated by
other competent and convincing evidence. In. the absence
of such other evidence, Mr. Torrena's "confession"
implicating Mr. Calangi must be received with considerable
caution. The very least that petitioner Corporation should
have done was to confront private respondent with
Torrena's sworn statement; the record does not show that
petitioner Corporation did so. The burden of showing the
existence of a just cause for terminating the services of
private respondent Calangi lay on the petitioners.
Petitioners have not discharged that burden.
320 | P a g e
It remains only to note that the criminal complaint for
attempted murder against Mr. Calangi was dismissed by
the Provincial Fiscal of Rizal. 10
Coming now to the second issue raised by petitioners in
their Pleadings, Article 280 of the Labor Code, as amended
states:
Art. 280. -Security of Tenure. — In case of
regular employment, the employer shall not
terminate the services of an employee except
for a just cause or when authorized by this
Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement
without loss of seniority rights and to his
backwages computed from the time his
compensation was withheld from him up to the
time of his reinstatement. (Emphasis supplied)
We have held in the past that both reinstatement, without
loss of seniority rights, and payment of backwages are the
normal consequences of a finding that an employee has
been illegaly dismissed, and which remedies together
make the dismissed employee whole. 11 A finding of illegal
dismissal having been correctly made in this case by public
respondent Commission, private respondent is, as a matter
of right, entitled to receive both types of relief made
available in Article 280 of the Labor Code, as amended. It
matters not that private respondent Calangi had omitted in
his complaint filed in Case No. NLRC-NCR-10-4518-83 a
claim for reinstatement without loss of seniority rights for he
is entitled to such relief as the facts alleged and proved
warrant. 12
In view of the finding of illegal dismissal in this case,
petitioner Corporation is liable to private respondent
Calangi for payment of the latter's backwages for three (3)
years, without qualification and deduction. Considering the
circumstances of this case, however, the Court beheves
that reinstatement of private respondent to his former
position—or to any other equivalent position in the
company — will not serve the best interests of the parties
involved. Petitioner Corporation should not be compelled to
take back in its fold an employee who, at least in the minds
of his employers, poses a significant threat to the lives and
safety of company workers. Consequently, we hold that
private respondent should be given his separation pay in
lieu of such reinstatement. The amount of separation pay
shall be equal to private respondent's one-half (1/2)
month's salary for every year of service, to be computed
from 13 December 1974 (date of first employment) until 10
June 1986 (three years after date of illegal dismissal). 13
WHEREFORE, the Petition for certiorari is DISMISSED.
The Temporary Restraining Order and the Resolutions
issued on 8 April 1987 and 24 August 1987, respectively,
by the Court in this case are WITHDRAWN. The Decision
of public rAshville respondent Commission in Case No.
NLRC-NCR-10-4518-83 is hereby AFFIRMED, subject the
the modifications that petitioners shall pay private
respondent Calangi: (a) three (3) years backwages without
qualification or deduction, and (b) separation pay,
computed as above indicated, in lieu of reinstatement. No
pronouncement as to costs.
SO ORDERED.
321 | P a g e
Fernan (Chairman), Gutierrez, Jr., Bidin and Cortes, JJ.,
concur.
G.R. No. 122389 June 19, 1997
MIGUEL SINGSON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
PHILIPPINE AIRLINES, INC. (PAL), respondents.
PUNO, J.:
Assailed in the petition for certiorari before us is the
Resolution of the public respondent National Labor
Relations Commission1 (hereinafter NLRC) reversing the
Decision of the Labor Arbiter2 in NLRC-NCR Case No. 00-
10- 05750-91 finding the dismissal of petitioner Miguel
Singson illegal and ordering his reinstatement. Petitioner
filed a motion for reconsideration which was denied by the
public respondent in an Order dated June 27, 1995.
The antecedent facts reveal that petitioner Singson was
employed by private respondent Philippine Airlines, Inc.
(hereinafter PAL) as Traffic Representative Passenger,
Handling Division. His duty consisted of checking in
passengers and baggage for a particular flight. On June 7,
1991, petitioner was assigned to serve the check-in
counter of Japan Air Lines (hereinafter JAL) the for Flight
742. Among the passengers checked in by him was Ms.
Lolita Kondo who was bound for Narita, Japan. After
checking in, Ms. Kondo lodged a complaint alleging that
petitioner required her to pay US $200.00 for alleged
excess baggage without issuing any receipt. A
confrontation took place where petitioner was asked by the
security officer to empty his pockets. The dollars paid by
Ms. Kondo were not found in his possession. However,
when the lower panel of the check-in counter he was
manning was searched, the sum of two hundred sixty five
dollars (US $265) was found therein consisting of two (2)
one hundred dollar bills, one (1) fifty dollar bill, one (1) ten
dollar bill and one (1) five dollar bill. Petitioner was
administratively charged and investigated formed by a
committee formed by private respondent PAL.3
In an affidavit presented to the investigators, Ms. Kondo
declared that she was with three (3) Japanese friends
when she checked in on June 7, 1991, for their flight to
Narita, Japan. While in line, a man approached her and
told her that she had excess baggage. She denied the
allegation since the pieces of baggage did not only belong
to her but also to her Japanese companions. The man did
not believe that the Japanese were her companions and he
charged that she just approached them at the airport. To
settle the matter, he told her to give him two hundred
dollars (US $200) and he apologized for their argument.
She gave him one (1) one hundred dollar bill and two (2)
fifty dollar bills or a total of two hundred dollars (US $200)
as excess baggage fee. She placed the money at the side
of his counter desk and he covered it with a piece of paper.
He did not issue a receipt. She then reported the matter to
JAL's representative. Ms. Kondo identified the employee
who checked her in as the petitioner.4
322 | P a g e
In his affidavit, petitioner admitted that he was the one who
checked in Ms. Kondo and her Japanese companions.
They checked in five (5) pieces of luggage which weighed
80 kilos and within the allowed limit for check-in baggage.
He attached the claim checks to the jacket of their tickets,
returned the tickets and passport to Ms. Kondo. He then
heard an altercation involving a woman passenger with
excess hand-carried baggage who was being charged for
it; she was insisting she had paid for it in the counter but
could not produce a receipt. The passenger turned out to
be Ms. Kondo and she was accusing Cocoy Gabriel as the
one who charged her for excess baggage. Mr. Gabriel at
that time was assigned at the THAI Airways counter,
hence, it was impossible that a passenger for a JAL flight
would pay him US $200. Petitioner was talking to the JAL's
representative when two PAL employees and Ms. Kondo
approached them. He was told of Ms. Kondo's claim that
she paid the excess baggage fee to him. Petitioner was
surprised at the accusation since Ms. Kondo had no
excess baggage when she checked in.5
The investigation committee found petitioner guilty of the
offense charged and recommended his dismissal. Private
respondent PAL adopted the committee's recommendation
and dismissed him from the service effective June 7, 1991.6
On September 12, 1991, petitioner lodged a complaint
against respondent PAL before the NLRC-NCR for illegal
dismissal, attorney's fees and damages. The case was
docketed as NLRC-NCR Case No. 00-10-05750-91 and
raffled off to then Labor Arbiter Raul T . Aquino. Aquino
found the evidence adduced by private respondent PAL in
terminating petitioner's employment insufficient. Aquino
declared petitioner's dismissal illegal and ordered his
reinstatement with backwages. Respondent PAL appealed
the decision of the Labor Arbiter. On May 19, 1995, the
Second Division of public respondent NLRC, composed of
Commissioners Victoriano R. Calaycay, Rogelio I. Rayala
and Raul T . Aquino as presiding commissioner,
promulgated its Resolution reversing the decision of then
Labor Arbiter Aquino and dismissing the complaint against
respondent PAL. Petitioner filed on June 5, 1995, a motion
for the reconsideration of the aforementioned Resolution
and an Amended Motion for Reconsideration on June 15,
1995. Public respondent NLRC, thru the Second
Division with only two commissioners taking part, namely,
Commissioners Calaycay and Rayala, denied the motion.
Hence, this petition for certiorari under Rule 65 of the Rules
of Court where petitioner submits the following assignment
of errors:
I. Public respondent NLRC acted with grave
abuse of discretion and/or in excess of
jurisdiction when the Hon. Raul T. Aquino, in
his capacity as Presiding Commissioner of the
Second Division of the NLRC and as a
member thereof, participated actively in the
promulgation of the aforesaid decision and in
the consultation of the members thereof in
reaching the conclusion before it was assigned
to theponente, Hon. Calaycay.
II. Public respondent NLRC gravely abused its
discretion as in fact it exceeded its jurisdiction
when it declared the affidavit of Lolita Kondo
sufficient to declare his dismissal from
employment legal even without any cross-
323 | P a g e
examination during the investigation
conducted by Philippine Air Lines.
III. Public respondent NLRC seriously and
gravely erred amounting to abuse of discretion
and/or in excess of its jurisdiction when it
declared in the assailed decision that the
quantum of evidence necessary to justify the
supreme penalty of dismissal of the petitioner
have been complied with, and in not imposing
the burden of proving the legality of the
dismissal of the petitioner.
We find merit in this petition.
Petitioner assails the Resolution of the public respondent
NLRC on account of Commissioner Raul T. Aquino's
participation in reviewing and reversing on appeal his own
decision as labor arbiter in NLRC-NCR Case No. 00-10-
05750-91. Respondents contend that Commissioner
Aquino's failure to inhibit himself is a harmless error that
will not infirm the subject resolution. We do not agree. In
the case of Ang Tibay v. Court of Industrial Relations,7 we
laid down the requisites of procedural due process in
administrative proceedings, to wit: (1) the right to a hearing,
which includes the right to present one's case and submit
evidence in support thereof; (2) the tribunal must consider
the evidence presented; (3) the decision must have
something to support itself; (4) the evidence must be
substantial; (5) the decision must be based on the
evidence presented at the hearing, or at least contained in
the record and disclosed to the parties affected; (6) the
tribunal or body or any of its judges must act on its own
independent consideration of the law and facts of the
controversy, and not simply accept the views of a
subordinate; (7) the Board or body should, in all
controversial questions, render its decision in such manner
that the parties to the proceeding can know the various
issues involved, and the reason for the decision rendered.
In addition, administrative due process includes (a) the
right to notice, be it actual or constructive, of the institution
of the proceedings that may affect a person's legal right;
(b) reasonable opportunity to appear and defend his rights
and to introduce witnesses and relevant evidence in his
favor; (c) a tribunal so constituted as to give him
reasonable assurance of honesty and impartiality, and one
of competent jurisdiction; and (d) a finding or decision by
that tribunal supported by substantial evidence presented
at the hearing or at least ascertained in the records or
disclosed to the parties.8 It is self-evident from the ruling
case law that the officer who reviews a case on appeal
should not be the same person whose decision is the
subject of review. Thus, we have ruled that "the reviewing
officer must perforce be other than the officer whose
decision is under review.9
In the case at bar, we hold that petitioner was denied due
process when Commissioner Aquino participated, as
presiding commissioner of the Second Division of the
NLRC, in reviewing private respondent PAL's appeal. He
was reviewing his own decision as a former labor arbiter.
Under Rule VII, Section 2 (b) of the New Rules of
Procedure of the NLRC, 10 each Division shall consist of
one member from the public sector who shall act as the
Presiding Commissioner and one member each from the
workers and employers sectors, respectively. The
composition of the Division guarantees equal
representation and impartiality among its members. Thus,
324 | P a g e
litigants are entitled to a review of three (3) commissioners
who are impartial right from the start of the process of
review. Commissioner Aquino can hardly be considered
impartial since he was the arbiter who decided the case
under review. He should have inhibited himself from any
participation in this case.
Prescinding from this premise, the May 19, 1995 resolution
of the respondent NLRC is void for the Division that
handed it down was not composed of three impartial
commissioners. The infirmity of the resolution was not
cured by the fact that the motion for reconsideration of the
petitioner was denied by two commissioners and without
the participation of Commissioner Aquino. The right of
petitioner to an impartial review of his appeal starts from
the time he filed his appeal. He is not only entitled to an
impartial tribunal in the resolution of his motion for
reconsideration. Moreover, his right is to an impartial
review of three commissioners. The denial of petitioner's
right to an impartial review of his appeal is not an
innocuous error. It negated his right to due process.
IN VIEW WHEREOF, the Resolution of the Second
Division of the NLRC dated May 19, 1995 and its Order
dated June 27, 1995 in NLRC-NCR Case No. 00-10-
05750-91 is SET ASIDE. The case is remanded to the
NLRC for further proceedings. No Costs.
SO ORDERED.
Regalado, Romero and Torres, Jr., JJ., concur.
Mendoza, J., took no part.
G.R. No. L-29064 April 29, 1971
AIR MANILA, INC., petitioner,
vs.
HON. MARCELO S. BALATBAT, DIRECTOR NILO DE
GUIA, DR. GREGORIO Y. ZARA, and COL. JUAN B.
GUEVARRA as members of the CIVIL AERONAUTICS
BOARD and PHILIPPINE AIR LINES, INC., respondents.
Bautista Angelo, Antonio, Lopez and Associates and
Santos, Buted and Associates for petitioner.
Crispin D. Baizas and Cenon Cervantes, Jr. for respondent
Philippine Air Lines, Inc.
Office of the Solicitor General Antonio P. Barredo and
Solicitor Bernardo P. Pardo for respondent Civil
Aeronautics Board.
REYES, J.B.L., J.:
This is a petition for certiorari filed by Air Manila, Inc., to
determine the validity of Resolution No. 139 (68) of the
Civil Aeronautics Board in CAB Case No. 1414, allegedly
issued without or in excess of jurisdiction.
There is no dispute as to the facts of this case.
On 1 April 1968, the Philippine Air Lines, hereafter referred
to as PAL, petitioned the Civil Aeronautics Board, referred
to hereafter as the Board, for approval of a proposed
schedule introducing seven nights - F515/516, F555/556,
325 | P a g e
F561/562, F531/532, F591/338, F527/528, and F211/212 -
and the adjustment of the flight schedule that may thus be
affected (CAB Case No. 1414). On 15 April 1968, action on
the petition was deferred for further study.
On 22 April 1968, the Board passed Resolution No. 109
(68), referring PAL's petition to a hearing examiner for
economic justification. Accordingly, the designated hearing
officer set the initial hearing thereof for 30 April 1968.
On 29 April 1968, PAL moved for reconsideration of
Resolution No. 109 (68). By resolution of 6 May 1968, the
Board deferred action on this later motion, until PAL shall
have resumed its DC-3 services in certain airports named
therein.
On 9 May 1968, PAL filed another motion, this time for
reconsideration of the Board resolution of 6 May 1968, on
the ground that the new flights which it was proposing to
operate in Case No. EP-1414 will be serviced by jet-prop or
pure jet equipment only, thus, the order for resumption of
DC-3 services in said resolution was improper and should
be deleted. In its Resolution No. 131 (68) of 20 May 1968,
the Board deferred action on this motion for
reconsideration.
It appears, however, that on 15 May 1968, PAL filed an
Urgent Petition for approval of a consolidated schedule of
jet and jet prop flights, with an interim DC-3 schedule to
different secondary and feeder points (DTS-35). On 28
May 1968, the Board issued its Resolution No. 139 (68),
approving DTS-35 for a period of 30 days, effective 1 June
1968, subject to the conditions that (a) the flight between
Manila and San Fernando, La Union, F210/211 of the
same timetable, be operated daily instead of twice a week
as proposed and (b) that all schedules under DTS-35, for
which no previous approval has been granted by the
Board, are to be referred to a hearing examiner for
reception of evidence on its economic justification. After the
examiner's report, several of the proposed flights were
approved for 30 days from 31 July 1968.
On 31 May 1968, Air Manila, Inc., filed the instant petition
claiming that the respondent Board acted without or in
excess of jurisdiction and/or with abuse of discretion in
issuing its Resolution No. 139 (68). It is petitioner's
allegation that the proposed new schedule, involving an
increase of frequencies, would not only saturate the routes
served also by petitioner, but would also affect its
schedule; that the Board's approval of said Domestic
Traffic Schedule without receiving the evidence of the
parties constituted a deprivation of petitioner's right to be
heard; and that such authorization to PAL to operate the
proposed schedule without economic justification
amounted to a capricious and whimsical exercise by the
Board of its power amounting to lack of jurisdiction.
There is no merit to the contention of petitioner. It has been
correctly said that administrative proceedings are not
exempt from the operation of certain basic and
fundamental procedural principles, such as the due
process requirements in investigations and trials.1 And this
administrative due process is recognized to include (a) the
right to notice, be it actual or constructive, of the institution
of the proceedings that may affect a person's legal rights;
(b) reasonable opportunity to appear and defend his rights,
introduce witnesses and relevant evidence in his favor, (c)
a tribunal so constituted as to give him reasonable
326 | P a g e
assurance of honesty and impartiality, and one of
competent Jurisdiction; and (4) a finding or decision by that
tribunal supported by substantial evidence presented at the
hearing, or at least contained in the records or disclosed to
the parties affected.2
In the present case, it can not truthfully be said that the
provisional approval by the Board of PAL's proposed DTS-
35 violates the requisites of administrative due process.
Admittedly, after PAL's proposal to introduce new Mercury
night flights (in CAB Case No. EP-1414) had been referred
to a hearing examiner for economic justification, PAL
submitted a so-called consolidated schedule of flights,
DTS-35, that included the same Mercury night flights
involved in Case EP-1414, and this was allowed by Board
Resolution No. 139 (68). According to respondents,
however, the Board's action was impelled by the
circumstance that at the time, the authorizations of certain
flight schedules previously allowed but were incorporated
in DTS-35 were about to expire; thus, the consolidated
schedule had to be approved temporarily if the operations
of the flights referred to were not to be suspended. In short,
the temporary y permit was issued to prevent the stoppage
or cessation of services in the affected areas. This point
petitioner has failed to refute.
Neither can the provisional authorization of DTS-35 be said
to have done away with the requisite hearing and
investigation of the new flight schedules and, consequently,
to have deprived the petitioner of its right to be heard. Note
that in allowing the operation or effectivity of PAL's
consolidated flight schedule, it was precisely prescribed
that "all schedules under the DTS-35 for which no previous
approval has been granted by the Board, are hereby
referred to a hearing examiner for reception of evidence on (a) Route — MANILA-MACTAN-
its economic justification."3 It has not been denied that such MANILA
hearings were actually conducted by the hearing examiner F515/516 — Seven
and a report on the result thereof was submitted to the (7) additional flights a week
Board. And the Board, considering the report of the hearing and vice-versa; schedule is timed
examiner, passed Resolution No. 190 (68)4 approving, for a just ahead of Air
period of 30 days starting 31 July 1968, only three or four Manila's schedule.
frequencies of the seven proposed new flights (F338,
F591, F531/532, F555/556, F527/528, F561/562, and (b) Route — MANILA-DAVAO-
F515/516). There is no proof, not even allegation, that in all MANILA
those bearings petitioner was not notified or given F555/556 — Seven
opportunity to adduce evidence in support of its opposition. (7) additional flights a week
and vice-versa; schedule is timed
It may be true that the temporary approval of DTS-35 just ahead of Air Manilas
resulted in the immediate operation of the opposed flights schedule.
before the existence of economic justification therefor has
been finally determined. But this fact alone would not work (c) Route — MANILA-BACOLOD-
against the validity of the provisional authorization thus MANILA
issued. For, under the law, the Civil Aeronautics Board is F531/532 — Seven
not only empowered to grant certificates of public (7) additional flights a week
convenience and necessity; it can also issue, deny, revise, and vice-versa; timed just ahead
alter, modify, cancel, suspend or revoke, in whole or in of Air Manila's
part, any temporary operating permit, upon petition or schedule.
complaint of another or even at its own initiative.5 The
exercise of the power, of course, is supposed to be (d) Route — MACTAN-
conditioned upon the paramount consideration of public TACLOBAN-MACTAN
convenience and necessity, and nothing has been F527/528 — Seven
presented in this case to prove that the disputed action by (7) additional flights a week
the Board has been prompted by a cause other than the and vice-versa.
good of the service.
(e) Route — TACLOBAN-
It may be also pointed out that the new schedule objected MACTAN-TACLOBAN
to by petitioner will affect its services in six routes in the F391/392 — Flight schedule
following manner: revised as to make it
327 | P a g e
 just ahead of Air Manila's
schedule.
(f) Route — MACTAN-DAVAO-
MACTAN
F579/580 — PAL's old schedule
revised to adverse-
ly affect Air Manila's schedule in
this route.
FOR THE FOREGOING CONSIDERATIONS, the petition
in this case is hereby dismissed, with costs against the
petitioner.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro,
Fernando, Teehankee, Barredo, Villamor and Makasiar,
JJ., concur.

Respondents disclosed, however, and this has not been

denied by petitioner, that the schedule of flights
provisionally approved in Resolution No. 139(68) was KING OF KINGS TRANSPORT, G.R. No. 166208
subsequently readjusted by the Board in order to conform
with its established policy on separation time between INC., CLAIRE DELA FUENTE,
flights.6 While the aforementioned readjustment of the
schedule was secured by the Filipinas Orient Airways and, and MELISSA LIM, Present:
therefore, may not particularly improve petitioner's
situation, the resolution indicated that relief can still be Petitioners,
obtained from the Board, thus precluding resort at once to
the relief afforded by a certiorari proceeding in this QUISUMBING, J., Chairperson,
Tribunal.7 Likewise, the records show that by Resolution
No. 190 (68) in the same Case No. EP-1414, the Board CARPIO,
allowed only three or four frequencies of the proposed
seven new flights, such authorization terminating after 30 CARPIO MORALES,
days from 31 July 1968.
- versus - TINGA, and
It is evident from the foregoing facts that not only has the
resolution subject of the present petition been modified, but VELASCO, JR., JJ.
its effectivity had been fixed up to 30 September 1968.
There being no proof that the situation existing when Promulgated:
Resolution No. 139 (68) was issued still persists, the issue
herein presented apparently has become moot and SANTIAGO O. MAMAC,
academic.
328 | P a g e
Respondent. June 29, 2007
x------------------------------------------------------------------------------
-----------x
DECISION
VELASCO, JR., J.:
Is a verbal appraisal of the charges against the
employee a breach of the procedural due process? This is
the main issue to be resolved in this plea for review under
Rule 45 of the September 16, 2004Decision[1] of the Court
of Appeals (CA) in CA-GR SP No. 81961. Said judgment
affirmed the dismissal of bus conductor Santiago O. Mamac
from petitioner King of Kings Transport, Inc. (KKTI), but
ordered the bus company to pay full backwages for
violation of the twin-notice requirement and 13th-month
pay. Likewise assailed is the December
Resolution[2] rejecting KKTIs Motion for Reconsideration.
329 | P a g e
The Facts
Petitioner KKTI is a corporation engaged in public
transportation and managed by Claire Dela Fuente and
Melissa Lim.
Respondent Mamac was hired as bus conductor of Don
Mariano Transit Corporation (DMTC) on April 29, 1999. The
DMTC employees including respondent formed
the Damayan ng mga Manggagawa, Tsuper at Conductor-
Transport Workers Union and registered it with the
Department of Labor and Employment. Pending the holding
of a certification election in DMTC, petitioner KKTI was
incorporated with the Securities and Exchange Commission
which acquired new buses. Many DMTC employees were
subsequently transferred to KKTI and excluded from the
2, 2004 CA election.
The KKTI employees later organized the Kaisahan ng mga
Kawani sa King of Kings (KKKK) which was registered with
DOLE. Respondent was elected KKKK president.
Respondent was required to accomplish a prepared
Conductors Trip Report and submit it to the company after
each trip. As a background, this report indicates the ticket
opening and closing for the particular day of duty. After
submission, the company audits the reports. Once an
irregularity is discovered, the company issues an Irregularity
Report against the employee, indicating the nature and
details of the irregularity.Thereafter, the concerned
employee is asked to explain the incident by making a
written statement or counter-affidavit at the back of the
same Irregularity Report. After considering the explanation
of the employee, the company then makes a determination
of whether to accept the explanation or impose upon the
employee a penalty for committing an infraction. That
decision shall be stated on said Irregularity Report and will
be furnished to the employee.
330 | P a g e
Upon audit of the October 28, 2001 Conductors
Report of respondent, KKTI noted an irregularity. It
discovered that respondent declared several sold tickets as
returned tickets causing KKTI to lose an income of eight
hundred and ninety pesos. While no irregularity report was
on the October 28, 2001 incident, KKTI
nevertheless asked respondent to explain the
discrepancy. In his letter,[3]respondent said that the
erroneous declaration in his October 28, 2001 Trip Report
was unintentional. He explained that during that days trip,
the windshield of the bus assigned to them was smashed;
and they had to cut short the trip in order to immediately
report the matter to the police. As a result of the incident,
he got confused in making the trip report.
On November 26, 2001, respondent received a
letter[4] terminating his employment effective November
29, 2001. The dismissal letter alleged that the October 28,
2001 irregularity was an act of fraud against the
company. KKTI also cited as basis for respondents dismissal
the other offenses he allegedly committed since 1999.
 On September 16, 2002, Labor Arbiter Ramon Valentin C.
Reyes rendered judgment dismissing respondents
On December 11, 2001, respondent filed a Complaint
Complaint for lack of merit.[6]
for illegal dismissal, illegal deductions, nonpayment of 13th-
month pay, service incentive leave, and separation pay. He
denied committing any infraction and alleged that his
Aggrieved, respondent appealed to the National Labor
dismissal was intended to bust union activities. Moreover,
Relations Commission (NLRC). On August 29, 2003, the
he claimed that his dismissal was effected without due
NLRC rendered a Decision, the dispositive portion of which
process.
reads:

In its April 3, 2002 Position Paper,[5] KKTI contended
that respondent was legally dismissed after his commission
of a series of misconducts and misdeeds. It claimed that
respondent had violated the trust and confidence reposed
WHEREFORE, the decision dated 16 September
2002 is MODIFIED in that respondent King of Kings
Transport Inc. is hereby ordered to indemnify complainant
in the amount of ten thousand pesos (P10,000) for failure
to comply with due process prior to termination.

upon him by KKTI. Also, it averred that it had observed due

process in dismissing respondent and maintained that The other findings are AFFIRMED.
respondent was not entitled to his money claims such as
service incentive leave and 13th-month pay because he was
SO ORDERED.[7]
paid on commission or percentage basis.

331 | P a g e
 Respondent moved for reconsideration but it was award of PhP 10,000 as indemnification by awarding full
denied through the November 14, 2003 Resolution[8] of the backwages from the time respondents employment was
NLRC. terminated until finality of the decision.

Thereafter, respondent filed a Petition for Certiorari Moreover, the CA held that respondent is entitled to
before the CA urging the nullification of the NLRC Decision the 13th-month pay benefit.
and Resolution.

Hence, we have this petition.

The Ruling of the Court of Appeals

The Issues
Affirming the NLRC, the CA held that there was just cause
for respondents dismissal. It ruled that respondents act in Petitioner raises the following assignment of errors
declaring sold tickets as returned tickets x x x constituted for our consideration:
[9]
fraud or acts of dishonesty justifying his dismissal.

Whether the Honorable Court of Appeals erred

in awarding in favor of the complainant/private
Also, the appellate court sustained the finding that
respondent, full back wages, despite the denial
petitioners failed to comply with the required procedural of his petition for certiorari.
due process prior to respondents termination. However,
following the doctrine in Serrano v. NLRC,[10] it modified the
332 | P a g e
 Whether the Honorable Court of Appeals erred
in ruling that KKTI did not comply with the
requirements of procedural due process before
dismissing the services of the
complainant/private respondent.
Whether the Honorable Court of Appeals
rendered an incorrect decision in that [sic] it
awarded in favor of the complaint/private
respondent, 13th month pay benefits contrary to
PD 851.[11]
The Courts Ruling
Non-compliance with the Due Process Requirements
Due process under the Labor Code involves two
aspects: first, substantivethe valid and authorized causes of
termination of employment under the Labor Code;
and second, proceduralthe manner of dismissal.[12] In the
present case, the CA affirmed the findings of the labor
arbiter and the NLRC that the termination of employment
of respondent was based on a just cause. This ruling is not
at issue in this case. The question to be determined is
whether the procedural requirements were complied with.

The petition is partly meritorious. Art. 277 of the Labor Code provides the manner of
termination of employment, thus:

The disposition of the first assigned error depends on

whether petitioner KKTI complied with the due process Art. 277. Miscellaneous Provisions.x x x

requirements in terminating respondents employment;

thus, it shall be discussed secondly.

333 | P a g e
 (b) Subject to the constitutional right of
workers to security of tenure and their right to
SEC. 2. Standards of due process;
be protected against dismissal except for a just
requirements of notice.In all cases of
and authorized cause without prejudice to the
termination of employment, the following
requirement of notice under Article 283 of this
standards of due process shall be substantially
Code, the employer shall furnish the worker
observed:
whose employment is sought to be terminated a
written notice containing a statement of the
causes for termination and shall afford the latter
I. For termination of employment based
ample opportunity to be heard and to defend
on just causes as defined in Article 282 of the
himself with the assistance of his representative
Code:
if he so desires in accordance with company
rules and regulations promulgated pursuant to
guidelines set by the Department of Labor and
(a) A written notice served on
Employment. Any decision taken by the
the employee specifying the ground
employer shall be without prejudice to the right
or grounds for termination, and
of the worker to contest the validity or legality of
giving said employee reasonable
his dismissal by filing a complaint with the
opportunity within which to explain
regional branch of the National Labor Relations
Commission. The burden of proving that the his side.
termination was for a valid or authorized cause
shall rest on the employer.
(b) A hearing or conference
during which the employee
concerned, with the assistance of
Accordingly, the implementing rule of the aforesaid counsel if he so desires is given
provision states: opportunity to respond to the
334 | P a g e
 charge, present his evidence, or termination against them, and a directive that the
rebut the evidence presented
employees are given the opportunity to submit their
against him.
written explanation within a reasonable period. Reasonable
opportunity under the Omnibus Rules means every kind of
(c) A written notice of assistance that management must accord to the employees
termination served on the to enable them to prepare adequately for their
employee, indicating that upon due
defense.[15] This should be construed as a period of at least
consideration of all the
five (5) calendar days from receipt of the notice to give the
circumstances, grounds have been
established to justify his employees an opportunity to study the accusation against
termination. [13] them, consult a union official or lawyer, gather data and
evidence, and decide on the defenses they will raise against
the complaint. Moreover, in order to enable the employees
In case of termination, the foregoing
to intelligently prepare their explanation and defenses, the
notices shall be served on the employees last
notice should contain a detailed narration of the facts and
known address.[14]
circumstances that will serve as basis for the charge against
the employees. A general description of the charge will not
suffice.Lastly, the notice should specifically mention which
To clarify, the following should be considered in terminating
company rules, if any, are violated and/or which among the
the services of employees:
grounds under Art. 282 is being charged against the
employees.
(1) The first written notice to be served on the employees
should contain the specific causes or grounds for

335 | P a g e
(2) After serving the first notice, the employers should
schedule and conduct a hearing or conference wherein the
employees will be given the opportunity to: (1) explain and
clarify their defenses to the charge against them; (2)
present evidence in support of their defenses; and (3) rebut
the evidence presented against them by the
management. During the hearing or conference, the
employees are given the chance to defend themselves
personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or
hearing could be used by the parties as an opportunity to
come to an amicable settlement.
(3) After determining that termination of employment is
justified, the employers shall serve the employees a written
notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been
considered; and (2) grounds have been established to
justify the severance of their employment.
336 | P a g e
In the instant case, KKTI admits that it had failed to
provide respondent with a charge sheet.[16] However, it
maintains that it had substantially complied with the rules,
claiming that respondent would not have issued a written
explanation had he not been informed of the charges
against him.[17]
We are not convinced.
First, respondent was not issued a written notice
charging him of committing an infraction. The law is clear
on the matter. A verbal appraisal of the charges against an
employee does not comply with the first notice
requirement. In Pepsi Cola Bottling Co. v. NLRC,[18] the Court
held that consultations or conferences are not a substitute
for the actual observance of notice and hearing. Also,
in Loadstar Shipping Co., Inc. v. Mesano,[19] the Court,
sanctioning the employer for disregarding the due process
requirements, held that the employees written explanation
did not excuse the fact that there was a complete absence
of the first notice.
 already being effected. Thus, he was surprised to receive
the November 26, 2001 termination letter indicating as
Second, even assuming that petitioner KKTI was able
grounds, not only his October 28, 2001 infraction, but also
to furnish respondent an Irregularity Report notifying him
his previous infractions.
of his offense, such would not comply with the
requirements of the law. We observe from the irregularity
reports against respondent for his other offenses that such Sanction for Non-compliance with Due Process
contained merely a general description of the charges Requirements
against him. The reports did not even state a company rule
or policy that the employee had allegedly
violated. Likewise, there is no mention of any of the As stated earlier, after a finding that petitioners
grounds for termination of employment under Art. 282 of failed to comply with the due process requirements, the CA
the Labor Code. Thus, KKTIs standard charge sheet is not awarded full backwages in favor of respondent in
sufficient notice to the employee. accordance with the doctrine in Serrano v.
NLRC.[20] However, the doctrine in Serrano had already been
abandoned in Agabon v. NLRC by ruling that if the dismissal
Third, no hearing was conducted. Regardless of is done without due process, the employer should
respondents written explanation, a hearing was still indemnify the employee with nominal damages.[21]
necessary in order for him to clarify and present evidence in
support of his defense. Moreover, respondent made the
letter merely to explain the circumstances relating to the Thus, for non-compliance with the due process
irregularity in his October 28, 2001 Conductors Trip requirements in the termination of respondents
Report. He was unaware that a dismissal proceeding was employment, petitioner KKTI is sanctioned to pay
337 | P a g e
respondent the amount of thirty thousand pesos (PhP
30,000) as damages.
Thirteenth (13th)-Month Pay
Section 3 of the Rules Implementing Presidential Decree
No. 851[22] provides the exceptions in the coverage of the
payment of the 13th-month benefit. The provision states:
SEC. 3. Employers covered.The Decree shall
apply to all employers except to:
xxxx
e) Employers of those who are paid on purely
commission, boundary, or task basis, and those
who are paid a fixed amount for performing a
specific work, irrespective of the time consumed
in the performance thereof, except where the
workers are paid on piece-rate basis in which
338 | P a g e
case the employer shall be covered by this
issuance insofar as such workers are concerned.
Petitioner KKTI maintains that respondent was paid
on purely commission basis; thus, the latter is not entitled
to receive the 13th-month pay benefit. However, applying
the ruling in Philippine Agricultural Commercial and
Industrial Workers Union v. NLRC,[23] the CA held that
respondent is entitled to the said benefit.
It was erroneous for the CA to apply the case of Philippine
Agricultural Commercial and Industrial Workers
Union. Notably in the said case, it was established that the
drivers and conductors praying for 13th- month pay were
not paid purely on commission. Instead, they were
receiving a commission in addition to a fixed or guaranteed
wage or salary. Thus, the Court held that bus drivers and
conductors who are paid a fixed or guaranteed minimum
wage in case their commission be less than the statutory
minimum, and commissions only in case where they are
over and above the statutory minimum, are entitled to a
13th-month pay equivalent to one-twelfth of their total
earnings during the calendar year.
On the other hand, in his Complaint,[24] respondent
admitted that he was paid on commission only. Moreover,
this fact is supported by his pay slips[25] which indicated the
varying amount of commissions he was receiving each
trip. Thus, he was excluded from receiving the 13th-month
pay benefit.
WHEREFORE, the petition is PARTLY GRANTED and the
September 16, 2004 Decision of the CA is MODIFIED by
deleting the award of backwages and 13th-month pay.
Instead, petitioner KKTI is ordered to indemnify respondent
the amount of thirty thousand pesos (PhP 30,000) as
nominal damages for failure to comply with the due process
requirements in terminating the employment of
respondent.
No costs.
SO ORDERED.
339 | P a g e
G.R. No. L-1377 May 12, 1948
LEYTE LAND TRANSPORTATION COMPANY,
INC., petitioners,
vs.
LEYTE FARMER'S and LABORER'S
UNION, respondents.
Mateo Canonoy for petitioner.
Arsenio I. Martinez for Court of Industrial Relations.
PARAS, J.:
This is an appeal by certiorari from a decision of the Court
of Industrial Relations in which the petitioner (appellant),
Leyte Land Transportation Company, Inc., was ordered, —
among other directives not here assailed, — (1) to grant its
various employees, drivers, conductors, and laborers
increase in salaries and wages at average rates of five and
ten pesos, representing an annual total of some P14,940;
(2) to grant, under certain conditions, its other employers;
(3) to grant, under certain conditions, its employees and
laborers 15 days vacation with pay and 15 days sick leave
with pay.
The petitioner contends that the Court of Industrial
Relations made a mistake in conceding salary or wage
increases, after being "convinced that the basic salary of
P100 for drivers and P80 for conductors is just taking into
consideration the financial condition of the corporation just
now," and merely because such increases will enable the
workers "to meet the high cost of living now in Tacloban in
order to help them buy the necessities for a decent
livelihood." It is intimated in this connection that the total
amount of the increases, "if added to the crippling losses
will throw the Company into bankruptcy."
There can be no doubt about the propriety of the action of
the Court of Industrial Relations in taking into account the
"high cost of living" as a factor for determining the
reasonableness of any salary or wage raise, since said
court is impliedly empowered to do so under section 20 of
Commonwealth Act No. 103 which provides that "in the
hearing, investigation and determination of any question or
controversy and in exercising any duties and power under
this Act, the Court shall act according to justice and equity
and substantial merits of the case, without regard to
technicalities or legal forms," not to mention section 5
which provides, in connection with minimum wages for a
given industry or in a given locality, that the court shall fix
the same at a rate that "would give the workingmen a just
compensation, for their labor and an adequate income to
meet essential necessities of civilized life, and at the same
time allow the capital a fair return on its investment." It
cannot be supposed that the Court of Industrial Relations is
powerless to adopt the latter criterion, simply because it is
called upon to fix a minimum wage to be paid by a specific
employer, and not by all employers engaged in the
transportation business.
Whether or not the ruling of the Court of Industrial
Relations will allow the petitioner a fair return on its
investments or result in its bankruptcy is a factual inquiry
340 | P a g e
which we are not authorized to make. (Commonwealth Act
No. 103, section 15, as amended by Commonwealth Act
No. 559, section 2; Rules of Court 44; National Labor
Union vs. Philippine Match Co., 40 Off. Gaz., 8th Supp., p.
134; Bardwell Brothers vs. Philippine Labor Union, 39 Off.
Gaz., p. 1032; Pasumil Worker's Union vs. Court of
Industrial Relations, 40 Off. Gaz., 6th Supp., p. 71;
Kaisahan ng mga Manggagawa Sa Kahoy sa Pilipinas vs.
Gotamco Saw Mill, G. R. No. L-1573, March 29, 1948.)
Even so, it is not amiss to point out, by way of preserving
petitioner's peace of mind, that the increases in question
are, under the express terms of the appealed decision,
merely temporary, with the result that the petitioner may
reopen the question at any proper time.
The Court has already upheld the constitutionality of the
power of Court of Industrial Relations to determine and fix
minimum wages for workers (Antamok Goldfields Mining
Company vs. Court of Industrial Relations, 40 Off. Gaz.,
8th Supp., p. 173; International Hardwood and Veneer
Company vs. Pañgil Federation of Labor, 40 Off. Gaz., 9th
Supp., p. 118; Central Azucarrera de Tarlac vs. Court of
Industrial Relations, 40 Off. Gaz., 9th Supp., p. 146),
thereby making it unnecessary for us to discuss at length
the arguments of the petitioner on the point. Indeed, the
power in question was said to have been granted to the
Court of Industrial Relations in virtue of the constitutional
mandates that "the promotion of social justice to insure the
well-being and economic security of all the people should
be the concern of the State" (Constitution, Article II, section
5); "the State shall afford protection to labor, especially to
working women and minors, and shall regulate the
relations between the landowner and tenant, and between
labor and capital and capital in industry and in agriculture"
(Id., Article XIV, section 6); "the State may provide for
compulsory arbitration." (Id.)
The authority of the Court of Industrial Relations to order
the petitioner to grant its employees and laborers vacation
and sick leaves with pay is clearly included or implied from
its general jurisdictions to consider, investigate, decide and
settle all questions, mattes, controversies, or disputes
arising between, and/affecting employers and employees
or laborers, and regulate the relations between them
(Commonwealth Act No. 103, section 1, as amended by
Commonwealth Act No. 559, and to take cognizance of any
industrial dispute causing or likely to cause a strike or
lockout, arising from differences as regards, among others,
wages or conditions of employment. It is needless to
remind all employers that the concession of vacation and
sick leaves in the long run redounds to their benefit, foe as
well remarked by professors Watkins and Dood in "Labor
Problems" (1940), pages 330-331, quoted in the
memorandum of the respondent of the respondent Court of
Industrial Relations, "when there is an assurance of
holidays and vacations, workers to take up their tasks with
greater efficiency and tend to sustain their productiveness
for longer periods."
In answer to the contention of the petitioner that the
doctrine laid down in the appealed decision on effect "has
deprived the company of its rights to enter into contract of
employment as it and the employee may agree," it is
sufficient to quote the following pronouncements of the
United States Supreme Court: :The fact that both parties
are of full age and competent to contract does not
necessarily deprive the State of the power to interfere
where the parties do not stand upon an equality, or where
341 | P a g e
the public health demands that one party to the contract
shall be protected against himself. The State still retains an
interest in his welfare, however reckless he may be. The
whole is no greater than the sum of all the parts, and where
the individual health, safety and welfare are sacrificed or
neglected, the State must suffer." (West Coast Hotel
Company vs. Parrish, 300 U. S., 379, 394; 81 Law ed.,
703, 710, quoting Holden vs. Hardy, 169 U. S., 366; 42
Law ed., 780. The former, by the way, expressly overrules
the case of Adkins vs. Children's Hospital, 261 U. S., 525;
67 Law ed., 785, cited by the petitioner.) With respect to
the decision in People vs. Pomar, 46 Phil., 440, also
invoked in petitioner's behalf, we merely recall what Mr.
Justice Laurel stated in his concurring opinion in the case
of ang Tibay vs. Court of Industrial Relations et al., G. R.
No. 46496, quoted in Antamok Goldfields Mining Company
vs. Court of Industrial Relations, 40 Off. Gaz., 8th Supp.,
pages 173, 193: "In the midst of the changes that have
taken place, it may likewise be doubted if the
pronouncement made by this Court in the case People vs.
Pomar (46 Phil., 440) — also relied upon the petitioner in
its printed memorandum — still retains its virtuality as a
living principle. The policy of laissez faire has to some
extent given way to the assumption by the government of
the right of intervention even in contractual relations
affected with public interest."
Criticism is addressed to the extension of the increases
and other benefits in question to employees and laborers
who were not made parties hereto and who did not join the
seventy-six drivers and conductors who had made
corresponding demands upon and declared a strike against
the petitioner. Aside from the fact that the Court of
Industrial Relations is authorized to act according to justice
and equity without regard to technicalities or legal forms
(Commonwealth Act No. 103, section 20), the criticism is
answered in the decision of this Court in Parsons Hardware
Co., Inc. vs. Court of Industrial Relations , G. R. No. 48215,
wherein it was held: "Even assuming that the eighteen
laborers were not members of the union at the time its
petition for a general increase in salaries was submitted,
we are of the opinion and so hold that as they are laborers
of the company, they are entitled to the increase. ... It has
to be so, because to accord such increase only to
members of the union would constitute an unjust and
unwarranted discrimination against non-members."
The petitioner alleges that the lower court erred in fixing a
scale of salaries, wages and per diems higher than that
adopted by the National Government and its subdivisions.
The comparison is rather sad because, the Government,
unlike the petitioner, is not established for profit and mainly
derives it income from the taxes paid by the people.
Moreover, we can take judicial notice of the fact that the
Government, within the limits of the finances, has already
striven and is still striving to raise and standardize the
salaries and wages of its employees and laborers,
especially those on the lower brackets.
The decision appealed from is, therefore, hereby affirmed,
with costs against the petitioner. So ordered.
Feria, Pablo, Perfecto, Bengzon, and Tuason, JJ., concur.
G.R. No. L-25246 September 12, 1974
BENJAMIN VICTORIANO, plaintiff-appellee,
vs.
342 | P a g e
ELIZALDE ROPE WORKERS' UNION and ELIZALDE
ROPE FACTORY, INC., defendants, ELIZALDE ROPE
WORKERS' UNION, defendant-appellant.
Salonga, Ordonez, Yap, Sicat & Associates for plaintiff-
appellee.
Cipriano Cid & Associates for defendant-appellant.
ZALDIVAR, J.:p
Appeal to this Court on purely questions of law from the decision of the Court of First Instance of
Manila in its Civil Case No. 58894.
The undisputed facts that spawned the instant case follow:
Benjamin Victoriano (hereinafter referred to as Appellee), a
member of the religious sect known as the "Iglesia ni
Cristo", had been in the employ of the Elizalde Rope
Factory, Inc. (hereinafter referred to as Company) since
1958. As such employee, he was a member of the Elizalde
Rope Workers' Union (hereinafter referred to as Union)
which had with the Company a collective bargaining
agreement containing a closed shop provision which reads
as follows:
Membership in the Union shall be required as
a condition of employment for all permanent
employees workers covered by this
Agreement.
The collective bargaining agreement expired on March 3,
1964 but was renewed the following day, March 4, 1964.
Under Section 4(a), paragraph 4, of Republic Act No. 875,
prior to its amendment by Republic Act No. 3350, the
employer was not precluded "from making an agreement
with a labor organization to require as a condition of
employment membership therein, if such labor organization
is the representative of the employees." On June 18, 1961,
however, Republic Act No. 3350 was enacted, introducing
an amendment to — paragraph (4) subsection (a) of
section 4 of Republic Act No. 875, as follows: ... "but such
agreement shall not cover members of any religious sects
which prohibit affiliation of their members in any such labor
organization".
Being a member of a religious sect that prohibits the
affiliation of its members with any labor organization,
Appellee presented his resignation to appellant Union in
1962, and when no action was taken thereon, he reiterated
his resignation on September 3, 1974. Thereupon, the
Union wrote a formal letter to the Company asking the
latter to separate Appellee from the service in view of the
fact that he was resigning from the Union as a member.
The management of the Company in turn notified Appellee
and his counsel that unless the Appellee could achieve a
satisfactory arrangement with the Union, the Company
would be constrained to dismiss him from the service. This
prompted Appellee to file an action for injunction, docketed
as Civil Case No. 58894 in the Court of First Instance of
Manila to enjoin the Company and the Union from
dismissing Appellee.1 In its answer, the Union invoked the
"union security clause" of the collective bargaining
agreement; assailed the constitutionality of Republic Act
No. 3350; and contended that the Court had no jurisdiction
over the case, pursuant to Republic Act No. 875, Sections
24 and 9 (d) and (e).2 Upon the facts agreed upon by the
343 | P a g e
parties during the pre-trial conference, the Court a
quo rendered its decision on August 26, 1965, the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING, judgment is
rendered enjoining the defendant Elizalde
Rope Factory, Inc. from dismissing the plaintiff
from his present employment and sentencing
the defendant Elizalde Rope Workers' Union to
pay the plaintiff P500 for attorney's fees and
the costs of this action.3
From this decision, the Union appealed directly to this
Court on purely questions of law, assigning the following
errors:
I. That the lower court erred when it did not
rule that Republic Act No. 3350 is
unconstitutional.
II. That the lower court erred when it
sentenced appellant herein to pay plaintiff the
sum of P500 as attorney's fees and the cost
thereof.
In support of the alleged unconstitutionality of Republic Act
No. 3350, the Union contented, firstly, that the Act infringes
on the fundamental right to form lawful associations; that
"the very phraseology of said Republic Act 3350, that
membership in a labor organization is banned to all those
belonging to such religious sect prohibiting affiliation with
any labor organization"4 , "prohibits all the members of a
given religious sect from joining any labor union if such
sect prohibits affiliations of their members thereto"5 ; and,
consequently, deprives said members of their constitutional
right to form or join lawful associations or organizations
guaranteed by the Bill of Rights, and thus becomes
obnoxious to Article III, Section 1 (6) of the 1935
Constitution. 6
Secondly, the Union contended that Republic Act No. 3350
is unconstitutional for impairing the obligation of contracts
in that, while the Union is obliged to comply with its
collective bargaining agreement containing a "closed shop
provision," the Act relieves the employer from its reciprocal
obligation of cooperating in the maintenance of union
membership as a condition of employment; and that said
Act, furthermore, impairs the Union's rights as it deprives
the union of dues from members who, under the Act, are
relieved from the obligation to continue as such members.7
Thirdly, the Union contended that Republic Act No. 3350
discriminatorily favors those religious sects which ban their
members from joining labor unions, in violation of Article Ill,
Section 1 (7) of the 1935 Constitution; and while said Act
unduly protects certain religious sects, it leaves no rights or
protection to labor organizations.8
Fourthly, Republic Act No. 3350, asserted the Union,
violates the constitutional provision that "no religious test
shall be required for the exercise of a civil right," in that the
laborer's exercise of his civil right to join associations for
purposes not contrary to law has to be determined under
the Act by his affiliation with a religious sect; that
conversely, if a worker has to sever his religious
connection with a sect that prohibits membership in a labor
organization in order to be able to join a labor organization,
said Act would violate religious freedom.9
344 | P a g e
Fifthly, the Union contended that Republic Act No. 3350,
violates the "equal protection of laws" clause of the
Constitution, it being a discriminately legislation, inasmuch
as by exempting from the operation of closed shop
agreement the members of the "Iglesia ni Cristo", it has
granted said members undue advantages over their fellow
workers, for while the Act exempts them from union
obligation and liability, it nevertheless entitles them at the
same time to the enjoyment of all concessions, benefits
and other emoluments that the union might secure from the
employer. 10
Sixthly, the Union contended that Republic Act No. 3350
violates the constitutional provision regarding the
promotion of social justice. 11
Appellant Union, furthermore, asserted that a "closed shop
provision" in a collective bargaining agreement cannot be
considered violative of religious freedom, as to call for the
amendment introduced by Republic Act No. 3350; 12and
that unless Republic Act No. 3350 is declared
unconstitutional, trade unionism in this country would be
wiped out as employers would prefer to hire or employ
members of the Iglesia ni Cristo in order to do away with
labor organizations. 13
Appellee, assailing appellant's arguments, contended that
Republic Act No. 3350 does not violate the right to form
lawful associations, for the right to join associations
includes the right not to join or to resign from a labor
organization, if one's conscience does not allow his
membership therein, and the Act has given substance to
such right by prohibiting the compulsion of workers to join
labor organizations; 14 that said Act does not impair the
obligation of contracts for said law formed part of, and was
incorporated into, the terms of the closed shop
agreement; 15 that the Act does not violate the
establishment of religion clause or separation of Church
and State, for Congress, in enacting said law, merely
accommodated the religious needs of those workers whose
religion prohibits its members from joining labor unions,
and balanced the collective rights of organized labor with
the constitutional right of an individual to freely exercise his
chosen religion; that the constitutional right to the free
exercise of one's religion has primacy and preference over
union security measures which are merely contractual 16;
that said Act does not violate the constitutional provision of
equal protection, for the classification of workers under the
Act depending on their religious tenets is based on
substantial distinction, is germane to the purpose of the
law, and applies to all the members of a given class; 17 that
said Act, finally, does not violate the social justice policy of
the Constitution, for said Act was enacted precisely to
equalize employment opportunities for all citizens in the
midst of the diversities of their religious beliefs." 18
I. Before We proceed to the discussion of the first assigned
error, it is necessary to premise that there are some
thoroughly established principles which must be followed in
all cases where questions of constitutionality as obtains in
the instant case are involved. All presumptions are
indulged in favor of constitutionality; one who attacks a
statute, alleging unconstitutionality must prove its invalidity
beyond a reasonable doubt, that a law may work hardship
does not render it unconstitutional; that if any reasonable
basis may be conceived which supports the statute, it will
be upheld, and the challenger must negate all possible
bases; that the courts are not concerned with the wisdom,
345 | P a g e
justice, policy, or expediency of a statute; and that a liberal
interpretation of the constitution in favor of the
constitutionality of legislation should be adopted. 19
1. Appellant Union's contention that Republic Act No.
3350 prohibits and bans the members of such religious
sects that forbid affiliation of their members with labor
unions from joining labor unions appears nowhere in the
wording of Republic Act No. 3350; neither can the same be
deduced by necessary implication therefrom. It is not
surprising, therefore, that appellant, having thus misread
the Act, committed the error of contending that said Act is
obnoxious to the constitutional provision on freedom of
association.
Both the Constitution and Republic Act No. 875 recognize
freedom of association. Section 1 (6) of Article III of the
Constitution of 1935, as well as Section 7 of Article IV of
the Constitution of 1973, provide that the right to form
associations or societies for purposes not contrary to law
shall not be abridged. Section 3 of Republic Act No. 875
provides that employees shall have the right to self-
organization and to form, join of assist labor organizations
of their own choosing for the purpose of collective
bargaining and to engage in concerted activities for the
purpose of collective bargaining and other mutual aid or
protection. What the Constitution and the Industrial Peace
Act recognize and guarantee is the "right" to form or join
associations. Notwithstanding the different theories
propounded by the different schools of jurisprudence
regarding the nature and contents of a "right", it can be
safely said that whatever theory one subscribes to, a right
comprehends at least two broad notions, namely: first,
liberty or freedom, i.e., the absence of legal restraint,
whereby an employee may act for himself without being
prevented by law; and second, power, whereby an
employee may, as he pleases, join or refrain from Joining
an association. It is, therefore, the employee who should
decide for himself whether he should join or not an
association; and should he choose to join, he himself
makes up his mind as to which association he would join;
and even after he has joined, he still retains the liberty and
the power to leave and cancel his membership with said
organization at any time. 20 It is clear, therefore, that the
right to join a union includes the right to abstain from
joining any union. 21 Inasmuch as what both the
Constitution and the Industrial Peace Act have recognized,
and guaranteed to the employee, is the "right" to join
associations of his choice, it would be absurd to say that
the law also imposes, in the same breath, upon the
employee the duty to join associations. The law does not
enjoin an employee to sign up with any association.
The right to refrain from joining labor organizations
recognized by Section 3 of the Industrial Peace Act is,
however, limited. The legal protection granted to such right
to refrain from joining is withdrawn by operation of law,
where a labor union and an employer have agreed on a
closed shop, by virtue of which the employer may employ
only member of the collective bargaining union, and the
employees must continue to be members of the union for
the duration of the contract in order to keep their jobs. Thus
Section 4 (a) (4) of the Industrial Peace Act, before its
amendment by Republic Act No. 3350, provides that
although it would be an unfair labor practice for an
employer "to discriminate in regard to hire or tenure of
employment or any term or condition of employment to
encourage or discourage membership in any labor
346 | P a g e
organization" the employer is, however, not precluded
"from making an agreement with a labor organization to
require as a condition of employment membership therein,
if such labor organization is the representative of the
employees". By virtue, therefore, of a closed shop
agreement, before the enactment of Republic Act No.
3350, if any person, regardless of his religious beliefs,
wishes to be employed or to keep his employment, he must
become a member of the collective bargaining union.
Hence, the right of said employee not to join the labor
union is curtailed and withdrawn.
To that all-embracing coverage of the closed shop
arrangement, Republic Act No. 3350 introduced an
exception, when it added to Section 4 (a) (4) of the
Industrial Peace Act the following proviso: "but such
agreement shall not cover members of any religious sects
which prohibit affiliation of their members in any such labor
organization". Republic Act No. 3350 merely excludes ipso
jure from the application and coverage of the closed shop
agreement the employees belonging to any religious sects
which prohibit affiliation of their members with any labor
organization. What the exception provides, therefore, is
that members of said religious sects cannot be compelled
or coerced to join labor unions even when said unions have
closed shop agreements with the employers; that in spite of
any closed shop agreement, members of said religious
sects cannot be refused employment or dismissed from
their jobs on the sole ground that they are not members of
the collective bargaining union. It is clear, therefore, that
the assailed Act, far from infringing the constitutional
provision on freedom of association, upholds and
reinforces it. It does not prohibit the members of said
religious sects from affiliating with labor unions. It still
leaves to said members the liberty and the power to
affiliate, or not to affiliate, with labor unions. If,
notwithstanding their religious beliefs, the members of said
religious sects prefer to sign up with the labor union, they
can do so. If in deference and fealty to their religious faith,
they refuse to sign up, they can do so; the law does not
coerce them to join; neither does the law prohibit them from
joining; and neither may the employer or labor union
compel them to join. Republic Act No. 3350, therefore,
does not violate the constitutional provision on freedom of
association.
2. Appellant Union also contends that the Act is
unconstitutional for impairing the obligation of its contract,
specifically, the "union security clause" embodied in its
Collective Bargaining Agreement with the Company, by
virtue of which "membership in the union was required as a
condition for employment for all permanent employees
workers". This agreement was already in existence at the
time Republic Act No. 3350 was enacted on June 18, 1961,
and it cannot, therefore, be deemed to have been
incorporated into the agreement. But by reason of this
amendment, Appellee, as well as others similarly situated,
could no longer be dismissed from his job even if he should
cease to be a member, or disaffiliate from the Union, and
the Company could continue employing him
notwithstanding his disaffiliation from the Union. The Act,
therefore, introduced a change into the express terms of
the union security clause; the Company was partly
absolved by law from the contractual obligation it had with
the Union of employing only Union members in permanent
positions, It cannot be denied, therefore, that there was
indeed an impairment of said union security clause.
347 | P a g e
According to Black, any statute which introduces a change
into the express terms of the contract, or its legal
construction, or its validity, or its discharge, or the remedy
for its enforcement, impairs the contract. The extent of the
change is not material. It is not a question of degree or
manner or cause, but of encroaching in any respect on its
obligation or dispensing with any part of its force. There is
an impairment of the contract if either party is absolved by
law from its performance. 22 Impairment has also been
predicated on laws which, without destroying contracts,
derogate from substantial contractual rights. 23
It should not be overlooked, however, that the prohibition to
impair the obligation of contracts is not absolute and
unqualified. The prohibition is general, affording a broad
outline and requiring construction to fill in the details. The
prohibition is not to be read with literal exactness like a
mathematical formula, for it prohibits unreasonable
impairment only. 24 In spite of the constitutional prohibition,
the State continues to possess authority to safeguard the
vital interests of its people. Legislation appropriate to
safeguarding said interests may modify or abrogate
contracts already in effect. 25 For not only are existing laws
read into contracts in order to fix the obligations as
between the parties, but the reservation of essential
attributes of sovereign power is also read into contracts as
a postulate of the legal order. All contracts made with
reference to any matter that is subject to regulation under
the police power must be understood as made in reference
to the possible exercise of that power. 26 Otherwise,
important and valuable reforms may be precluded by the
simple device of entering into contracts for the purpose of
doing that which otherwise may be prohibited. The policy of
protecting contracts against impairment presupposes the
maintenance of a government by virtue of which
contractual relations are worthwhile a government which
retains adequate authority to secure the peace and good
order of society. The contract clause of the Constitution
must, therefore, be not only in harmony with, but also in
subordination to, in appropriate instances, the reserved
power of the state to safeguard the vital interests of the
people. It follows that not all legislations, which have the
effect of impairing a contract, are obnoxious to the
constitutional prohibition as to impairment, and a statute
passed in the legitimate exercise of police power, although
it incidentally destroys existing contract rights, must be
upheld by the courts. This has special application to
contracts regulating relations between capital and labor
which are not merely contractual, and said labor contracts,
for being impressed with public interest, must yield to the
common good. 27
In several occasions this Court declared that the prohibition
against impairing the obligations of contracts has no
application to statutes relating to public subjects within the
domain of the general legislative powers of the state
involving public welfare. 28 Thus, this Court also held that
the Blue Sunday Law was not an infringement of the
obligation of a contract that required the employer to
furnish work on Sundays to his employees, the law having
been enacted to secure the well-being and happiness of
the laboring class, and being, furthermore, a legitimate
exercise of the police power. 29
In order to determine whether legislation unconstitutionally
impairs contract obligations, no unchanging yardstick,
applicable at all times and under all circumstances, by
which the validity of each statute may be measured or
348 | P a g e
determined, has been fashioned, but every case must be
determined upon its own circumstances. Legislation
impairing the obligation of contracts can be sustained when
it is enacted for the promotion of the general good of the
people, and when the means adopted to secure that end
are reasonable. Both the end sought and the means
adopted must be legitimate, i.e., within the scope of the
reserved power of the state construed in harmony with the
constitutional limitation of that power. 30
What then was the purpose sought to be achieved by
Republic Act No. 3350? Its purpose was to insure freedom
of belief and religion, and to promote the general welfare
by preventing discrimination against those members of
religious sects which prohibit their members from joining
labor unions, confirming thereby their natural, statutory and
constitutional right to work, the fruits of which work are
usually the only means whereby they can maintain their
own life and the life of their dependents. It cannot be
gainsaid that said purpose is legitimate.
The questioned Act also provides protection to members of
said religious sects against two aggregates of group
strength from which the individual needs protection. The
individual employee, at various times in his working life, is
confronted by two aggregates of power — collective labor,
directed by a union, and collective capital, directed by
management. The union, an institution developed to
organize labor into a collective force and thus protect the
individual employee from the power of collective capital, is,
paradoxically, both the champion of employee rights, and a
new source of their frustration. Moreover, when the Union
interacts with management, it produces yet a third
aggregate of group strength from which the individual also
needs protection — the collective bargaining relationship. 31
The aforementioned purpose of the amendatory law is
clearly seen in the Explanatory Note to House Bill No.
5859, which later became Republic Act No. 3350, as
follows:
It would be unthinkable indeed to refuse
employing a person who, on account of his
religious beliefs and convictions, cannot
accept membership in a labor organization
although he possesses all the qualifications for
the job. This is tantamount to punishing such
person for believing in a doctrine he has a
right under the law to believe in. The law
would not allow discrimination to flourish to the
detriment of those whose religion discards
membership in any labor organization.
Likewise, the law would not commend the
deprivation of their right to work and pursue a
modest means of livelihood, without in any
manner violating their religious faith and/or
belief. 32
It cannot be denied, furthermore, that the means adopted
by the Act to achieve that purpose — exempting the
members of said religious sects from coverage of union
security agreements — is reasonable.
It may not be amiss to point out here that the free exercise
of religious profession or belief is superior to contract
rights. In case of conflict, the latter must, therefore, yield to
the former. The Supreme Court of the United States has
349 | P a g e
also declared on several occasions that the rights in the
First Amendment, which include freedom of religion, enjoy
a preferred position in the constitutional
system. 33 Religious freedom, although not unlimited, is a
fundamental personal right and liberty, 34 and has a
preferred position in the hierarchy of values. Contractual
rights, therefore, must yield to freedom of religion. It is only
where unavoidably necessary to prevent an immediate and
grave danger to the security and welfare of the community
that infringement of religious freedom may be justified, and
only to the smallest extent necessary to avoid the danger.
3. In further support of its contention that Republic Act No.
3350 is unconstitutional, appellant Union averred that said
Act discriminates in favor of members of said religious
sects in violation of Section 1 (7) of Article Ill of the 1935
Constitution, and which is now Section 8 of Article IV of the
1973 Constitution, which provides:
No law shall be made respecting an
establishment of religion, or prohibiting the
free exercise thereof, and the free exercise
and enjoyment of religious profession and
worship, without discrimination and
preference, shall forever be allowed. No
religious test shall be required for the exercise
of civil or political rights.
The constitutional provision into only prohibits legislation
for the support of any religious tenets or the modes of
worship of any sect, thus forestalling compulsion by law of
the acceptance of any creed or the practice of any form of
worship, 35 but also assures the free exercise of one's
chosen form of religion within limits of utmost amplitude. It
has been said that the religion clauses of the Constitution
are all designed to protect the broadest possible liberty of
conscience, to allow each man to believe as his
conscience directs, to profess his beliefs, and to live as he
believes he ought to live, consistent with the liberty of
others and with the common good. 36 Any legislation whose
effect or purpose is to impede the observance of one or all
religions, or to discriminate invidiously between the
religions, is invalid, even though the burden may be
characterized as being only indirect. 37 But if the stage
regulates conduct by enacting, within its power, a general
law which has for its purpose and effect to advance the
state's secular goals, the statute is valid despite its indirect
burden on religious observance, unless the state can
accomplish its purpose without imposing such burden. 38
In Aglipay v. Ruiz 39 , this Court had occasion to state that
the government should not be precluded from pursuing
valid objectives secular in character even if the incidental
result would be favorable to a religion or sect. It has
likewise been held that the statute, in order to withstand the
strictures of constitutional prohibition, must have a secular
legislative purpose and a primary effect that neither
advances nor inhibits religion. 40 Assessed by these criteria,
Republic Act No. 3350 cannot be said to violate the
constitutional inhibition of the "no-establishment" (of
religion) clause of the Constitution.
The purpose of Republic Act No. 3350 is secular, worldly,
and temporal, not spiritual or religious or holy and eternal.
It was intended to serve the secular purpose of advancing
the constitutional right to the free exercise of religion, by
averting that certain persons be refused work, or be
dismissed from work, or be dispossessed of their right to
350 | P a g e
work and of being impeded to pursue a modest means of
livelihood, by reason of union security agreements. To help
its citizens to find gainful employment whereby they can
make a living to support themselves and their families is a
valid objective of the state. In fact, the state is enjoined, in
the 1935 Constitution, to afford protection to labor, and
regulate the relations between labor and capital and
industry. 41 More so now in the 1973 Constitution where it is
mandated that "the State shall afford protection to labor,
promote full employment and equality in employment,
ensure equal work opportunities regardless of sex, race or
creed and regulate the relation between workers and
employers. 42
The primary effects of the exemption from closed shop
agreements in favor of members of religious sects that
prohibit their members from affiliating with a labor
organization, is the protection of said employees against
the aggregate force of the collective bargaining agreement,
and relieving certain citizens of a burden on their religious
beliefs; and by eliminating to a certain extent economic
insecurity due to unemployment, which is a serious
menace to the health, morals, and welfare of the people of
the State, the Act also promotes the well-being of society. It
is our view that the exemption from the effects of closed
shop agreement does not directly advance, or diminish, the
interests of any particular religion. Although the exemption
may benefit those who are members of religious sects that
prohibit their members from joining labor unions, the
benefit upon the religious sects is merely incidental and
indirect. The "establishment clause" (of religion) does not
ban regulation on conduct whose reason or effect merely
happens to coincide or harmonize with the tenets of some
or all religions. 43 The free exercise clause of the
Constitution has been interpreted to require that religious
exercise be preferentially aided. 44
We believe that in enacting Republic Act No. 3350,
Congress acted consistently with the spirit of the
constitutional provision. It acted merely to relieve the
exercise of religion, by certain persons, of a burden that is
imposed by union security agreements. It was Congress
itself that imposed that burden when it enacted the
Industrial Peace Act (Republic Act 875), and, certainly,
Congress, if it so deems advisable, could take away the
same burden. It is certain that not every conscience can be
accommodated by all the laws of the land; but when
general laws conflict with scrupples of conscience,
exemptions ought to be granted unless some "compelling
state interest" intervenes. 45 In the instant case, We see no
such compelling state interest to withhold exemption.
Appellant bewails that while Republic Act No. 3350
protects members of certain religious sects, it leaves no
right to, and is silent as to the protection of, labor
organizations. The purpose of Republic Act No. 3350 was
not to grant rights to labor unions. The rights of labor
unions are amply provided for in Republic Act No. 875 and
the new Labor Code. As to the lamented silence of the Act
regarding the rights and protection of labor unions, suffice it
to say, first, that the validity of a statute is determined by its
provisions, not by its silence 46 ; and, second, the fact that
the law may work hardship does not render it
unconstitutional. 47
It would not be amiss to state, regarding this matter, that to
compel persons to join and remain members of a union to
keep their jobs in violation of their religious scrupples,
351 | P a g e
would hurt, rather than help, labor unions, Congress has
seen it fit to exempt religious objectors lest their resistance
spread to other workers, for religious objections have
contagious potentialities more than political and philosophic
objections.
Furthermore, let it be noted that coerced unity and loyalty
even to the country, and a fortiori to a labor — union
assuming that such unity and loyalty can be attained
through coercion — is not a goal that is constitutionally
obtainable at the expense of religious liberty. 48 A desirable
end cannot be promoted by prohibited means.
4. Appellants' fourth contention, that Republic Act No. 3350
violates the constitutional prohibition against requiring a
religious test for the exercise of a civil right or a political
right, is not well taken. The Act does not require as a
qualification, or condition, for joining any lawful association
membership in any particular religion or in any religious
sect; neither does the Act require affiliation with a religious
sect that prohibits its members from joining a labor union
as a condition or qualification for withdrawing from a labor
union. Joining or withdrawing from a labor union requires a
positive act. Republic Act No. 3350 only exempts members
with such religious affiliation from the coverage of closed
shop agreements. So, under this Act, a religious objector is
not required to do a positive act — to exercise the right to
join or to resign from the union. He is exempted ipso
jure without need of any positive act on his part. A
conscientious religious objector need not perform a positive
act or exercise the right of resigning from the labor union —
he is exempted from the coverage of any closed shop
agreement that a labor union may have entered into. How
then can there be a religious test required for the exercise
of a right when no right need be exercised?
We have said that it was within the police power of the
State to enact Republic Act No. 3350, and that its purpose
was legal and in consonance with the Constitution. It is
never an illegal evasion of a constitutional provision or
prohibition to accomplish a desired result, which is lawful in
itself, by discovering or following a legal way to do it. 49
5. Appellant avers as its fifth ground that Republic Act No.
3350 is a discriminatory legislation, inasmuch as it grants
to the members of certain religious sects undue
advantages over other workers, thus violating Section 1 of
Article III of the 1935 Constitution which forbids the denial
to any person of the equal protection of the laws. 50
The guaranty of equal protection of the laws is not a
guaranty of equality in the application of the laws upon all
citizens of the state. It is not, therefore, a requirement, in
order to avoid the constitutional prohibition against
inequality, that every man, woman and child should be
affected alike by a statute. Equality of operation of statutes
does not mean indiscriminate operation on persons merely
as such, but on persons according to the circumstances
surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which
are different in fact be treated in law as though they were
the same. The equal protection clause does not forbid
discrimination as to things that are different. 51 It does not
prohibit legislation which is limited either in the object to
which it is directed or by the territory within which it is to
operate.
352 | P a g e
The equal protection of the laws clause of the Constitution
allows classification. Classification in law, as in the other
departments of knowledge or practice, is the grouping of
things in speculation or practice because they agree with
one another in certain particulars. A law is not invalid
because of simple inequality. 52 The very idea of
classification is that of inequality, so that it goes without
saying that the mere fact of inequality in no manner
determines the matter of constitutionality. 53 All that is
required of a valid classification is that it be reasonable,
which means that the classification should be based on
substantial distinctions which make for real differences;
that it must be germane to the purpose of the law; that it
must not be limited to existing conditions only; and that it
must apply equally to each member of the class. 54 This
Court has held that the standard is satisfied if the
classification or distinction is based on a reasonable
foundation or rational basis and is not palpably arbitrary. 55
In the exercise of its power to make classifications for the
purpose of enacting laws over matters within its jurisdiction,
the state is recognized as enjoying a wide range of
discretion. 56 It is not necessary that the classification be
based on scientific or marked differences of things or in
their relation. 57 Neither is it necessary that the classification
be made with mathematical nicety. 58 Hence legislative
classification may in many cases properly rest on narrow
distinctions, 59 for the equal protection guaranty does not
preclude the legislature from recognizing degrees of evil or
harm, and legislation is addressed to evils as they may
appear.
We believe that Republic Act No. 3350 satisfies the
aforementioned requirements. The Act classifies
employees and workers, as to the effect and coverage of
union shop security agreements, into those who by reason
of their religious beliefs and convictions cannot sign up with
a labor union, and those whose religion does not prohibit
membership in labor unions. Tile classification rests on real
or substantial, not merely imaginary or whimsical,
distinctions. There is such real distinction in the beliefs,
feelings and sentiments of employees. Employees do not
believe in the same religious faith and different religions
differ in their dogmas and cannons. Religious beliefs,
manifestations and practices, though they are found in all
places, and in all times, take so many varied forms as to be
almost beyond imagination. There are many views that
comprise the broad spectrum of religious beliefs among the
people. There are diverse manners in which beliefs,
equally paramount in the lives of their possessors, may be
articulated. Today the country is far more heterogenous in
religion than before, differences in religion do exist, and
these differences are important and should not be ignored.
Even from the phychological point of view, the classification
is based on real and important differences. Religious
beliefs are not mere beliefs, mere ideas existing only in the
mind, for they carry with them practical consequences and
are the motives of certain rules. of human conduct and the
justification of certain acts. 60 Religious sentiment makes a
man view things and events in their relation to his God. It
gives to human life its distinctive character, its tone, its
happiness or unhappiness its enjoyment or irksomeness.
Usually, a strong and passionate desire is involved in a
religious belief. To certain persons, no single factor of their
experience is more important to them than their religion, or
their not having any religion. Because of differences in
religious belief and sentiments, a very poor person may
353 | P a g e
consider himself better than the rich, and the man who
even lacks the necessities of life may be more cheerful
than the one who has all possible luxuries. Due to their
religious beliefs people, like the martyrs, became resigned
to the inevitable and accepted cheerfully even the most
painful and excruciating pains. Because of differences in
religious beliefs, the world has witnessed turmoil, civil
strife, persecution, hatred, bloodshed and war, generated
to a large extent by members of sects who were intolerant
of other religious beliefs. The classification, introduced by
Republic Act No. 3350, therefore, rests on substantial
distinctions.
The classification introduced by said Act is also germane to
its purpose. The purpose of the law is precisely to avoid
those who cannot, because of their religious belief, join
labor unions, from being deprived of their right to work and
from being dismissed from their work because of union
shop security agreements.
Republic Act No. 3350, furthermore, is not limited in its
application to conditions existing at the time of its
enactment. The law does not provide that it is to be
effective for a certain period of time only. It is intended to
apply for all times as long as the conditions to which the
law is applicable exist. As long as there are closed shop
agreements between an employer and a labor union, and
there are employees who are prohibited by their religion
from affiliating with labor unions, their exemption from the
coverage of said agreements continues.
Finally, the Act applies equally to all members of said
religious sects; this is evident from its provision. The fact
that the law grants a privilege to members of said religious
sects cannot by itself render the Act unconstitutional, for as
We have adverted to, the Act only restores to them their
freedom of association which closed shop agreements
have taken away, and puts them in the same plane as the
other workers who are not prohibited by their religion from
joining labor unions. The circumstance, that the other
employees, because they are differently situated, are not
granted the same privilege, does not render the law
unconstitutional, for every classification allowed by the
Constitution by its nature involves inequality.
The mere fact that the legislative classification may result
in actual inequality is not violative of the right to equal
protection, for every classification of persons or things for
regulation by law produces inequality in some degree, but
the law is not thereby rendered invalid. A classification
otherwise reasonable does not offend the constitution
simply because in practice it results in some
inequality. 61 Anent this matter, it has been said that
whenever it is apparent from the scope of the law that its
object is for the benefit of the public and the means by
which the benefit is to be obtained are of public character,
the law will be upheld even though incidental advantage
may occur to individuals beyond those enjoyed by the
general public. 62
6. Appellant's further contention that Republic Act No. 3350
violates the constitutional provision on social justice is also
baseless. Social justice is intended to promote the welfare
of all the people. 63 Republic Act No. 3350 promotes that
welfare insofar as it looks after the welfare of those who,
because of their religious belief, cannot join labor unions;
the Act prevents their being deprived of work and of the
means of livelihood. In determining whether any particular
354 | P a g e
measure is for public advantage, it is not necessary that
the entire state be directly benefited — it is sufficient that a
portion of the state be benefited thereby.
Social justice also means the adoption by the Government
of measures calculated to insure economic stability of all
component elements of society, through the maintenance
of a proper economic and social equilibrium in the inter-
relations of the members of the community. 64 Republic Act
No. 3350 insures economic stability to the members of a
religious sect, like the Iglesia ni Cristo, who are also
component elements of society, for it insures security in
their employment, notwithstanding their failure to join a
labor union having a closed shop agreement with the
employer. The Act also advances the proper economic and
social equilibrium between labor unions and employees
who cannot join labor unions, for it exempts the latter from
the compelling necessity of joining labor unions that have
closed shop agreements and equalizes, in so far as
opportunity to work is concerned, those whose religion
prohibits membership in labor unions with those whose
religion does not prohibit said membership. Social justice
does not imply social equality, because social inequality
will always exist as long as social relations depend on
personal or subjective proclivities. Social justice does not
require legal equality because legal equality, being a
relative term, is necessarily premised on differentiations
based on personal or natural conditions. 65 Social justice
guarantees equality of opportunity 66 , and this is precisely
what Republic Act No. 3350 proposes to accomplish — it
gives laborers, irrespective of their religious scrupples,
equal opportunity for work.
7. As its last ground, appellant contends that the
amendment introduced by Republic Act No. 3350 is not
called for — in other words, the Act is not proper,
necessary or desirable. Anent this matter, it has been held
that a statute which is not necessary is not, for that reason,
unconstitutional; that in determining the constitutional
validity of legislation, the courts are unconcerned with
issues as to the necessity for the enactment of the
legislation in question. 67 Courts do inquire into the wisdom
of laws. 68 Moreover, legislatures, being chosen by the
people, are presumed to understand and correctly
appreciate the needs of the people, and it may change the
laws accordingly. 69 The fear is entertained by appellant that
unless the Act is declared unconstitutional, employers will
prefer employing members of religious sects that prohibit
their members from joining labor unions, and thus be a
fatal blow to unionism. We do not agree. The threat to
unionism will depend on the number of employees who are
members of the religious sects that control the demands of
the labor market. But there is really no occasion now to go
further and anticipate problems We cannot judge with the
material now before Us. At any rate, the validity of a statute
is to be determined from its general purpose and its
efficacy to accomplish the end desired, not from its effects
on a particular case. 70 The essential basis for the exercise
of power, and not a mere incidental result arising from its
exertion, is the criterion by which the validity of a statute is
to be measured. 71
II. We now pass on the second assignment of error, in
support of which the Union argued that the decision of the
trial court ordering the Union to pay P500 for attorney's
fees directly contravenes Section 24 of Republic Act No.
875, for the instant action involves an industrial dispute
355 | P a g e
wherein the Union was a party, and said Union merely
acted in the exercise of its rights under the union shop
provision of its existing collective bargaining contract with
the Company; that said order also contravenes Article 2208
of the Civil Code; that, furthermore, Appellee was never
actually dismissed by the defendant Company and did not
therefore suffer any damage at all . 72
In refuting appellant Union's arguments, Appellee claimed
that in the instant case there was really no industrial
dispute involved in the attempt to compel Appellee to
maintain its membership in the union under pain of
dismissal, and that the Union, by its act, inflicted intentional
harm on Appellee; that since Appellee was compelled to
institute an action to protect his right to work, appellant
could legally be ordered to pay attorney's fees under
Articles 1704 and 2208 of the Civil Code. 73
The second paragraph of Section 24 of Republic Act No.
875 which is relied upon by appellant provides that:
No suit, action or other proceedings shall be
maintainable in any court against a labor
organization or any officer or member thereof
for any act done by or on behalf of such
organization in furtherance of an industrial
dispute to which it is a party, on the ground
only that such act induces some other person
to break a contract of employment or that it is
in restraint of trade or interferes with the trade,
business or employment of some other person
or with the right of some other person to
dispose of his capital or labor. (Emphasis
supplied)
That there was a labor dispute in the instant case cannot from is affirmed, with costs against appellant Union. It is so
be disputed for appellant sought the discharge of ordered.
respondent by virtue of the closed shop agreement and
under Section 2 (j) of Republic Act No. 875 a question Makalintal, C.J, Castro, Teehankee, Barredo, Makasiar,
involving tenure of employment is included in the term Antonio, Esguerra, Muñoz Palma and Aquino, JJ., concur.
"labor dispute". 74 The discharge or the act of seeking it is
the labor dispute itself. It being the labor dispute itself, that
very same act of the Union in asking the employer to
dismiss Appellee cannot be "an act done ... in furtherance
of an industrial dispute". The mere fact that appellant is a
labor union does not necessarily mean that all its acts are
in furtherance of an industrial dispute. 75 Appellant Union,
therefore, cannot invoke in its favor Section 24 of Republic Separate Opinions
Act No. 875. This case is not intertwined with any unfair
labor practice case existing at the time when Appellee filed
his complaint before the lower court.
FERNANDO, J, concurring:
Neither does Article 2208 of the Civil Code, invoked by the
The decision arrived at unanimously by this Court that
Union, serve as its shield. The article provides that
Republic Act No. 3350 is free from the constitutional
attorney's fees and expenses of litigation may be awarded
infirmities imputed to it was demonstrated in a manner
"when the defendant's act or omission has compelled the
wellnigh conclusive in the learned, scholarly, and
plaintiff ... to incur expenses to protect his interest"; and "in
comprehensive opinion so typical of the efforts of
any other case where the court deems it just and equitable
the ponente, Justice Zaldivar. Like the rest of my brethren,
that attorney's fees and expenses of litigation should be
I concur fully. Considering moreover, the detailed attention
recovered". In the instant case, it cannot be gainsaid that
paid to each and every objection raised as to its validity
appellant Union's act in demanding Appellee's dismissal
and the clarity and persuasiveness with which it was shown
caused Appellee to incur expenses to prevent his being
to be devoid of support in authoritative doctrines, it would
dismissed from his job. Costs according to Section 1, Rule
appear that the last word has been written on this particular
142, of the Rules of Court, shall be allowed as a matter of
subject. Nonetheless, I deem it proper to submit this brief
course to the prevailing party.
expression of my views on the transcendent character of
religious freedom1 and its primacy even as against the
WHEREFORE, the instant appeal is dismissed, and the
claims of protection to labor,2 also one of the fundamental
decision, dated August 26, 1965, of the Court of First
principles of the Constitution.
Instance of Manila, in its Civil Case No. 58894, appealed
356 | P a g e

1. Religious freedom is identified with the liberty every
individual possesses to worship or not a Supreme Being,
and if a devotee of any sect, to act in accordance with its
creed. Thus is constitutionally safeguarded, according to
Justice Laurel, that "profession of faith to an active power
that binds and elevates man to his Creator ...."3 The choice
of what a man wishes to believe in is his and his alone.
That is a domain left untouched, where intrusion is not
allowed, a citadel to which the law is denied entry,
whatever be his thoughts or hopes. In that sphere, what he
wills reigns supreme. The doctrine to which he pays fealty
may for some be unsupported by evidence, devoid of
rational foundation. No matter. There is no requirement as
to its conformity to what has found acceptance. It suffices
that for him such a concept holds undisputed sway. That is
a recognition of man's freedom. That for him is one of the
ways of self- realization. It would be to disregard the dignity
that attaches to every human being to deprive him of such
an attribute. The "fixed star on our constitutional
constellation," to borrow the felicitous phrase of Justice
Jackson, is that no official, not excluding the highest, has it
in his power to prescribe what shall be orthodox in matters
of conscience — or to mundane affairs, for that matter.
Gerona v. Secretary of Education 4 speaks similarly. In the language of
its ponente, Justice Montemayor: "The realm of belief and creed is infinite and limitless bounded only
by one's imagination and thought. So is the freedom of belief, including religious belief, limitless and
without bounds. One may believe in most anything, however strange, bizarre and unreasonable the
same may appear to others, even heretical when weighed in the scales of orthodoxy or doctrinal
standards."5 There was this qualification though: "But between the freedom of belief and the exercise
of said belief, there is quite a stretch of road to travel. If the exercise of said religious belief clashes
with the established institutions of society and with the law, then the former must yield and give way to
the latter. The Government steps in and either restrains said exercise or even prosecutes the one
exercising it."6 It was on that basis that the daily compulsory flag ceremony in accordance with a
statute7 was found free from the constitutional objection on the part of a religious sect, the Jehovah's
Witnesses, whose members alleged that their participation would be offensive to their religious beliefs.
In a case not dissimilar, West Virginia State Board of Education v. Barnette,8 the American Supreme
Court reached a contrary conclusion. Justice Jackson's eloquent opinion is, for this writer, highly
persuasive. Thus: "The case is made difficult not because the principles of its decision are obscure but
because the flag involved is our own. Nevertheless, we apply the limitations of the Constitution with no
357 | P a g e
fear that freedom to be intellectually and spiritually diverse or even contrary will disintegrate the social
organization. To believe that patriotism will not flourish if patriotic ceremonies are voluntary and
spontaneous instead of a compulsory routine is to make an unflattering estimate of the appeal of our
institutions to free minds. We can have intellectual individualism and the rich cultural diversities that we
owe to exceptional minds only at the price of occasional eccentricity and abnormal attitudes. When
they are so harmless to others or to the State as those we deal with here, the price is not too great. But
freedom to differ is not limited to things that do not matter much. That would be a mere shadow of
freedom. The test of its substance is the right to differ as to things that touch the heart of the existing
order."9
There is moreover this ringing affirmation by Chief Justice
Hughes of the primacy of religious freedom in the forum of
conscience even as against the command of the State
itself: "Much has been said of the paramount duty to the
state, a duty to be recognized, it is urged, even though it
conflicts with convictions of duty to God. Undoubtedly that
duty to the state exists within the domain of power, for
government may enforce obedience to laws regardless of
scruples. When one's belief collides with the power of the
state, the latter is supreme within its sphere and
submission or punishment follows. But, in the forum of
conscience, duty to a moral power higher than the state
has always been maintained. The reservation of that
supreme obligation, as a matter of principle, would
unquestionably be made by many of our conscientious and
law-abiding citizens. The essence of religion is belief in a
relation to God involving duties superior to those arising
from any human relation." 10 The American Chief Justice
spoke in dissent, it is true, but with him in agreement were
three of the foremost jurists who ever sat in that Tribunal,
Justices Holmes, Brandeis, and Stone.
2. As I view Justice Zaldivar's opinion in that light, my
concurrence, as set forth earlier, is wholehearted and
entire. With such a cardinal postulate as the basis of our
polity, it has a message that cannot be misread. Thus is
intoned with a reverberating clang, to paraphrase Cardozo,
a fundamental principle that drowns all weaker sounds.
The labored effort to cast doubt on the validity of the
statutory provision in question is far from persuasive. It is
attended by futility. It is not for this Court, as I conceive of
the judicial function, to restrict the scope of a preferred
freedom.
3. There is, however, the question of whether such an
exception possesses an implication that lessens the
effectiveness of state efforts to protect labor, likewise, as
noted, constitutionally ordained. Such a view, on the
surface, may not be lacking in plausibility, but upon closer
analysis, it cannot stand scrutiny. Thought must be given to
the freedom of association, likewise an aspect of
intellectual liberty. For the late Professor Howe a
constitutionalist and in his lifetime the biographer of the
great Holmes, it even partakes of the political theory of
pluralistic sovereignty. So great is the respect for the
autonomy accorded voluntary societies. 11 Such a right
implies at the very least that one can determine for himself
whether or not he should join or refrain from joining a labor
organization, an institutional device for promoting the
welfare of the working man. A closed shop, on the other
hand, is inherently coercive. That is why, as is
unmistakably reflected in our decisions, the latest of which
is Guijarno v. Court of Industrial Relations, 12 it is far from
being a favorite of the law. For a statutory provision then to
further curtail its operation, is precisely to follow the
dictates of sound public policy.
The exhaustive and well-researched opinion of Justice
Zaldivar thus is in the mainstream of constitutional tradition.
That, for me, is the channel to follow.
G.R. No. L-24396 July 29, 1968
358 | P a g e
SANTIAGO P. ALALAYAN, ET AL., suing in his behalf
and for the benefit of all other persons having common
or general interest with him in accordance with Sec.
12, Rule 3, Rules of Court, petitioners-appellants,
vs.
NATIONAL POWER CORPORATION and
ADMINISTRATOR OF ECONOMIC
COORDINATION, respondents-appellees.
Alafriz Law Offices for petitioners-appellants.
The Government Corporate Counsel and Office of the
Solicitor General for respondents-appellees.
FERNANDO, J.:
This declaratory relief proceeding was started in the lower
court by petitioners, Alalayan and Philippine Power and
Development Company, both franchise holders of electric
plants in Laguna, to test the validity of a section of an
amendatory act,1 empowering respondent National Power
Corporation "in any contract for the supply of electric power
to a franchise holder," receiving at least 50% of its electric
power and energy from it to require as a condition that
such franchise holder "shall not realize a net profit of more
than twelve percent annually of its investments plus two-
month operating expenses." Respondent, under such
provision, could likewise "renew all existing contracts with
franchise holders for the supply of electric power and
energy," so that the provisions of the Act could be given
effect.2 This statutory provision was assailed on the ground
that, being a rider, it is violative of the constitutional
provision requiring that a bill, which may be enacted into
law, cannot embrace more than one subject, which shall be
expressed in its title,3 as well as the due process
guarantee, the liberty to contract of petitioners being
infringed upon. The lower court sustained its validity. We
sustain the lower court in this appeal.
In the petition for declaratory relief, after the usual
allegations as to parties, it was stated that respondent
National Power Corporation "has for some years now
been, and still is, by virtue of similar, valid and existing
contracts entered into by it with one hundred and thirty
seven (137) natural persons and corporations distributed
all over the country, supplying, distributing, servicing and
selling electric power and energy at fixed rites schedules to
the latter who have for some years now been and still are,
legally engaged in resupplying, redistributing, reservicing
and reselling the said electric power and energy to
individual customers within the coverage of their respective
franchises."4 Petitioners are included among the said 197
natural persons and entities.5 Then, reference was made to
the particular contracts petitioners entered into with
respondent, the contracts to continue indefinitely unless
and until either party would give to the other two years
previous notice in writing of its intention to terminate the
same.6After which, it was noted that on June 18, 1960, an
act authorizing the increase of the capital stock of the
National Power Corporation to P100 million took effect.7 A
year later, on June 17, 1961, it was alleged that the
challenged legislation became a law, purportedly to
increase further the authorized capital stock, but including
the alleged rider referred to above, which, in the opinion of
petitioners, transgressed the constitutional provision on the
subject matter and title of bills as well as the due process
clause.8 Mention was then made of the National Power
Corporation approving a rate increase of at least 17.5%,
the effectivity of which, was at first deferred to November 1,
359 | P a g e
1962, then subsequently to January 15, 1963, with the
threat that in case petitioners would fail to sign the revised
contract providing for the increased rate, respondent
National Power Corporation would then cease "to supply,
distribute and service electric power and energy to them."9
That would be, in the opinion of petitioners, violative of their
rights, proceeding from legislation suffering from
constitutional infirmities.10 A declaration of
unconstitutionality was therefore sought by them. It was
prayed: "(1) To give due course to this petition; (2) To issue
a writ of preliminary injunction, upon the posting of the
requisite bond, enjoining respondent NPC from carrying or
prosecuting its threat to enforce the provisions of the rider
or Section 3 of Republic Act No. 3043 ... in the manner
stated in paragraph 18 of this petition until this Honorable
Court shall have finally decided or disposed, by final
judgment, of the issues raised in this petition; (3) After due
hearing, to declare the rider or Section 3 of Republic Act
No. 3043 null and void for being illegal and
unconstitutional, and to issue a permanent injunction
requiring respondent NPC to refrain from enforcing or
implementing the provisions of the same law."11
Soon after, petitioner Philippine Power and Development
Company moved that insofar as it was concerned, the case
be dismissed, which motion was granted by the lower court
on January 25, 1963.12 The sole petitioner is therefore
Santiago P. Alalayan, suing in his behalf and for the benefit
of all other persons having common or general interest with
him. Respondent National Power Corporation filed an
opposition on February 15, 1963, opposing the issuance of
a writ for preliminary injunction.13 On March 21, 1963, the
lower court, considering that there was "no sufficient
ground for the issuance of the writ for preliminary
injunction," denied the same.14
There was in the answer, dated March 29, 1963, an
admission of the main facts alleged, with a denial of the
legal conclusion which petitioner would deduce therefrom,
respondent National Power Corporation upholding the
validity of the challenged provision. Then, came a partial
stipulation of facts submitted on October 1, 1964,
consisting of a resolution of the Philippine Electric Plant
Owners Association to take the necessary steps to stop
respondent National Power Corporation from enforcing its
announced increase, samples of contracts between electric
plant operators on the one hand and respondent National
Power Corporation on the other, the contract with petitioner
Alalayan, dated May 26, 1956, showing that he did
purchase and take power and energy as follows: "Sixty
(60) kilowatts and of not less than 140,000 kilowatt-hours in
any contract year at the rate of P120.00 per kilowatt per
year" payable in twelve equal monthly installments, "plus
an energy charge of P0.013 per kilowatt hour, payable on
the basis of monthly delivery"; a letter of June 22, 1962 of
respondent National Power Corporation to petitioner
approving his 17.5% rate increase of power so that
beginning July 1, 1962, the demand charge would be
P10.00 per kilowatt per month and the energy charge
would be P0.02 per kilowatt hour; a letter of August 15,
1962, wherein respondent National Power Corporation
notified petitioner that it deferred the effectivity of the new
rates, but it will be enforced on November 1, 1962; a letter
of June 25, 1963 enforcing respondent National Power
Corporation deferring once again the effectivity of the new
rates until January 1, 1964; as well as the congressional
360 | P a g e
transcripts on House Bill No. 5377 and Senate Bill No. 613,
now Republic Act No. 3043.15
In an order of November 5, 1964, the lower court gave the
parties a period of twenty days within which to submit
simultaneously their respective memoranda. After the
submission thereof, the lower court, in a decision of
January 30, 1965, sustained the validity and
constitutionality of the challenged provision. Hence, this
appeal.
As was set forth earlier, this appeal cannot prosper. We
share the view of the lower court that the provision in
question cannot be impugned either on the ground of its
being violative of the constitutional requirement that a bill
cannot embrace more than one subject to be expressed in
its title or by virtue of its alleged failure to satisfy the due
process criterion.
1. We consider first the objection that the statute in
question is violative of the constitutional provision that no
bill "which may be enacted into law shall embrace more
than one subject which shall be expressed in [its] title ...
"16This provision is similar to those found in many American
State Constitutions. It is aimed against the evils of the so-
called omnibus bills and log-rolling legislation as well as
surreptitious or unconsidered enactments.17 Where the
subject of a bill is limited to a particular matter, the
lawmakers along with the people should be informed of the
subject of proposed legislative measures. This
constitutional provision thus precludes the insertion of
riders in legislation, a rider being a provision not germane
to the subject matter of the bill. Petitioner Alalayan asserts
that the provision objected to is such a rider.
To lend approval to such a plea is to construe the above
constitutional provision as to cripple or impede proper
legislation. To impart to it a meaning which is reasonable
and not unduly technical, it must be deemed sufficient that
the title be comprehensive enough reasonably to include
the general object which the statute seeks to effect without
expressing each and every end and means necessary for
its accomplishment. Thus, mere details need not be set
forth. The legislature is not required to make the title of the
act a complete index of its contents. The provision merely
calls for all parts of an act relating to its subject finding
expression in its title.18 More specifically, if the law amends
a section or part of a statute, it suffices if reference be
made to the legislation to be amended, there being no
need to state the precise nature of the amendment.19
It was in 1938, in Government v. Hongkong & Shanghai
Bank,20 where, for the first time after the inauguration of the
Commonwealth, this Court passed upon a provision of that
character. We held there that the Reorganization
Law,21providing for the mode in which the total annual
expenses of the Bureau of Banking could be reimbursed
through assessment levied upon all banking institutions
subject to inspection by the Bank Commissioner was not
violative of such a requirement in the Jones Law, the
previous organic act. Justice Laurel, however, vigorously
dissented, his view being that while the main subject of the
act was reorganization, the provision assailed did not deal
with reorganization but with taxation. This case
of Government v. Hongkong & Shanghai Bank was
decided by a bare majority of four justices against three.
Thereafter, it would appear that the constitutional
requirement is to be given the liberal test as indicated in
the majority opinion penned by Justice Abad Santos, and
361 | P a g e
not the strict test as desired by the minority headed by
Justice Laurel.
Such a trend is made manifest in the cases beginning with
Sumulong v. Commission on Elections,22 up to and
including Felwa v. Salas,23 a 1966 decision, the opinion
coming from Chief Justice Concepcion. There is nothing
in Lidasan v. Commission on Elections,24 where a
statute25 was annulled on this ground, to indicate the
contrary. As aptly expressed by Justice Sanchez: "Of
course, the Constitution does not require Congress to
employ in the title of an enactment, language of such
precision as to mirror, fully index or catalogue all the
contents and the minute details therein. It suffices if the title
should serve the purpose of the constitutional demand that
it inform the legislators, the persons interested in the
subject of the bill, and the public, of the nature, scope and
consequences of the proposed law and its operation. And
this, to lead them to inquire into the body of the bill, study
and discuss the same, take appropriate action thereon,
and, thus, prevent surprise or fraud upon the legislators."
We thus hold that there is no violation of the constitutional
provision which requires that any bill enacted into law shall
embrace only one subject to be expressed in the title
thereof.
2. Nor is petitioner anymore successful in his plea for the
nullification of the challenged provision on the ground of his
being deprived of the liberty to contract without due
process of law.
It is to be admitted of course that property rights find
shelter in specific constitutional provisions, one of which is
the due process clause. It is equally certain that our
fundamental law framed at a time of "surging unrest and
dissatisfaction",26 when there was the fear expressed in
many quarters that a constitutional democracy, in view of
its commitment to the claims of property, would not be able
to cope effectively with the problems of poverty and misery
that unfortunately afflict so many of our people, is not
susceptible to the indictment that the government therein
established is impotent to take the necessary remedial
measures. The framers saw to that. The welfare state
concept is not alien to the philosophy of our
Constitution.27 It is implicit in quite a few of its provisions. It
suffices to mention two.
There is the clause on the promotion of social justice to
ensure the well-being and economic security of all the
people,28 as well as the pledge of protection to labor with
the specific authority to regulate the relations between
landowners and tenants and between labor and
capital.29 This particularized reference to the rights of
working men whether in industry and agriculture certainly
cannot preclude attention to and concern for the rights of
consumers, who are the objects of solicitude in the
legislation now complained of. The police power as an
attribute to promote the common weal would be diluted
considerably of its reach and effectiveness if on the mere
plea that the liberty to contract would be restricted, the
statute complained of may be characterized as a denial of
due process. The right to property cannot be pressed to
such an unreasonable extreme.
It is understandable though why business enterprises, not
unnaturally evincing lack of enthusiasm for police power
legislation that affect them adversely and restrict their
362 | P a g e
profits could predicate alleged violation of their rights on
the due process clause, which as interpreted by them is a
bar to regulatory measures. Invariably, the response from
this Court, from the time the Constitution was enacted, has
been far from sympathetic. Thus, during the
Commonwealth, we sustained legislation providing for
collective bargaining,30 security of tenure,31 minimum
wages,32 compulsory arbitration,33 and tenancy
regulation.34 Neither did the objections as to the validity of
measures regulating the issuance of securities35 and public
services36 prevail.
For it is to be remembered that the liberty relied upon is not
freedom of the mind, which occupies a preferred position,
nor freedom of the person, but the liberty to contract,
associated with business activities, which, as has been so
repeatedly announced, may be subjected, in the interest of
the general welfare under the police power, to restrictions
varied in character and wide ranging in scope as long as
due process is observed. In Calalang v. Williams,37 this
Court found no objection to an enactment limiting the use
of and traffic in the national roads and streets as against
the assertion that the exercise of such an authority
amounted to an unlawful interference with legitimate
business and abridgment of personal liberty. The opinion
by Justice Laurel explains why such an argument was far
from persuasive. Thus: "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 ... "38 The above
doctrine, valid then and equally valid now, constituted more
than sufficient justification for statutes curtailing the liberty
enjoyed by business enterprises, whether conducted by
natural or juridical persons, to satisfy the needs of public
welfare.
So it continues to be under the Republic. This Court has
invariably given the seal of approval to statutes intended to
improve the lot of tenants,39 who thereafter were given the
option to transform their relationship with landowners to
one of lease, which grant of authority was sustained in
1964.40 Retail trade was nationalized, the measure
receiving judicial approval as against due process
objection,41 a decision foreshadowed earlier with the
favorable action taken on legislation granting preference to
Filipino citizens in the lease of public market stalls.42 It is
easily understandable why the regulation of practice of
medicine;43 limitation of the hours of labor;44 imposition of
price control;45requirement of separation pay for one
month46 as well as a social security scheme47 cannot be
impugned as unconstitutional. While not exhaustive, the
above decisions manifest in no certain terms the inherent
difficulty of assailing regulatory legislation based on alleged
denial of due process.
It would thus appear that unless this Court is prepared to
overturn a doctrine so firmly adhered to in a number of
cases notable for the unanimity of their response to an
objection similar to the one here raised, petitioner Alalayan
cannot prevail. Certainly, this Court is not prepared to take
that step. For in the face of a constitutional provision that
363 | P a g e
allows deprivation of liberty, including liberty of contract, as
long as due process is observed, the alleged nullity of a
legislative act of this character can only be shown if in fact
there is such a denial. The relevant question then is, what
does due process require?
The holding of this Court in Ermita-Malate Hotel and Motel
Operators Asso. v. City Mayor,48 sheds some light. Thus:
"There is no controlling and precise definition of due
process. It furnishes though a standard to which
governmental action should conform in order that
deprivation of life, liberty or property, in each appropriate
case, be valid. What then is the standard of due process
which must exist both as a procedural and as substantive
requisite to free the challenged ordinance, or any
governmental action for that matter, from the imputation of
legal infirmity sufficient to spell its doom? It is
responsiveness to the supremacy of reason, obedience to
the dictates of justice. Negatively put, arbitrariness is ruled
out and unfairness avoided. To satisfy the due process
requirement, official action, to paraphrase Cardozo, must
not outrun the bounds of reason and result in sheer
oppression. Due process is thus hostile to any official
action marred by lack of reasonableness. Correctly has it
been identified as freedom from arbitrariness. It is the
embodiment of the sporting idea of fair play. It exacts fealty
"to those strivings for justice" and judges the act of
officialdom of whatever branch "in the light of reason drawn
from considerations of fairness that reflect [democratic]
traditions of legal and political thought." It is not a narrow or
"technical conception with fixed content unrelated to time,
place and circumstances," decisions based on such a
clause requiring a "close and perceptive inquiry into
fundamental principles of our society." Questions of due
process are not to be treated narrowly or pedantically in
slavery to form or phrases." .
The due process objection is sought to be bolstered by an
allegation that such power conferred in the challenged
legislation to limit the net profits to "12% annually of
[petitioner's] investments plus two-month operating
expenses" has a confiscatory aspect. This argument has
the ring of futility. Precisely, in Manila Electric Co. v. Public
Service Commission,49 this Court in an opinion by the
present Chief Justice upheld such a figure as against the
contention that it was rather too generous to the public
utility. To speak of it as confiscatory then is to employ the
language by hyperbole. Moreover, in the absence any
evidence to demonstrate the alleged confiscatory effect of
the provision in question, there would be no basis for its
nullification, in view of the well-known presumption of
validity that every statute has in its favor.50
In the light of the above, there is thus clearly no occasion
for yielding assent to the claim of petitioner that the
legislation assailed contravenes the due process clause.
3. While not explicitly avowed by petitioner, there is the
intimation that to apply the challenged legislation to
contracts then in existence would be an infringement of the
constitutional prohibition against any law impairing the
obligation of contracts.51 No such fear need be entertained.
A citation from a 1940 decision of this Court, in Pangasinan
Transportation Co. v. Public Service Commission,52 is
particularly relevant. In the language of Justice Laurel,
speaking for the Court: "Upon the other hand, statutes
enacted for the regulation of public utilities, being a proper
exercise by the state of its police power, are applicable not
364 | P a g e
only to those public utilities coming into existence after its
passage, but likewise to those already, existence
established and in operation."53 Such a doctrine was
followed in the case of a tenancy legislation, the Congress
undoubtedly having in mind and not having failed to take
notice "of the existence of contracts" which stipulated a
division of the crops on a 50-50 basis and therefore must
have intended to regulate the same. There was thus no
impairment of an obligation of contract, such an enactment
under the police power being remedial in nature, the non-
applicability of which to existing conditions would be self-
defeating in character.54
In Abe v. Foster Wheeler Corp.,55 Justice Barrera, speaking
for the Court, took note of the contention "that as the
contracts of employment were entered into at a time when
there was no law granting the workers said right, the
application as to them of the subsequent enactment
restoring the same right constitutes an impairment of their
contractual obligations." Then he, made clear why the
Court was of a contrary view as, "the constitutional
1äw phï1.ñët
guaranty of non-impairment ... is limited by the exercise of
the police power of the State, in the interest of public
health, safe, morals and general welfare." Thus was
reaffirmed what previously had been announced as the
rule. Such a doctrine was reiterated early this year
in Philippine American Life Insurance Co. v. Auditor
General,56 where this Court found no objection to the
applicability of the Margin Law,57 even if it be assumed that
a reinsurance treaty was already in existence and had
imposed the corresponding obligation on the parties prior
to its enactment.
This is not to say that in each and every case the
invocation of the protection of the non-impairment clause
would be unavailing once the legislation complained of is
shown to be an exercise of the police power. Otherwise,
that would render nugatory the constitutional guarantee of
non-impairment, and for that matter both the equal
protection and due process clauses which equally serve to
protect property rights. Here, as in other cases where
governmental authority may trench upon property rights,
the process of balancing, adjustment or harmonization is
called for.
Rutter v. Esteban58 lends support to such an approach. In
that leading case, the continued operation and
enforcement of the Moratorium Act59 which allowed an
eight-year period of grace for the payment of pre-war
obligations on the part of debtors who suffered as a
consequence of World War II was, in a 1953 decision, held
"unreasonable and oppressive, and should not be
prolonged a minute longer" for being violative of the
constitutional provision prohibiting the impairment of the
obligation of the contracts "and, therefore, ... should be
declared null and void and without effect."60 As of the date
of its enactment in 1948, the police power could be relied
upon to sustain its validity, in view of the serious economic
condition faced by the country upon liberation and the state
of penury that then afflicted a greater portion of the Filipino
people. By 1953 however, the Moratorium Act could be
rightfully considered as an infringement of the non-
impairment clause, as the economy had in the meanwhile
considerably changed for the better.
There is no clearer instance then of the process of
harmonization and balancing which is incumbent upon the
365 | P a g e
judiciary to undertake whenever a regulatory measure
under the police power is assailed as violative of
constitucess or equal protection, all of which are intended
to safeguard property rights. Three leading decisions of the
United States Supreme Court, Home Building & Loan
Astional guarantees, whether of non-impairment,
due prosociation v. Blaisdell,61 Nebbia v. New
York,62 and Norman v. Baltimore and Ohio Railroad
Co.,63 speak similarly.
Even if, therefore, reliance be had on the non-impairment
clause by petitioner and the process of adjustment or
harmonization be undertaken to ascertain whether the
applicability of the statutory provision assailed to existing
contracts would run counter to such a guarantee, still the
same conclusion emerges. There is a failure to make out a
case for its invalidity.
WHEREFORE, there being no showing that Section 3 of
Republic Act No. 3043 is unconstitutional, the decision of
the lower court, dismissing the petition, is affirmed. With
costs against petitioner Alalayan.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,
Zaldivar, Sanchez, Castro and Angeles, JJ., concur.
G.R. No. 96169 September 24, 1991
EMPLOYERS CONFEDERATION OF THE
PHILIPPINES, petitioner,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION
AND REGIONAL TRIPARTITE WAGES AND
PRODUCTIVITY BOARD-NCR, TRADE UNION
CONGRESS OF THE PHILIPPINES, respondents.
Sycip Salazar, Hernandez & Gatmaitan for petitioner.
Gilbert P. Lorenzo for private respondent.
SARMIENTO, J.:
The petition is given due course and the various pleadings
submitted being sufficient to aid the Court in the proper
resolution of the basic issues raised in this case, we decide
it without further ado.
The Employers Confederation of the Philippines (ECOP) is
questioning the validity of Wage Order No. NCR-01-A
dated October 23, 1990 of the Regional Tripartite Wages
and Productivity Board, National Capital Region,
promulgated pursuant to the authority of Republic Act No.
6727, "AN ACT TO RATIONALIZE WAGE POLICY
DETERMINATION BY ESTABLISHING THE MECHANISM
AND PROPER STANDARDS THEREFORE, AMENDING
FOR THE PURPOSE ARTICLE 99 OF, AND
INCORPORATING ARTICLES 120, 121, 122, 123, 124,
126, AND 127 INTO, PRESIDENTIAL DECREE NO. 442
AS AMENDED, OTHERWISE KNOWN AS THE LABOR
CODE OF THE PHILIPPINES, FIXING NEW WAGE
RATES, PROVIDING WAGE INCENTIVES FOR
INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND
FOR OTHER PURPOSES," was approved by the
President on June 9, 1989. Aside from providing new wage
366 | P a g e
rates,1 the "Wage Rationalization Act" also provides,
among other things, for various Regional Tripartite Wages
and Productivity Boards in charge of prescribing minimum
wage rates for all workers in the various regions2 and for a
National Wages and Productivity Commission to review,
among other functions, wage levels determined by the
boards.3
On October 15, 1990, the Regional Board of the National
Capital Region issued Wage Order No. NCR-01, increasing
the minimum wage by P17.00 daily in the National Capital
Region.4 The Trade Union Congress of the Philippines
(TUCP) moved for reconsideration; so did the Personnel
Management Association of the Philippines
(PMAP).5 ECOP opposed.
On October 23, 1990, the Board issued Wage Order No.
NCR-01-A amending Wage Order No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all
workers and employees in the private sector in the
National Capital Region already receiving wages
above the statutory minimum wage rates up to one
hundred and twenty-five pesos (P125.00) per day
shall also receive an increase of seventeen pesos
(P17.00) per day.
ECOP appealed to the National Wages and Productivity
Commission. On November 6, 1990, the Commission
promulgated an Order, dismissing the appeal for lack of
merit. On November 14, 1990, the Commission denied
reconsideration.
The Orders of the Commission (as well as Wage Order No.
NCR-01-A) are the subject of this petition, in which. ECOP
assails the board's grant of an "across-the-board" wage
increase to workers already being paid more than existing
minimum wage rates (up to P125. 00 a day) as an alleged
excess of authority, and alleges that under the Republic
Act No. 6727, the boards may only prescribe "minimum
wages," not determine "salary ceilings." ECOP likewise
claims that Republic Act No. 6727 is meant to promote
collective bargaining as the primary mode of settling
wages, and in its opinion, the boards can not preempt
collective bargaining agreements by establishing ceilings.
ECOP prays for the nullification of Wage Order No. NCR
01-A and for the "reinstatement" of Wage Order No. NCR-
01.
The Court directed the Solicitor General to comment on
behalf of the Government, and in the Solicitor General's
opinion, the Board, in prescribing an across-the-board hike
did not, in reality, "grant additional or other benefits to
workers and employees, such as the extension of wage
increases to employees and workers already receiving
more than minimum wages ..."6 but rather, fixed minimum
wages according to the "salary-ceiling method."
ECOP insists, in its reply, that wage is a legislative
function, and Republic Act No. 6727 delegated to the
regional boards no more "than the power to grant minimum
wage adjustments"7 and "in the absence of clear statutory
authority,"8 the boards may no more than adjust "floor
wages."9
The Solicitor General, in his rejoinder, argues that Republic
Act No. 6727 is intended to correct "wage distortions" and
367 | P a g e
the salary-ceiling method (of determining wages) is meant,
precisely, to rectify wage distortions.10
The Court is inclined to agree with the Government. In the
National Wages and Productivity Commission's Order of
November 6, 1990, the Commission noted that the
determination of wages has generally involved two
methods, the "floor-wage" method and the "salary-ceiling"
method. We quote:
Historically, legislation involving the adjustment of
the minimum wage made use of two methods. The
first method involves the fixing of determinate
amount that would be added to the prevailing
statutory minimum wage. The other involves "the
salary-ceiling method" whereby the wage adjustment
is applied to employees receiving a certain
denominated salary ceiling. The first method was
adopted in the earlier wage orders, while the latter
method was used in R.A. Nos. 6640 and 6727. Prior
to this, the salary-ceiling method was also used in no
less than eleven issuances mandating the grant of
cost-of-living allowances (P.D. Nos. 525, 1123, 1614,
1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5
and 6). The shift from the first method to the second
method was brought about by labor disputes arising
from wage distortions, a consequence of the
implementation of the said wage orders. Apparently,
the wage order provisions that wage distortions shall
be resolved through the grievance procedure was
perceived by legislators as ineffective in checking
industrial unrest resulting from wage order
implementations. With the establishment of the
 second method as a practice in minimum wage economic and social development program. In the
fixing, wage distortion disputes were minimized.11 determination of such regional minimum wages, the
Regional Board shall, among other relevant factors,
As the Commission noted, the increasing trend is toward consider the following:
the second mode, the salary-cap method, which has
reduced disputes arising from wage distortions (brought (a) The demand for living wages;
about, apparently, by the floor-wage method). Of course,
disputes are appropriate subjects of collective bargaining (b) Wage adjustment vis-a-vis the consumer price
and grievance procedures, but as the Commission index;
observed and as we are ourselves agreed, bargaining has
helped very little in correcting wage distortions. Precisely, (c) The cost of living and changes or increases
Republic Act No. 6727 was intended to rationalize wages, therein;
first, by providing for full-time boards to police wages
round-the-clock, and second, by giving the boards enough (d) The needs of workers and their families;
powers to achieve this objective. The Court is of the
opinion that Congress meant the boards to be creative in (e) The need to induce industries to invest in the
resolving the annual question of wages without labor and countryside;
management knocking on the legislature's door at every
turn. The Court's opinion is that if Republic No. 6727 (f) Improvements in standards of living;
intended the boards alone to set floor wages, the Act would
have no need for a board but an accountant to keep track (g) The prevailing wage levels;
of the latest consumer price index, or better, would have
(h) Fair return of the capital invested and capacity to
Congress done it as the need arises, as the legislature,
pay of emphasis employers;
prior to the Act, has done so for years. The fact of the
matter is that the Act sought a "thinking" group of men and
(i) Effects of employment generation and family
women bound by statutory standards. We quote:
income; and
ART. 124. Standards / Criteria for Minimum Wage
(j) The equitable distribution of income and wealth
Fixing. — The regional minimum wages to be
along the imperatives of economic and social
established by the Regional Board shall be as nearly
development.12
adequate as is economically feasible to maintain the
minimum standards of living necessary for the The Court is not convinced that the Regional Board of the
health, efficiency and general well-being of the National Capital Region, in decreeing an across-the-board
employees within the framework of the national
368 | P a g e
hike, performed an unlawful act of legislation. It is true that
wage-fixing, like rate constitutes an act Congress;13 it is
also true, however, that Congress may delegate the power
to fix rates14 provided that, as in all delegations cases,
Congress leaves sufficient standards. As this Court has
indicated, it is impressed that the above-quoted standards
are sufficient, and in the light of the floor-wage method's
failure, the Court believes that the Commission correctly
upheld the Regional Board of the National Capital Region.
Apparently, ECOP is of the mistaken impression that
Republic Act No. 6727 is meant to "get the Government out
of the industry" and leave labor and management alone in
deciding wages. The Court does not think that the law
intended to deregulate the relation between labor and
capital for several reasons: (1) The Constitution calls upon
the State to protect the rights of workers and promote their
welfare;15 (2) the Constitution also makes it a duty of the
State "to intervene when the common goal so demands" in
regulating property and property relations;16 (3) the Charter
urges Congress to give priority to the enactment of
measures, among other things, to diffuse the wealth of the
nation and to regulate the use of property;17 (4) the Charter
recognizes the "just share of labor in the fruits of
production;"18 (5) under the Labor Code, the State shall
regulate the relations between labor and management;19 (6)
under Republic Act No. 6727 itself, the State is interested
in seeing that workers receive fair and equitable
wages;20and (7) the Constitution is primarily a document of
social justice, and although it has recognized the
importance of the private sector,21 it has not embraced fully
the concept of laissez faire22 or otherwise, relied on pure
market forces to govern the economy; We can not give to
369 | P a g e
the Act a meaning or intent that will conflict with these
basic principles.
It is the Court's thinking, reached after the Court's own
study of the Act, that the Act is meant to rationalize wages,
that is, by having permanent boards to decide wages rather
than leaving wage determination to Congress year after
year and law after law. The Court is not of course saying
that the Act is an effort of Congress to pass the buck, or
worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As Justice
Cruz observed, "[w]ith the proliferation of specialized
activities and their attendant peculiar problems, the
national legislature has found it more necessary to entrust
to administrative agencies the power of subordinate
legislation' as it is caned."23
The Labor Code defines "wage" as follows:
"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 reasonably value, as determined by the
Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not
include any profit to the employer or to any person
affiliated with the employer.24
The concept of "minimum wage" is, however, a different
thing, and certainly, it means more than setting a floor
wage to upgrade existing wages, as ECOP takes it to
mean. "Minimum wages" underlies the effort of the State,
as Republic Act No. 6727 expresses it, "to promote
productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in
the fruits of production; to enhance employment generation
in the countryside through industry dispersal; and to allow
business and industry reasonable returns on investment,
expansion and growth,"25 and as the Constitution expresses
it, to affirm "labor as a primary social economic force."26 As
the Court indicated, the statute would have no need for a
board if the question were simply "how much". The State is
concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is
subserved.
It is another question, to be sure, had Congress created
"roving" boards, and were that the case, a problem of
undue delegation would have ensued; but as we said, we
do not see a Board (National Capital Region) "running riot"
here, and Wage Order No. NCR-01-A as an excess of
authority.
It is also another question whether the salary-cap method
utilized by the Board may serve the purposes of Republic
Act No. 6727 in future cases and whether that method is
after all, a lasting policy of the Board; however, it is a
question on which we may only speculate at the moment.
At the moment, we find it to be reasonable policy
(apparently, it has since been Government policy); and if in
370 | P a g e
the future it would be perceptibly unfair to management, we
will take it up then.
WHEREFORE, premises considered, the petition is
DENIED. No pronouncement as to costs.
IT IS SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ.,
concur.
Paras, J., took no part.
G.R. No. 96169 September 24, 1991
EMPLOYERS CONFEDERATION OF THE
PHILIPPINES, petitioner,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION
AND REGIONAL TRIPARTITE WAGES AND
PRODUCTIVITY BOARD-NCR, TRADE UNION
CONGRESS OF THE PHILIPPINES, respondents.
Sycip Salazar, Hernandez & Gatmaitan for petitioner.
Gilbert P. Lorenzo for private respondent.
SARMIENTO, J.:
The petition is given due course and the various pleadings
submitted being sufficient to aid the Court in the proper
resolution of the basic issues raised in this case, we decide
it without further ado.
The Employers Confederation of the Philippines (ECOP) is
questioning the validity of Wage Order No. NCR-01-A
dated October 23, 1990 of the Regional Tripartite Wages
and Productivity Board, National Capital Region,
promulgated pursuant to the authority of Republic Act No.
6727, "AN ACT TO RATIONALIZE WAGE POLICY
DETERMINATION BY ESTABLISHING THE MECHANISM
AND PROPER STANDARDS THEREFORE, AMENDING
FOR THE PURPOSE ARTICLE 99 OF, AND
INCORPORATING ARTICLES 120, 121, 122, 123, 124,
126, AND 127 INTO, PRESIDENTIAL DECREE NO. 442
AS AMENDED, OTHERWISE KNOWN AS THE LABOR
CODE OF THE PHILIPPINES, FIXING NEW WAGE
RATES, PROVIDING WAGE INCENTIVES FOR
INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND
FOR OTHER PURPOSES," was approved by the
President on June 9, 1989. Aside from providing new wage
rates,1 the "Wage Rationalization Act" also provides,
among other things, for various Regional Tripartite Wages
and Productivity Boards in charge of prescribing minimum
wage rates for all workers in the various regions2 and for a
National Wages and Productivity Commission to review,
among other functions, wage levels determined by the
boards.3
On October 15, 1990, the Regional Board of the National
Capital Region issued Wage Order No. NCR-01, increasing
the minimum wage by P17.00 daily in the National Capital
Region.4 The Trade Union Congress of the Philippines
(TUCP) moved for reconsideration; so did the Personnel
371 | P a g e
Management Association of the Philippines
(PMAP).5 ECOP opposed.
On October 23, 1990, the Board issued Wage Order No.
NCR-01-A amending Wage Order No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all
workers and employees in the private sector in the
National Capital Region already receiving wages
above the statutory minimum wage rates up to one
hundred and twenty-five pesos (P125.00) per day
shall also receive an increase of seventeen pesos
(P17.00) per day.
ECOP appealed to the National Wages and Productivity
Commission. On November 6, 1990, the Commission
promulgated an Order, dismissing the appeal for lack of
merit. On November 14, 1990, the Commission denied
reconsideration.
The Orders of the Commission (as well as Wage Order No.
NCR-01-A) are the subject of this petition, in which. ECOP
assails the board's grant of an "across-the-board" wage
increase to workers already being paid more than existing
minimum wage rates (up to P125. 00 a day) as an alleged
excess of authority, and alleges that under the Republic
Act No. 6727, the boards may only prescribe "minimum
wages," not determine "salary ceilings." ECOP likewise
claims that Republic Act No. 6727 is meant to promote
collective bargaining as the primary mode of settling
wages, and in its opinion, the boards can not preempt
collective bargaining agreements by establishing ceilings.
ECOP prays for the nullification of Wage Order No. NCR
01-A and for the "reinstatement" of Wage Order No. NCR-
01.
The Court directed the Solicitor General to comment on
behalf of the Government, and in the Solicitor General's
opinion, the Board, in prescribing an across-the-board hike
did not, in reality, "grant additional or other benefits to
workers and employees, such as the extension of wage
increases to employees and workers already receiving
more than minimum wages ..."6 but rather, fixed minimum
wages according to the "salary-ceiling method."
ECOP insists, in its reply, that wage is a legislative
function, and Republic Act No. 6727 delegated to the
regional boards no more "than the power to grant minimum
wage adjustments"7 and "in the absence of clear statutory
authority,"8 the boards may no more than adjust "floor
wages."9
The Solicitor General, in his rejoinder, argues that Republic
Act No. 6727 is intended to correct "wage distortions" and
the salary-ceiling method (of determining wages) is meant,
precisely, to rectify wage distortions.10
The Court is inclined to agree with the Government. In the
National Wages and Productivity Commission's Order of
November 6, 1990, the Commission noted that the
determination of wages has generally involved two
methods, the "floor-wage" method and the "salary-ceiling"
method. We quote:
Historically, legislation involving the adjustment of
the minimum wage made use of two methods. The
first method involves the fixing of determinate
372 | P a g e
amount that would be added to the prevailing
statutory minimum wage. The other involves "the
salary-ceiling method" whereby the wage adjustment
is applied to employees receiving a certain
denominated salary ceiling. The first method was
adopted in the earlier wage orders, while the latter
method was used in R.A. Nos. 6640 and 6727. Prior
to this, the salary-ceiling method was also used in no
less than eleven issuances mandating the grant of
cost-of-living allowances (P.D. Nos. 525, 1123, 1614,
1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5
and 6). The shift from the first method to the second
method was brought about by labor disputes arising
from wage distortions, a consequence of the
implementation of the said wage orders. Apparently,
the wage order provisions that wage distortions shall
be resolved through the grievance procedure was
perceived by legislators as ineffective in checking
industrial unrest resulting from wage order
implementations. With the establishment of the
second method as a practice in minimum wage
fixing, wage distortion disputes were minimized.11
As the Commission noted, the increasing trend is toward
the second mode, the salary-cap method, which has
reduced disputes arising from wage distortions (brought
about, apparently, by the floor-wage method). Of course,
disputes are appropriate subjects of collective bargaining
and grievance procedures, but as the Commission
observed and as we are ourselves agreed, bargaining has
helped very little in correcting wage distortions. Precisely,
Republic Act No. 6727 was intended to rationalize wages,
first, by providing for full-time boards to police wages
round-the-clock, and second, by giving the boards enough
powers to achieve this objective. The Court is of the
opinion that Congress meant the boards to be creative in
resolving the annual question of wages without labor and
management knocking on the legislature's door at every
turn. The Court's opinion is that if Republic No. 6727
intended the boards alone to set floor wages, the Act would
have no need for a board but an accountant to keep track
of the latest consumer price index, or better, would have
Congress done it as the need arises, as the legislature,
prior to the Act, has done so for years. The fact of the
matter is that the Act sought a "thinking" group of men and
women bound by statutory standards. We quote:
ART. 124. Standards / Criteria for Minimum Wage
Fixing. — The regional minimum wages to be
established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the
minimum standards of living necessary for the
health, efficiency and general well-being of the
employees within the framework of the national
economic and social development program. In the
determination of such regional minimum wages, the
Regional Board shall, among other relevant factors,
consider the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price
index;
(c) The cost of living and changes or increases
therein;
(d) The needs of workers and their families;
373 | P a g e
(e) The need to induce industries to invest in the
countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to
pay of emphasis employers;
(i) Effects of employment generation and family
income; and
(j) The equitable distribution of income and wealth
along the imperatives of economic and social
development.12
The Court is not convinced that the Regional Board of the
National Capital Region, in decreeing an across-the-board
hike, performed an unlawful act of legislation. It is true that
wage-fixing, like rate constitutes an act Congress;13 it is
also true, however, that Congress may delegate the power
to fix rates14 provided that, as in all delegations cases,
Congress leaves sufficient standards. As this Court has
indicated, it is impressed that the above-quoted standards
are sufficient, and in the light of the floor-wage method's
failure, the Court believes that the Commission correctly
upheld the Regional Board of the National Capital Region.
Apparently, ECOP is of the mistaken impression that
Republic Act No. 6727 is meant to "get the Government out
of the industry" and leave labor and management alone in
deciding wages. The Court does not think that the law
intended to deregulate the relation between labor and
capital for several reasons: (1) The Constitution calls upon
the State to protect the rights of workers and promote their
welfare;15 (2) the Constitution also makes it a duty of the
State "to intervene when the common goal so demands" in
regulating property and property relations;16 (3) the Charter
urges Congress to give priority to the enactment of
measures, among other things, to diffuse the wealth of the
nation and to regulate the use of property;17 (4) the Charter
recognizes the "just share of labor in the fruits of
production;"18 (5) under the Labor Code, the State shall
regulate the relations between labor and management;19 (6)
under Republic Act No. 6727 itself, the State is interested
in seeing that workers receive fair and equitable
wages;20and (7) the Constitution is primarily a document of
social justice, and although it has recognized the
importance of the private sector,21 it has not embraced fully
the concept of laissez faire22 or otherwise, relied on pure
market forces to govern the economy; We can not give to
the Act a meaning or intent that will conflict with these
basic principles.
It is the Court's thinking, reached after the Court's own
study of the Act, that the Act is meant to rationalize wages,
that is, by having permanent boards to decide wages rather
than leaving wage determination to Congress year after
year and law after law. The Court is not of course saying
that the Act is an effort of Congress to pass the buck, or
worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As Justice
Cruz observed, "[w]ith the proliferation of specialized
activities and their attendant peculiar problems, the
national legislature has found it more necessary to entrust
to administrative agencies the power of subordinate
legislation' as it is caned."23
374 | P a g e
The Labor Code defines "wage" as follows:
"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 reasonably value, as determined by the
Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not
include any profit to the employer or to any person
affiliated with the employer.24
The concept of "minimum wage" is, however, a different
thing, and certainly, it means more than setting a floor
wage to upgrade existing wages, as ECOP takes it to
mean. "Minimum wages" underlies the effort of the State,
as Republic Act No. 6727 expresses it, "to promote
productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in
the fruits of production; to enhance employment generation
in the countryside through industry dispersal; and to allow
business and industry reasonable returns on investment,
expansion and growth,"25 and as the Constitution expresses
it, to affirm "labor as a primary social economic force."26 As
the Court indicated, the statute would have no need for a
board if the question were simply "how much". The State is
concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is
subserved.
It is another question, to be sure, had Congress created
"roving" boards, and were that the case, a problem of
undue delegation would have ensued; but as we said, we
do not see a Board (National Capital Region) "running riot"
here, and Wage Order No. NCR-01-A as an excess of
authority.
It is also another question whether the salary-cap method
utilized by the Board may serve the purposes of Republic
Act No. 6727 in future cases and whether that method is
after all, a lasting policy of the Board; however, it is a
question on which we may only speculate at the moment.
At the moment, we find it to be reasonable policy
(apparently, it has since been Government policy); and if in
the future it would be perceptibly unfair to management, we
will take it up then.
WHEREFORE, premises considered, the petition is
DENIED. No pronouncement as to costs.
IT IS SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ.,
concur.
Paras, J., took no part.
G.R. No. 77875 February 4, 1993
375 | P a g e
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
376 | P a g e
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:
377 | P a g e
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
378 | P a g e
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
379 | P a g e
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.
On this score, respondent NLRC aptly ruled:
. . . Based on the facts heretofore narrated,
division head Reynaldo Abad 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 will necessarily be at the mercy of their
employer. That could not have been the intendment of the
pertinent provision of the CBA, much less the benevolent
policy underlying our labor laws.
380 | P a g e
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.
SO ORDERED.
Narvasa, C.J., Feliciano, Nocon and Campos, Jr., JJ.,
concur.
[G.R. No. 119243. April 17, 1997]
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 of the National
[1]
Labor Relations Commission (NLRC) in NLRC Case No.
00-06-04136-93 (CA No. L-007370-94), which modified
the 11 July 1994 decision of the Labor Arbiter by
[2]
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.
381 | P a g e
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, thus concluded:
[4]
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]
382 | P a g e
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., where the
[7]
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 of 7 October 1994, the
[8]
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 was [11]
denied by the NLRC in its 7 December 1994
resolution. Petitioner thus filed this special civil action
[12]
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
383 | P a g e
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 for public respondent NLRC, the
[13]
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, the [15]
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, petitioner disputed the application of
[16]
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
384 | P a g e
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. Likewise, the burden of proof is on the
[17]
employer to show the employees clear and deliberate
intent to discontinue his employment without any
intention of returning, mere absence is not
[18]
sufficient. These elements are not present here. First,
[19]
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. Without doubt, the intention is
[20]
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, but under the Article on Social Justice and
[21]

Human Rights, thus placing labor contracts on a higher

[22]

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.

385 | P a g e