OTHER IMPORTANT LABOR PROVISIONS

A. CONTRACTING ARRANGEMENT

1. Philippine Bank of Communications vs. National Labor Relations Commission GR No. L-66598 December 19, 1986

FACTS: Petitioner Philippine Bank of Communications and the Corporate Executive Search, Inc. (CESI) entered into an agreement under
which CESI would provide “Temporary Services” to petitioner consisting of eleven (11) messengers, one of them was Orpiada. The
contract period was described as “from January 1976 – although it appeared that Orpiada had been assigned to the bank since June
1975.

He rendered messengerial services to the bank, within its promises, together with other the others doing a similar job. In or about October
1976, the bank requested CESI to withdraw Orpiada’s assignment because Orpiada’s services “were no longer needed.”

Orpiada filed a complaint against the bank for illegal dismissal and failure to pay the 13 th- month pay. The bank impleaded CESI as an
additional respondent. The Labor Arbiter ruled in favor of Orpiada. Hence, this petition for certiorari filed by the bank.

ISSUE: Whether or not an employer-employee relationship existed between the bank and private respondent Orpiada.

HELD: Yes. There is an employer-employee relationship that existed between the bank and Orpiada. The fact that Orpiada worked or
rendered services to the bank for a period of about sixteen (16) months made him an employee of the bank. Under the Labor Code, any
employee who has rendered at least one (1) year of service, whether such service is continuous or not, shall be considered a regular
employee. Thus, Orpiada’s services may not be terminated by the bank except for a just cause or when authorized under the Labor Code.
CESI was engaged in labor-only contracting. Therefore, the petitioner bank is liable to Orpiada as if Orpiada had been directly employed,
not only by CESI but also by the bank.

2. Neri vs. National Labor Relations Commission G.R. Nos. 97008-09 July 23, 1993

FACTS: Petitioners instituted complaints against FEBTC and BCC to compel the bank to accept them as regular employees and for it to
pay the differential between the wages being paid them by BCC and those received by FEBTC employees with similar length of service.
They contended that BCC in engaged in labor-only contracting because it failed to adduce evidence purporting to show that it invested
in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of its business.
Moreover, petitioners argue that they perform duties which are directly related to the principal business or operation of
FEBTC.

It is well-settled that there is labor-only contracting where: (a) the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others; and, (b) the workers recruited and
placed by such person are performing activities which are directly related to the principal business of the employer.

Ruling: The Supreme Court ruled that respondent BCC need not prove that it made investments in the form of tools, equipment,
machineries, work premises, among others, because it has established that it has sufficient capitalization. This fact was both determined
by the Labor Arbiter and the NLRC as BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly
capitalized venture and cannot be deemed engaged in labor-only contracting.

While there may be no evidence that it has investment in the form of tools, equipment, machineries, work premises, among others, it is
enough that it has substantial capital, as was established before the Labor Arbiter as well as the NLRC. The law does not require both
substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or"
instead of "and".

Having established that it has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it does not
fall within the purview of "labor-only" contracting. There is even no need for it to refute petitioners' contention that the activities they
perform are directly related to the principal business of respondent bank. On the other hand, the Court has already taken judicial notice
of the general practice adopted in several government and private institutions and industries of hiring independent contractors to perform
special services.

These services range from janitorial, security and even technical or other specific services such as those performed by petitioners Neri
and Cabelin. While these services may be considered directly related to the principal business of the employer, nevertheless, they are
not necessary in the conduct of the principal business of the employer. Petition dismissed.

3. FILIPINAS SYNTHETIC FIBER CORPORATION vs NLRC G.R. No. 113347 June 14, 1996

FACTS: On 4 April 1991 FILSYN, a domestic corporation engaged in the manufacture of polyester fiber, contracted with De Lima Trading
and General Services (DE LIMA) for the performance of specific janitorial services. Pursuant to the agreement Felipe Loterte, among
others, was deployed at FILSYN to take care of the plants and maintain general cleanliness around the premises.

On 24 February 1992 Loterte sued FILSYN and DE LIMA as alternative defendants for illegal dismissal, underpayment of wages, non-
payment of legal holiday pay, service incentive leave pay and 13th month pay alleging that he was first assigned to perform janitorial
work at FILSYN in 1981 by the La Saga General Services; that the La Saga was changed to DE LIMA on August 1991; that when a
30
movement to demand increased wages and 13th month pay arose among the workers on December 1991 he was accused by a certain
Dodie La Flores of having posted in the bulletin board at FILSYN an article attributing to management a secret understanding to block
the demand; and, for denying responsibility, his gate pass was unceremoniously cancelled on 6 February 1992 and he was subsequently
dismissed.

Loterte was classified by the Labor Arbiter as a regular employee on the ground that he performed tasks usually necessary or desirable
in the main business of FILSYN for more than ten (10) years or since 1981. FILSYN was declared to be the real employer of Loterte and
DE LIMA as a mere labor contractor. Hence, FILSYN was adjudged liable for Loterte's reinstatement, payment of salary differentials and
back wages and other benefits. Hence, this petition for certiorari by FILSYN.

ISSUE: Whether or not there exists an employer-employee relationship between FILSYN and private respondent Felipe Loterte.

HELD: DE LIMA is an independent job contractor, therefore no direct employer-employee relationship exists between petitioner FILSYN
and private respondent Felipe Loterte. The relationship between petitioner Filipinas Synthetic Fiber Corporation (FILSYN) and private
respondent De Lima Trading and General Services (DE LIMA) is one of job contractorship.

Under the Labor Code, two (2) elements must exist for a finding of labor-only contracting: (a) the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and (b) the
workers recruited and placed by such persons are performing activities directly related to the principal business of such employer.

These two (2) elements do not exist in the instant case. As pointed out by petitioner, private respondent DE LIMA is a going concern duly
registered with the Securities and Exchange Commission with substantial capitalization of P1,600,000.00, P400,000.00 of which is
actually subscribed. Hence, it cannot be considered as engaged in labor-only contracting being a highly capitalized venture. Moreover,
while the janitorial services performed by Felipe Loterte pursuant to the agreement between FILSYN and DE LIMA may be considered
directly related to the principal business of FILSYN which is the manufacture of polyester fiber, nevertheless, they are not necessary in
its operation. On the contrary, they are merely incidental thereto, as opposed to being integral, without which production and company
sales will not suffer. Judicial notice has already been taken of the general practice in private as well as in government institutions and
industries of hiring janitorial services on an independent contractor basis.

Respondent De Lima Trading and General Services (DE LIMA) are ordered to reinstate private respondent FELIPE LOTERTE to his
former position or its equivalent without loss of seniority rights. And private respondent De Lima Trading and General Services (DE LIMA)
is ordered jointly and severally with petitioner Filipinas Synthetic Fiber Corporation (FILSYN) to pay private respondent FELIPE LOTERTE
hi salary differentials, 13th month pay, service incentive leave pay, and backwages without prejudice to FILSYN seeking reimbursement
from DE LIMA for whatever amount the former may pay or have paid the latter.

4. MARAGUINOT vs. NLRC G.R. No. 120969 January 22, 1998

FACTS: Petitioner Maraguinot, Jr. maintains that he was employed by private respondents as part of the filming crew. He was designated
Assistant Electrician and was promoted to the rank of Electrician. Petitioner Paulino Enero, on his part, claims that private respondents
employed him as a member of the shooting crew. Petitioners’ tasks consisted of loading, unloading and arranging movie equipment in
the shooting area as instructed by the cameraman, returning the equipment to Viva Films’ warehouse, assisting in the “fixing” of the
lighting system, and performing other tasks that the cameraman and/or director may assign. Petitioners sought the assistance of their
supervisor, Mrs. Cesario, to facilitate their request that private respondents adjust their salary in accordance with the minimum wage law.
Mrs. Cesario informed petitioners that Mr. del Rosario would agree to increase their salary only if they signed a blank employment contract.
As petitioners refused to sign, private respondents forced Enero to go on leave then refused to take him back when he reported for work.
Meanwhile, Maraguinot was dropped from the company payroll but was returned on June 1992. He was again asked to sign a blank
employment contract, and when he still refused, private respondents terminated his services on. Petitioners thus sued for illegal dismissal
before the Labor Arbiter.

On the other hand, private respondents claim that VIVA is primarily engaged in the distribution and exhibition of movies -- but not in the
business of making movies; in the same vein, private respondent Vic del Rosario is merely an executive producer, i.e., the financier who
invests a certain sum of money for the production of movies distributed and exhibited by VIVA.

Private respondents assert that they contract persons called “producers” -- also referred to as “associate producers” -- to “produce” or
make movies for private respondents; and contend that petitioners are project employees of the associate producers who, in turn, act as
independent contractors. As such, there is no employer-employee relationship between petitioners and private respondents. Private
respondents further contend that it was the associate producer of the film “Mahirap Maging Pogi,” who hired petitioner Maraguinot. The
movie shot from 2 July up to 22 July 1992, and it was only then that Maraguinot was released upon payment of his last salary, as his
services were no longer needed. Anent petitioner Enero, he was hired for the movie entitled “Sigaw ng Puso,/Narito ang Puso.” He went
on vacation and when he reported back for work on 20 July 1992, shooting for the movie had already been completed.

ISSUES:
Whether or not petitioners are project employees of associate producers who, in turn, act as independent contractors.
Whether or not petitioners were illegally dismissed.

HELD: It is settled that the contracting out of labor is allowed only in case of job contracting. Sec. 8. Job contracting. -- There is job
contracting permissible under the Code if the following conditions are met:

31
 (1) The contractor carries on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.

Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion pictures. As
such, and to be a job contractor under the preceding description, associate producers must have tools, equipment, machinery, work
premises, and other materials necessary to make motion pictures. However, the associate producers here have none of these.

Private respondents’ evidence reveals that the movie-making equipment are supplied to the producers and owned by VIVA. These include
generators, cables and wooden platforms, cameras and “shooting equipment;” in fact, VIVA likewise owns the trucks used to transport
the equipment. It is thus clear that the associate producer merely leases the equipment from VIVA. Private respondents further narrated
that VIVA’s generators broke down during petitioners’ last movie project, which forced the associate producer concerned to rent
generators, equipment and crew from another company. This only shows that the associate producer did not have substantial capital nor
investment in the form of tools, equipment and other materials necessary for making a movie.

Private respondents in effect admit that their producers, especially petitioners’ last producer, are not engaged in permissible job
contracting. If private respondents insist that their associate producers are labor contractors, then these producers can only be “labor-
only” contractors, defined by the Labor Code.

Sec. 9. Labor-only contracting.

(a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting
where such person: (1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and (2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether
or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the workers.

As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the
direct employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as
they did not supply, recruit nor hire the workers.

In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an
“available group of free-lance workers which includes the complainants Maraguinot and Enero.” And in their Memorandum, private
respondents declared that the associate producer “hires the services of... 6) camera crew which includes (a) cameraman; (b) the utility
crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc....” This clearly showed that the associate producers did
not supply the workers required by the movie project. The relationship between VIVA and its producers or associate producers seems to
be that of agency, as the latter make movies on behalf of VIVA, whose business is to “make” movies. As such, the employment relationship
between petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct employer. Notably,
nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew members; moreover, it
is VIVA’s corporate name which appears on the heading of the appointment slip. What likewise tells against VIVA is that it paid petitioners’
salaries as evidenced by vouchers, containing VIVA’s letterhead, for that purpose.

A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:

1) There is a continuous rehiring of project employees even after cessation of a project; and

2) The tasks performed by the alleged “project employee” are vital, necessary and indispensable to the usual business or
trade of the employer.

However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a
badge of regular employment.

In the instant case, the evidence on record shows that petitioner Enero was employed for a total of 2 years and engaged in at least 18
projects, while petitioner Maraguinot was employed for some 3 years and worked on at least 23 projects. Moreover, as petitioners’ tasks
involved, among other chores, the loading, unloading and arranging of movie equipment in the shooting area as instructed by the
cameramen, returning the equipment to the Viva Films’ warehouse, and assisting in the “fixing” of the lighting system, it may not be
gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is ascertained by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. In closing then, as petitioners had already gained the status of regular
32
employees, their dismissal was unwarranted, for the cause invoked by private respondents for petitioners’ dismissal, viz., completion of
project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to back
wages and reinstatement, without loss of seniority rights and other benefits that may have accrued. Nevertheless, following the principles
of “suspension of work” and “no pay” between the end of one project and the start of a new one, in computing petitioners’ back wages,
the amounts corresponding to what could have been earned during the periods from the date petitioners were dismissed until their
reinstatement when petitioners’ respective Shooting Units were not undertaking any movie projects, should be deducted.

5. Urbanes, Jr., vs. The Honorable Secretary Of Labor And Employment G.R. No. 122791 February 19, 2003

FACTS: Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency, entered into an
agreement to provide security services to respondent Social Security System (SSS).

During the effectivity of the agreement, petitioner, by letter of May 16, 1994, requested the SSS for the upward adjustment of their contract
rate in view of Wage Order No. NCR-03 which was issued by the Regional Tripartite Wages and Productivity Board-NCR.

Petitioner sent several letters dated June 7 and June 8, 1994, reiterating the request. On June 24, 1994, petitioner pulled out his agency’s
services from the premises of the SSS. Petitioner, on June 29, 1994, filed a complaint with the DOLE-NCR against the SSS seeking the
implementation of Wage Order No. NCR-03.

In its position paper, the SSS prayed for the dismissal of the complaint on the ground that petitioner is not the real party in interest and
has no legal capacity to file the same. In any event, it argued that if it had any obligation, it was to the security guards. Morever, it
contended that the security guards assigned to the SSS do not have any legal basis to file a complaint against it for lack of contractual
privity.

Finding for petitioner, the Regional Director of the DOLE-NCR ordered respondent SSS to pay complainant the sum of P 1,600,858.46
representing the wage differentials under Wage Order No. NCR-03 of the 168 Security Guards of Catalina Security Agency covering the
period from December 16, 1993 to June 24, 1994.

The SSS moved to reconsider the September 16, 1994 Order of the Regional Director, praying that the computation be revised. By Order
of December 9, 1994, the Regional Director modified his September 16, 1994 Order by reducing the amount payable by the SSS to
petitioner. The amount was reduced to P 1,237,740.00.

The SSS appealed to the Secretary of Labor upon several assigned errors. Thereafter, the Secretary of Labor, by Order of June 22, 1995,
set aside the order of the Regional Director and remanded the records of the case "for recomputation of the wage differentials using P
5,281.00 as the basis of the wage adjustment." And the Secretary held petitioner’s security agency "Jointly and severally liable for wage
differentials, the amount of which should be paid directly to the security guards concerned."

ISSUES:
1. Whether or not the Secretary of Labor has jurisdiction to review appeals from decisions of the Regional Directors.
2. Whether or not SSS is liable to pay petitioner for wage differentials.

Contentions:

Petitioner asserts that the Secretary of Labor does not have jurisdiction to review appeals from decisions of the Regional Directors in
complaints filed under Article 129 of the Labor Code which provides:

ART. 129. RECOVERY OF WAGES, SIMPLE MONEY CLAIMS AND OTHER BENEFITS. Upon complaint of any interested
party, the regional director of the Department of Labor and Employment or any duly authorized hearing officers of the
Department is empowered, through summary proceeding and after due notice, to hear and decide any matter involving the
recovery of wages and other monetary claims and benefits, including legal interest, owing to an employee or person
employed in domestic or household service or househelper under this Code, arising from employer-employee relations:
Provided, That such complaint does not include a claim for reinstatement; Provided, further, That the aggregate money
claim of each employee or househelper does not exceed Five Thousand pesos (P5,000.00). The regional director or hearing
officer shall decide or resolve the complaint within thirty (30) calendar days from the date of the filing of the same. Any sum
thus recovered on behalf of any employee or househelper pursuant to this Article shall be held in a special deposit account
by, and shall be paid on order of, the Secretary of Labor and Employment or the regional director directly to the employee
or househelper concerned. Any such sum not paid to the employee or househelper, because he cannot be located after
diligent and reasonable effort to locate him within a period of three (3) years, shall be held as a special fund of the
Department of Labor and Employment to be used exclusively for the amelioration and benefit of workers.

Any decision or resolution of the regional director or officer pursuant to this provision may be appealed on the same grounds
provided in Article 223 of this Code, within five (5) calendar days from receipt of a copy of said decision or resolution, to the
National Labor Relations Commission which shall resolve the appeal within ten (10) calendar days from submission of the
last pleading required or allowed under its rules.

Petitioner thus contends that as the appeal of SSS was filed with the wrong forum, it should have been dismissed.

33
The SSS, on the other hand, contends that Article 128, not Article 129, is applicable to the case. Article 128 provides:

ART. 128. VISITORIAL AND ENFORCEMENT POWERS

(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where the relationship
of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have
the power to issue compliance orders to give effect to labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may
be appealed to the latter.

HELD: Neither the petitioner’s contention nor the SSS’s is impressed with merit. Lapanday Agricultural Development Corporation v.
Court of Appeals instructs so. In that case, the security agency filed a complaint before the RTC against the principal or client
Lapanday for the upward adjustment of the contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday argued that it is
the National Labor Relations Commission, not the civil courts, which has jurisdiction to resolve the issue in the case, it involving the
enforcement of wage adjustment and other benefits due the agency’s security guards as mandated by several wage orders. Holding
that the RTC has jurisdiction over the controversy, this Court ruled:

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. 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 petitioner's 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. 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.

In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards, the relief sought has to do
with the enforcement of the contract between him and the SSS which was deemed amended by virtue of Wage Order No. NCR-03.
The controversy subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is the civil courts.

But even assuming arguendo that petitioner’s complaint were filed with the proper forum, for lack of cause of action it must be
dismissed. Articles 106, 107 and 109 of the Labor Code provide:

ART. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an employer enters into contract with another person for
the performance of the former’s work, the employees of the contractor and of the latter’s 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 wage 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.

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.

ART. 109. SOLIDARY LIABILTY. The provisions of existing laws to the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

As to the second issue, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his employee-security
guards "the increases" mandated by Wage Order No. NCR-03.

The records do not show that petitioner has paid the mandated increases to the security guards. The security guards in fact have
filed a complaint with the NLRC against petitioner relative to, among other things, underpayment of wages.

6. San Miguel Corporation vs. Maerc Integrated, Inc. G.R. No. 144672 July 10, 2003

FACTS: Brought before this court is a petition seeking for a review of the Court of Appeals' judgment. The facts are as follows:

291 workers filed complaints against San Miguel Corporation and Maerc Integrated Services, Inc. for illegal dismissal, underpayment of
wages, non-payment of service incentive leave pays and other labor standards benefits, and for separation pays from 25 June to 24
October 1991. The complainants alleged that they were hired by SMC through its agent or intermediary Maerc. They were paid on a per
piece or pakiao basis except for a few who worked as checkers and were paid on daily wage basis.

34
SMC denied liability for the claims and averred that the complainants were not its employees but of MAERC.

When the service contract was terminated, complainants claimed that SMC stopped them from performing their jobs; that this was
tantamount to their being illegally dismissed by SMC who was their real employer; and, that MAERC was merely made a tool or a shield
by SMC to avoid its liability under the Labor Code.

On 31 January 1995 the Labor Arbiter rendered a decision holding that MAERC was an independent contractor. He dismissed the
complaints for illegal dismissal but held that MAERC and SMC were jointly and severally liable to pay complainants their wage differentials.

The National Labor Relations Commission (NLRC) ruled in its 7 January 1997 decision that MAERC was a labor-only contractor and that
complainants were employees of SMC but still held SMC to be jointly and severally liable with MAERC for complainants' separation
benefits.

On 28 April 2000 the Court of Appeals denied the petition and affirmed the decision of the NLRC.

ISSUE: Whether or not the complainants are employees of petitioner SMC or of respondent MAERC.

HELD: Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERC's workers. It also appears that
majority of the complainants had already been working for SMC long before the signing of the service contract between SMC and MAERC
in 1988.

In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention
of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of
the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore
becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.

This distinction between job contractor and labor-only contractor, however, will not discharge SMC from paying the separation benefits
of the workers, inasmuch as MAERC was shown to be a labor-only contractor; in which case, petitioner's liability is that of a direct employer
and thus solidarily liable with MAERC.

Respondent Maerc Integrated Services, Inc. is declared to be a labor-only contractor. Accordingly, both petitioner San Miguel Corporation
and respondent Maerc Integrated Services, Inc., are ordered to jointly and severally pay complainants (private respondents herein)
separation benefits and wage differentials as may be finally recomputed by the Labor Arbiter as herein directed, plus attorney's fees to
be computed on the basis of ten percent (10%) of the amounts which complainants may recover pursuant to Art. 111 of the Labor Code,
as well as an indemnity fee of P2,000.00 to each complainant.

7. Mariveles Shipyard vs. Court of Appeals G.R. No. 144134 November 11, 2003

FACTS: Sometime in October 1993, petitioner Mariveles Shipyard Corp. engaged the services of Longest Force Investigation and
Security Agency, Inc. to render security services at its premises. Petitioner religiously complied with the terms of the contract, promptly
paying its bills and the contract rates. However, it found the services unsatisfactory and inadequate causing it to terminate its contract
with Longest Force. Longest force in turn terminated the employment of the security guards deployed to petitioner.

On September 2, 1996 private respondents filed a case of illegal dismissal, underpayment of wages pursuant to the PNPSOSIA-PADPAO
rates, nonpayment of overtime pay, premium pay for holiday and rest day, service incentive leave pay, 13 th month pay and attorney’s
fees against petitioner and Longest Force. Labor Arbiter and NLRC ruled in favor of private respondents and declared Longest Force and
petitioner jointly and severally liable to pay the money claims of complainants.

ISSUE: Whether or not petitioner is jointly and severally liable with Longest Force.

HELD: Petitioner’s liability is joint and several with Longest Force pursuant to Art 106, 107 and 109 of the Labor Code. When petitioner
contracted for security services with Longest Force as the security agency that hired private respondents to work as guards for the
shipyard corporation, petitioner became indirect employer of private respondents pursuant to Art 107. Following Art 106, when the agency
as contractor failed to pay the guards, the corporation as principal becomes jointly and severally liable for the guard’s wages.

Petitioner cannot evade its liability by claiming that it had religiously paid the compensation of the guards as stipulated under the contract.
Labor Standards are enacted by the legislature to alleviate the plight of workers whose wages barely meet the costs of their basic needs.

However, petitioner has the right of reimbursement from his co-debtor.

8. NEW GOLDEN CITY BUILDERS & DEV’T CORP vs COURT OF APPEALS G.R. No. 154715 December 11, 2003

35
FACTS: On April 4, 1995, petitioner New Golden City Builders and Development Corporation, a corporation engaged in the construction
business, entered into a construction contract with Prince David Development Corporation for the construction of a 17-storey office and
residential condominium building. Petitioner engaged the services of Nilo Layno Builders to do the specialized "concrete works, form
works and steel rebars works". Pursuant to the contract, Nilo Layno Builders hired private respondents to perform work at the project.
After the completion of the phase for which Nilo Layno Builders was contracted sometime in 1996, private respondents filed a complaint
case against petitioner and its president, Manuel Sy, with the Arbitration Branch of the NLRC for "unfair labor practice, non-payment of
13th month pay, non-payment of 5 days service incentive leave, illegal dismissal and severance pay in lieu of reinstatement." The Labor
Arbiter rendered a decision finding that Nilo Layno Builders was a labor-only-contractor; thus, private respondents were deemed
employees of the petitioner.

ISSUES:
Whether Nilo Layno Builders was an "independent contractor" or a "labor-only" contractor.
Whether or not there existed an employer-employee relationship between the petitioner and the respondent.

HELD: Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent contractor is one who
undertakes "job contracting," i.e., a person who:

(a) carries on an independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all matters connected
with the performance of the work except as to the results thereof; and

(b) has substantial capital or investment in the form of tools, equipments, machineries, work premises, and other materials
which are necessary in the conduct of the business.

Nilo Layno Builders is undertaking permissible labor or job contracting. Nilo Layno Builders is a duly licensed labor contractor carrying on
an independent business for a specialized work that involves the use of some particular, unusual and peculiar skills and expertise, like
concrete works, form works and steel rebars works. As a licensed labor contractor, it complied with the conditions set forth in Section 5,
Rule VII-A, Book III, Rules to Implement the Labor Code, among others, proof of financial capability and list of equipment, tools,
machineries and implements to be used in the business. Further, it entered into a written contract with the petitioner, a requirement under
Section 3, Rule VII-A, Book III, Rules to Implement the Labor Code to assure the employees of the minimum labor standards and benefits
provided by existing laws.

The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted
to do the work according to his own methods and without being subject to the control of the employer, except only to the results of the
work. This is exactly the situation obtaining in the case at bar. Nilo Layno Builders hired its own employees, the private respondents, to
do specialized work in the Prince David Project of the petitioner. The means and methods adopted by the private respondents were
directed by Nilo Layno Builders except that, from time to time, the engineers of the petitioner visited the site to check whether the work
was in accord with the plans and specifications of the principal.

Second issue, we hold that there existed an employer-employee relationship between petitioner and private respondents albeit for a
limited purpose. In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that
the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the
payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible
for any claim made by the employees. From the foregoing disquisition, the petitioner did not, as it could not, illegally dismiss the private
complainants. Hence, it could not be held liable for backwages and separation pay. Nevertheless, it is jointly and severally liable with Nilo
Layno Builders for the private complainants' wages, in the same manner and extent that it is liable to its direct employees. The pertinent
provisions of the Labor Code read:

ART. 106. Contractor or subcontractor. – Whenever an employer enters into a contract with another person for the performance
of the former's work, the employees of the contractor and of the latter's 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.

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.

9. National Food Authority vs. Masada Security Agency, Inc. G.R. No. 163448 March 8, 2005

FACTS: On September 17, 1996 respondent Masada Security Agency, Inc. entered into a one year contract to provide security services
to the offices, warehouses and installations of NFA within Reg. I. Upon the expiration of the contract, the parties extended the effectivity
thereon on a monthly basis under the same terms and conditions.

RTWPB issued several wage orders mandating increases in the daily wage rates. Accordingly, respondent requested NFA for a
corresponding upward adjustment in the monthly contract rate consisting of the increases in the daily minimum wage of the security
guards including the corresponding raise in their overtime pay, holiday pay, 13th month pay, holiday and rest day pay. It also claimed
increases in SSS and Pag-ibig premiums including administrative cost and margin.
36
NFA granted the request only with respect to the daily wage and denied with respect to the adjustments in the other benefits and
remunerations.

Regional Director and DOLE Secretary sustained the claim of defendant. RTC and CA also ruled in favor of defendant.

ISSUE: Whether or not the liability of principals in service contracts under Sec 6 of RA6727 and wage orders issued by the RTWPB is
limited only to the increment in minimum wage.

HELD: Yes, the principal’s liability is limited only to the payment of the increment in the statutory minimum wage rate, that is, the rate for
a regular 8-hour work day.

The term “wage” as used in Sec 6 of RA 6727 pertains to no other than the “statutory minimum wage” which is defined in the implementing
rules as the lowest wage rate fixed by law that an employer can pay his worker. The basis under Sec 7 is the normal working hours which
shall not exceed 8 hours a day.

Where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation and construction, be extended to others.
The principals in service contracts cannot be made to pay the corresponding wage increase in the overtime pay, night shift differential,
holiday and rest day pay, premium pay and other benefits granted to workers. While the basis of said remuneration and benefits is the
statutory minimum wage, the law cannot be unduly expanded as to include those not stated in the subject provision.

The parties may enter into stipulations increasing the liability of the principal, but as long as the minimum obligation is complied with,
there is no violation of the Wage Rationalization Act.

10. ABELLA V. PLDT G.R. No. 159469 June 8, 2005

FACTS: Respondent PSI entered into an agreement with PLDT to provide the latter with security guards. Under the agreement, it was
expressly provided that there shall be no employer-employee relationship between PLDT and the security guards, which may be supplied
by PSI, and that the latter shall have exclusive authorized to select, engage, and discharge its security guards, with full control over their
wages, salaries or compensation.

Consequently, respondent PSI deployed security guards to the PLDT. On June 5, 1995, 65 security guards supplied by PSI filed a
complaint for regularization against PLDT with the Labor Arbiter. They alleged that they have been employed by the company for more
than 1 year and that they were under the control and supervision of PLDT through its Security Department, therefore they should be
considered as regular employees.

HELD: In determining which between PLDT and PSI is the employer of the security guards, the existence of the following factors should
be considered: (1) selection and engagement of the employee; (2) payment of wages; (3) power to dismiss; and (4) power to control
employee’s conduct.

The Supreme Court adopted the consistent findings based on the evidence adduced that it was PSI which exercised the abovementioned
criteria. Furthermore, the court added PSI was, in fact, a legitimate job contractor. It is a registered corporation duly licensed by the PNP
to engage in security business. It has substantial capital and investment in the form of guns, ammunitions, equipments, vehicles, etc.,
and abase all, it is servicing other clients like PCI Bank and Crown Triumph, among others. Indeed, said security guards are already the
employee’s of PSI prior to their assignment to PLDT.

11. San Miguel Corporation vs. Aballa G.R. No. 149011 June 28, 2005

FACTS: Petitioner San Miguel Corporation (SMC) and Sunflower Multi-Purpose Cooperative (Sunflower) entered into a one-year Contract
of Services commencing on January 1, 1993, to be renewed on a month to month basis until terminated by either party.

Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMC’s Bacolod Shrimp Processing
Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after its expiration on January 1, 1994 and
private respondents continued to perform their tasks until September 11, 1995.

In July 1995, private respondents filed a complaint before the NLRC, praying to be declared as regular employees of SMC, with claims
for recovery of all benefits and privileges enjoyed by SMC rank and file employees. Private respondents subsequently filed on September
25, 1995 an Amended Complaint to include illegal dismissal as additional cause of action following SMC’s closure of its Bacolod Shrimp
Processing Plant on September 15, 1995 which resulted in the termination of their services.

SMC filed a Motion for Leave to File Attached Third Party Complaint dated November 27, 1995 to implead Sunflower as Third Party
Defendant which was granted by the Labor Arbiter. SMC insists that private respondents are the employees of Sunflower, an independent
contractor. On the other hand, private respondents assert that Sunflower is a labor-only contractor.

ISSUE: Whether or not respondents are employees of SMC.

37
HELD: There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such
person are performing activities which are directly related to the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.

The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted
to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the
work.

The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee
relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties’ relationship;
rather it is the totality of the facts and surrounding circumstances of the case.

What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises and other materials to qualify it as an independent contractor. On the other hand, it is gathered that the lot, building, machineries
and all other working tools utilized by private respondents in carrying out their tasks were owned and provided by SMC. And from the job
description provided by SMC itself, the work assigned to private respondents was directly related to the aquaculture operations of SMC.
Undoubtedly, the nature of the work performed by private respondents in shrimp harvesting, receiving and packing formed an integral
part of the shrimp processing operations of SMC.

Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract according to its
own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit
persons to work for SMC. Sunflower did not cater to clients other than SMC, and with the closure of SMC’s Bacolod Shrimp Processing
Plant, Sunflower likewise ceased to exist.

Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture
business of SMC, they should be deemed regular employees of the latter and as such are entitled to all the benefits and rights appurtenant
to regular employment.

Those performing janitorial and messengerial services however acquired regular status only after rendering one-year service pursuant to
Article 280 of the Labor Code. Although janitorial and messengerial services are considered directly related to the aquaculture business
of SMC, they are deemed unnecessary in the conduct of its principal business.

12. MANILA ELECTRIC COMPANY VS. ROGELIO BENAMIRA, ET. AL JULY 14, 2005

FACTS: The individual respondents are licensed security guards formerly employed by People’s Security, Inc. and deployed as such at
MERALCO’s head office in Ortigas Avenue, Pasig, Metro Manila. On Nov. 30, 1990, the security service agreement between PSI and
MERALCO was terminated.

Immediately thereafter, 56 of PSI’s security guards, including herein eight individual respondents, filed a complaint for unpaid monetary
benefits against PSI and MERALCO.

Meanwhile, the security service agreement between respondent Armed Security & Detective Agency, Inc., (ASDAI) and MERALCO took
effect on Dec. 1, 1990. Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCO’s head office.

On June 29, 1992, the labor arbiter rendered a decision in favor of the former PSI security guards, including the individual respondents.
Less than a month later, the individual respondents filed another complaint for unpaid monetary benefits, this time against ASDAI and
MERALCO.

On July 25, 1992, the security service agreement between respondent Advance Forces Security & Investigation Services, Inc. (AFSISI)
and MERALCO took effect, terminating the previous security service agreement with ASDAI. Except as to the number of security guards,
the amount to be paid the agency, and the effectivity of the agreement, the terms and conditions were substantially identical with the
security service agreement with ASDAI.

The individual respondents amended their complaint to implead AFSISI as party respondent. They then again amended their complaint
to allege that AFSISI terminated their services on August 6, 1992 without notice and just cause and therefore guilty of illegal dismissal.

The individual respondents alleged that: MERALCO and ASDAI never paid their overtime pay, service incentive leave pay, premium pay
for Sundays and Holidays, P50.00 monthly uniform allowance and underpaid their 13th month pay; on July 24, 1992, when the security
service agreement of ASDAI was terminated and AFSISI took over the security functions of the former on July 25, 1992, respondent
security guard Benamira was no longer given any work assignment when AFSISI learned that the former has a pending case against
PSI, in effect, dismissing him from the service without just cause; and, the rest of the individual respondents were absorbed by AFSISI
but were not given any assignments, thereby dismissing them from the service without just cause.

ASDAI denied in general terms any liability for the claims of the individual respondents, claiming that there is nothing due them in
connection with their services.
38
On the other hand, MERALCO denied liability on the ground of lack of employer-employee relationship with individual respondents. It
averred that the individual respondents are the employees of the security agencies it contracted for security services; and that it has no
existing liability for the individual respondents’ claims since said security agencies have been fully paid for their services per their
respective security service agreement.

For its part, AFSISI asserted that: it is not liable for illegal dismissal since it did not absorb or hire the individual respondents, the latter
were merely hold-over guards from ASDAI; it is not obliged to employ or absorb the security guards of the agency it replaced since there
is no provision in its security service agreement with MERALCO or in law requiring it to absorb and hire the guards of ASDAI as it has its
own guards duly trained to service its various clients.

On January 3, 1994, after the submission of their respective evidence and position papers, the labor arbiter rendered a Decision holding
ASDAI and MERALCO jointly and solidarily liable to the monetary claims of individual respondents and dismissing the complaint against
AFSISI. All the parties, except AFSISI, appealed to the NLRC. NLRC affirmed in toto the decision of the Labor Arbiter. The individual
respondents filed a motion for partial reconsideration but it was denied by the NLRC.

The individual respondents filed a petition for certiorari before the SC. They insisted that they were absorbed by AFSISI and the latter
effected their termination without notice and just cause. After the submission of the responsive pleadings and memoranda, SC referred
the petition to the CA which, modified the decision of the NLRC by declaring MERALCO as the direct employer of the individual
respondents.

The CA held that: MERALCO changed the security agency manning its premises three times while engaging the services of the same
people, the individual respondents; MERALCO employed a scheme of hiring guards through an agency and periodically entering into
service contract with one agency after another in order to evade the security of tenure of individual respondents; individual respondents
are regular employees of MERALCO since their services as security guards are usually necessary or desirable in the usual business or
trade of MERALCO and they have been in the service of MERALCO for no less than six years; an employer-employee relationship exists
between MERALCO and the individual respondents because:

(a) MERALCO had the final say in the selection and hiring of the guards, as when its advice was proved to have carried weight
in AFSISI’s decision not to absorb the individual respondents into its workforce;

(b) MERALCO paid the wages of individual respondents through ASDAI and AFSISI;

(c) MERALCO’s discretion on matters of dismissal of guards was given great weight and even finality since the record shows
that the individual respondents were replaced upon the advice of MERALCO; and

(d) MERALCO has the right, at any time, to inspect the guards, to require without explanation the replacement of any guard
whose behavior, conduct or appearance is not satisfactory and ASDAI and AFSISI cannot pull out any security guard from
MERALCO without the latter’s consent; and, a labor-only contract existed between ASDAI and AFSISI and MERALCO, such
that MERALCO is guilty of illegal dismissal without just cause and liable for reinstatement of individual respondents to its
workforce.

HELD: At the outset, we note that the individual respondents never alleged in their complaint in the Labor Arbiter, in their appeal in the
NLRC and even in their petition for certiorari in the CA that MERALCO was their employer. They have always advanced the theory that
AFSISI is their employer. A perusal of the records shows it was only in their Memorandum in the CA that this thesis was presented and
discussed for the first time. We cannot ignore the fact that this position of individual respondents runs contrary to their earlier submission
in their pleadings filed in the Labor Arbiter, NLRC and even in the petition for certiorari in the CA that AFSISI is their employer and liable
for their termination. As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants and to indicate fairly
the nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary to, or inconsistent, with his
pleadings.

Moreover, it is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in the pleadings
nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal. The individual
respondents are bound by their submissions that AFSISI is their employer and they should not be permitted to change their theory. Such
a change of theory cannot be tolerated on appeal, not due to the strict application of procedural rules but as a matter of fairness. A change
of theory on appeal is objectionable because it is contrary to the rules of fair play, justice and due process.

Thus, the CA should not have considered the new theory offered by the individual respondents in their memorandum.

In this case, the terms and conditions embodied in the security service agreement between MERALCO and ASDAI expressly recognized
ASDAI as the employer of individual respondents.

Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged the security guards; (b) assigned
them to MERALCO according to the number agreed upon; (c) provided the uniform, firearms and ammunition, nightsticks, flashlights,
raincoats and other paraphernalia of the security guards; (d) paid them salaries or wages; and (e) disciplined and supervised them or
principally controlled their conduct. The agreement even explicitly provided that “[n]othing herein contained shall be understood to make
the security guards under this Agreement, employees of the COMPANY, it being clearly understood that such security guards shall be
considered as they are, employees of the AGENCY alone.” Clearly, the individual respondents are the employees of ASDAI.

39
As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard whose behavior, conduct or
appearance is not satisfactory, such merely confirms that the power to discipline lies with the agency. It is a standard stipulation in security
service agreements that the client may request the replacement of the guards to it. Service-oriented enterprises, such as the business of
providing security services, generally adhere to the business adage that “the customer or client is always right” and, thus, must satisfy
the interests, conform to the needs, and cater to the reasonable impositions of its clients.

Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an indication of control.
It is simply a security clause designed to prevent the agency from unilaterally removing its security guards from their assigned posts at
MERALCO’s premises to the latter’s detriment.

The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is likewise not indicative
of control as it is not a unilateral right. The agreement provides that the agency is principally mandated to conduct inspections, without
prejudice to MERALCO’s right to conduct its own inspections.

Needless to stress, for the power of control to be present, the person for whom the services are rendered must reserve the right to direct
not only the end to be achieved but also the means for reaching such end. Not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former. Rules which serve as general guidelines towards the achievement of the mutually
desired result are not indicative of the power of control.

The security service agreements in the present case provided that all specific instructions by MERALCO relating to the discharge by the
security guards of their duties shall be directed to the agency and not directly to the individual respondents. The individual respondents
failed to show that the rules of MERALCO controlled their performance.

Moreover, ASDAI and AFSISI are not “labor-only” contractors. There is “labor only” contract when the person acting as contractor is
considered merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same
extent as if they had been directly employed by him. On the other hand, “job (independent) contracting” is present if the following
conditions are met: (a) the contractor carries on an independent business and undertakes the contract work on his own account under
his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except to the result thereof; and (b) the contractor has substantial capital or
investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his
business.Given the above distinction and the provisions of the security service agreements entered into by petitioner with ASDAI and
AFSISI, we are convinced that ASDAI and AFSISI were engaged in job contracting.

The individual respondents cannot be considered as regular employees of the MERALCO for, although security services are necessary
and desirable to the business of MERALCO, it is not directly related to its principal business and may even be considered unnecessary
in the conduct of MERALCO’s principal business, which is the distribution of electricity.

Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits against ASDAI is a clear indication that
the individual respondents acknowledge that ASDAI is their employer.

We cannot give credence to individual respondents’ insistence that they were absorbed by AFSISI when MERALCO’s security service
agreement with ASDAI was terminated. The individual respondents failed to present any evidence to confirm that AFSISI absorbed them
into its workforce. Thus, respondent Benamira was not retained in his post at MERALCO since July 25, 1992 due to the termination of
the security service agreement of MERALCO with ASDAI. As for the rest of the individual respondents, they retained their post only as
“hold-over” guards until the security guards of AFSISI took over their post on August 6, 1992.

In the present case, respondent Benamira has been “off-detail” for seventeen days while the rest of the individual respondents have only
been “off- detail” for five days when they amended their complaint on August 11, 1992 to include the charge of illegal dismissal. The
inclusion of the charge of illegal dismissal then was premature. Nonetheless, bearing in mind that ASDAI simply stopped giving the
individual respondents any assignment and their inactivity clearly persisted beyond the six-month period allowed by Article 286 of the
Labor Code, the individual respondents were, in effect, constructively dismissed by ASDAI from employment, hence, they should be
reinstated.

The fact that there is no actual and direct employer-employee relationship between MERALCO and the individual respondents does not
exonerate MERALCO from liability as to the monetary claims of the individual respondents. When MERALCO contracted for security
services with ASDAI as the security agency that hired individual respondents to work as guards for it, MERALCO became an indirect
employer of individual respondents pursuant to Article 107 of the Labor Code, which reads:

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.

When ASDAI as contractor failed to pay the individual respondents, MERALCO as principal becomes jointly and severally liable for the
individual respondents’ wages, under Articles 106 and 109 of the Labor Code, which provide:

ART. 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the
performance of the former[‘s] work, the employees of the contractor and of the latter[‘s] subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
40
 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.

ART. 109. Solidary liability - The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purpose of
determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect employer of the individual
respondents for the purpose of paying their wages in the event of failure of ASDAI to pay them. This statutory scheme gives the workers
the ample protection consonant with labor and social justice provisions of the 1987 Constitution.

However, as held in Mariveles Shipyard Corp. vs. Court of Appeals, the solidary liability of MERALCO with that of ASDAI does not
preclude the application of Article 1217 of the Civil Code on the right of reimbursement from his co-debtor by the one who paid, 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 the payment may claim from his co-debtors only the share which corresponds to each, with the 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.

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation,
such share shall be borne by all his co-debtors, in proportion to the debt of each.

ASDAI may not seek exculpation by claiming that MERALCO’s payments to it were inadequate for the individual respondents’ lawful
compensation. As an employer, ASDAI is charged with knowledge of labor laws and the adequacy of the compensation that it demands
for contractual services is its principal concern and not any other’s.

13. GRANSPAN DEVELOPMENT CORPORATION VS. BERNARDO G.R. No. 141464. September 21, 2005

FACTS: A complaint for illegal dismissal and non-payment of benefits was filed with the Labor Arbiter by respondents, against Grandspan
Development Corporation. Respondents alleged that they were employed as truck scale monitors by petitioner. Eventually, they were
assigned at its Truck Scale Section of the Warehouse/Materials Department.

They were issued identification cards signed by Bonifacio Selmo, petitioner’s personnel manager. On October 28, 1992, petitioner sent
them a notice terminating their services effective October 29, 1992 for using profane or offensive language, in violation of Article VI (2)
(a) of the company’s Rules and Regulations. Petitioner denied the allegations of respondents in their complaint, claiming that they are
employees of J. Narag Construction. Sometime in the third quarter of 1992, Canad Japan Co., Ltd. engaged petitioner’s services for
fabrication works of several round and rectangular steel tanks needed for the HCMG or Sogo project due for completion in September,
1992. As a consequence, petitioner subcontracted the services of J. Narag Construction which, in turn, assigned its 3 helpers (herein
respondents) to work for petitioner’s project. Labor Arbiter rendered a Decision dismissing respondents’ complaint.

National Labor Relations Commission, however, issued a Resolution remanding the case to the Labor Arbiter. The Appellate Court
rendered a Decision setting aside the NLRC’s Resolutions and ordering petitioner (1) to reinstate respondents Bernardo and Ceñidoza
to their former positions and pay, jointly and severally with J. Narag Construction, their backwages and other benefits, and (2) to pay
respondent Del Prado his separation pay. The Court of Appeals found that respondents are employees of petitioner; that they were non-
project workers; and that they were denied due process.

ISSUE: Whether or not the Court of Appeals erred in holding that respondents are employees of petitioner.

HELD: On the basis of the records, we have no reason to deviate from the Appellate Court’s finding that J. Narag Construction is indeed
a labor-only contractor. The Court of Appeals found that J. Narag Construction assigned respondents to perform activities directly related
to the main business of petitioner. They worked in petitioner’s premises, using its equipment, materials and supplies. J. Narag
Construction’s payroll worksheets covering the period from December 21, 1990 to July 31, 1991 show that the payment of their salaries
was approved by petitioner. The manager and supervisor of petitioner’s Warehouse Department supervised the manner and results of
their work. It was petitioner who terminated their services after finding them guilty of using profane or offensive language in violation of
Article VI (2) (a) of the company’s Rules and Regulations.

The Appellate Court then concluded that these circumstances confirm the existence of an employer-employee relationship between
petitioner and respondents.

These are the reasons:

(1) it is not registered as a building contractor with the SEC;
41
 (2) it has no contract with petitioner; and

(3) there is no proof of its financial capability and has no list of equipment, tools, machineries and implements used in the
business.

Clearly, J. Narag Construction could not be respondents’ employer. Likewise, as correctly observed by the Court of Appeals, petitioner
failed to present any report terminating the services of respondents when its projects were actually finished. Section 2.2 (e) of the Labor
Department Order No. 19 expressly provides that the report of termination is one of the indications of project employment. We, therefore,
uphold the finding of the Court of Appeals that respondents are petitioner’s regular employees. As such, they are entitled to security of
tenure and can only be dismissed for a just or authorized cause, as provided by Article 279 of the Labor Code.

14. Arnulfo C. Acevedo vs. Advantsar Company Inc. G.R. No. 157656. November 11, 2005

FACTS: The Advanstar Company Inc. (ACI) was engaged in the distribution and sale of various brands of liquor and alcoholic spirits,
including the Tanduay Brand. Felipe Loi was employed as its manager. To effectively launch its vigorous marketing operations, ACI hired
several salesmen, one of whom was Tony Jalapadan. On September 1, 1994, ACI executed an Agreement for the Sale of Merchandise
with Jalapadan for a period of one year, renewable for another year under the same terms and conditions.

Under the agreement, the parties agreed, inter alia, that Jalapadan would promote and sell products of ACI, solicit from customers and
outlets within his designated territory, collect payments from such customers and account the same to ACI and was also authorized to
employ and discharge a driver and other assistants as he deemed necessary. It was stipulated, however, that the hired hands would be
considered his employees, and that he alone would be liable for their compensation and actual expenses, including meals while on duty.

On August 5, 1997, Jalapadan hired Arnulfo Acevedo as the driver of the truck assigned to him by ACI. On October 7, 1998, Acevedo
failed to report for work. The next day, Jalapadan inquired why he failed to check and wash the truck. Jalapadan berated Acevedo and
ordered him to get his personal belongings and leave. Acevedo did as he was told. Later, Jalapadan urged Acevedo to go back to work,
stating that they were “one big family,” but Acevedo refused. He then signed a Letter dated October 10, 1998, informing Jalapadan that
he was resigning effective that date. However, on October 26, 1998, Acevedo filed a complaint against Jalapadan, ACI and its general
manager, Felipe Loi, for illegal dismissal and for the recovery of backwages and other monetary benefits.

ISSUES:
Whether or not the respondent ACI was the employer of respondent, Jalapadan?
Whether or not the petitioner is the employee of respondent ACI?
Whether or not the petitioner resigned from his employment?

HELD: On the first and second issues, the petitioner avers that respondent Jalapadan was a labor-only contractor, not an independent
contractor, hence, merely an agent of respondent ACI. Consequently, the latter is responsible to the employees hired by respondent
Jalapadan as if such employees had been directly employed by it, and, as such, the respondents are solidarily liable for their valid claims.
The petitioner is correct.

The pertinent provision of the Labor Code on labor-only contracting is paragraph 4 of Article 106, which provides: There is “labor-only”
contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities
which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed
by him.

Rule VIII-A, Book III, Section 4(f) of the Omnibus Rules Implementing the Labor Code further defines “labor-only” contracting as an
arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal. In labor-only contracting, the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service
under its own account and responsibility;

(b) The employees recruited, supplied or placed by such contractor or subcontractor, are performing activities which are
directly related to the main business of the principal.

In such case, the law creates an employee-employer relationship so that labor laws may not be circumvented. The principal employer
becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees. The labor-only contractor is considered
merely as an agent of the employer, the employer having been made, by law, responsible to the employees of the labor-only contractor
as if such employees had been directly employed by it.

On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm
out with the contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined
period regardless of whether such job, work or service is to be performed or completed within or outside the premises of
the principal.
42
The test to determine the existence of an independent contractorship is whether one who claims to be an independent contractor has
contracted to do the work according to his own methods and without being subject to the employer’s control except only as to the results.
Each case must be determined by its own facts and all the features of the relationship are to be considered.

In the case of Vinoya v. NLRC, the Court declared that it is not enough to show substantial capitalization or investment in the form of
tools, equipment, etc. to determine whether one is an independent contractor. Other factors that may be considered include the following:
whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to
another; the employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the control of the premises; the
duty to supply premises, tools, appliances, materials and labor; and the mode and manner or terms of payment.

In the present case, the respondents failed to prove that respondent Jalapadan was an independent contractor. Indeed, the substantial
evidence on record shows that he was merely a labor-only contractor based on the following facts:

1.) The respondents failed to adduce a scintilla of evidence that respondent Jalapadan had any substantial capital or investment,
such as tools and equipment, to perform the work contracted for. There is even no evidence that respondent Jalapadan had any
assets, or that he maintained an office, staff or a terminal for the truck entrusted to him by respondent ACI.

2.) Respondent Jalapadan bound and obliged himself to work exclusively for respondent ACI during the terms of the agreement.

3.) Under the agreement, respondent ACI had the right to control not only the end to be attained but also the manner and means
to be used in accomplishing that end or purpose. Aside from Jalapadan’s duties/obligations as salesman, respondent ACI could
require him to perform other duties and obligations.

4.) Respondent Jalapadan was obliged to pay the petitioner’s monthly wage of P3,648.00, as well as that of his helper, another
P4,000.00 a month, totaling P7,648.00, exclusive of other expenses such as meals, gasoline, and the upkeep of the vehicle.

On the other hand, respondent Jalapadan received from respondent ACI only P3,590.00 a month as compensation. He had no other
means of income because he was obliged, under the agreement, to devote all his time for respondent ACI. Considering all these, the
Court concludes that the petitioner’s wages must have been paid for by respondent ACI through respondent Jalapadan, its labor-only
contractor.

On the third issue, the Supreme Court agrees with the rulings of the NLRC and the CA that the petitioner was not dismissed from
employment. Nevertheless, assuming that complainant was a regular employee of Advanstar, this Commission finds his claim that he
was illegally dismissed to be nebulous. The only incident from which complainant drew the conclusion that he was dismissed from work
is when he was allegedly told to disembark from the vehicle. Nothing on record shows that he was terminated from work. The Court finds,
however, that contrary to the rulings of the NLRC and the CA, the petitioner did not resign from his employment. Reliance on the
handwritten letter of resignation signed and thumbmarked by the petitioner is misplaced. The handwritten letter of resignation signed by
the petitioner is inconsistent with the respondents’ claim that respondent Jalapadan was the petitioner’s employer. This is so because the
said letter is addressed to Tanduay Corporation, and not to respondent Jalapadan.

Neither the petitioner nor the respondents explained why the letter was addressed to Tanduay Corporation. Significantly, respondent
Jalapadan did not deny the petitioner’s claim that the letter was handwritten by him (Jalapadan). If such claim were true, there is neither
rhyme nor reason why Tanduay Corporation was its addressee. Moreover, it appears that the letter was coursed through respondent
Jalapadan as salesman of the said corporation, which is antithetical to the respondents’ claim that he was the petitioner’s employer and
an independent contractor of respondent ACI.

15. Big AA vs. Antonio GR No. 1608504 March 3, 2006

FACTS: Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo, with office address at 311 Barrio Santol,
Balagtas, Bulacan. On January 13, 2000, herein respondents Eutiquio Antonio, Jay Antonio, Felicisimo Antonio, Leonardo Antonio, Sr.
and Roberto Fabian filed a complaint for illegal lay-off and illegal deductions before the NLRC's Regional Arbitration Branch No. III. They
claimed that they were dismissed on January 11, 2000 and sought separation pay from petitioner. In respondents' position paper, they
alleged that as regular employees, they worked from 8:00 a.m. to 5:00 p.m. at petitioner's premises using petitioner's tools and equipment
and they received P250 per day. According to respondents, they were dismissed without just cause and due process; hence, their prayer
for reinstatement and full backwages.

On the other hand, in its position paper, petitioner Big AA Manufacturer, affirmed it is a sole proprietorship registered in the name of
Enrico Alejo and engaged in manufacturing office furniture, but it denied that respondents were its regular employees. Instead, petitioner
claimed that Eutiquio Antonio was one of its independent contractors who used the services of the other respondents. According to
petitioner, its independent contractors were paid by results and were responsible for the salaries of their own workers. Allegedly, there
was no employer-employee relationship between petitioner and respondents. However, petitioner stated it allowed respondents to use
its facilities to meet job orders. Petitioner also denied that respondents were laid-off by Big AA Manufacturer, since they were project
employees only.
43
ISSUES:
Are respondents regular employees of petitioner? Did they abandon their work? Were they illegally dismissed by petitioner? If so, what
benefits, if any, are due them?

HELD: Petitioner contends that employment for more than one year and "performing carpentry works that were necessary and desirable"
in petitioner's usual trade and business are "not controlling" factors in determining whether respondents are regular employees. Petitioner
argues that Article 280 of the Labor Code and the "circumstances which attended the relationship between" the parties must be
considered.

The circumstances of the case, according to petitioner, show that respondents were not its regular employees. Specifically, petitioner
Eutiquio was an independent businessman and was contracted to render particular job orders using his own methods and style. Further,
Eutiquio hired his own workers and used his own house as his factory and work premises where he kept his own tools, equipment and
materials. At the outset, it should be stressed that whether respondents are regular employees or project employees or independent
contractors is a question of fact.

The unanimous finding of the Labor Arbiter, NLRC, and Court of Appeals that respondents were petitioner's regular employees, not
independent contractors, binds this Court. Under Rule 45 of the Rules of Court, our jurisdiction is limited to questions of law. Notably,
petitioner not only urges us to re-examine the evidence presented below but to consider evidence not presented before the Labor Arbiter.
This practice of submitting evidence late is properly rejected as it defeats the speedy administration of justice involving poor workers. It
is also unfair.

Considering the submission of the parties, we are constrained to agree with the unanimous ruling of the Court of Appeals, NLRC and
Labor Arbiter that respondents are petitioner's regular employees. Respondents were employed for more than one year and their work
as carpenters was necessary or desirable in petitioner's usual trade or business of manufacturing office furniture.

Under Article 280 of the Labor Code, the applicable test to determine whether an employment should be considered regular or non-
regular is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade
of the employer. True, certain forms of employment require the performance of usual or desirable functions and exceed one year but do
not necessarily result to regular employment under Article 280 of the Labor Code. Some specific exceptions include project or seasonal
employment.

Yet, in this case, respondents cannot be considered project employees. Petitioner had neither shown that respondents were hired for a
specific project the duration of which was determined at the time of their hiring nor identified the specific project or phase thereof for which
respondents were hired.

We also agree that Eutiquio was not an independent contractor for he does not carry a distinct and independent business, and he does
not possess substantial capital or investment in tools, equipment, machinery or work premises. He works within petitioner's premises
using the latter's tools and materials, as admitted by petitioner. Eutiquio is also under petitioner's control and supervision. Attesting to this
is petitioner's admission that it allowed respondents to use its facilities for the "proper implementation" of job orders.

Moreover, the Implementing Guidelines regulating attendance, overtime, deadlines, penalties; providing petitioner's right to fire employees
or "contractors"; requiring the carpentry division to join petitioner's exercise program; and providing rules on machine maintenance, all
reflect control and supervision over respondents. Having ruled that respondents are regular employees, we shall proceed to determine
whether respondents have, as petitioner contends, abandoned their work, or they have been illegally dismissed.

For accusing respondents of abandonment, petitioner must present evidence (1) not only of respondents' failure to report for work or
absence without valid reason, but (2) also of respondents' clear intention to sever employer-employee relations as manifested by some
overt acts. The second element is the more determinative factor Here, petitioner's argument in support of its abandonment charge was
that respondents may have resented its issuance of the Implementing Guidelines.

This, in our view, fails to establish respondents' intention to abandon their jobs. On the contrary, by filing the complaint for illegal dismissal
within two days of their dismissal on January 11, 2000 and by seeking reinstatement in their position paper, respondents manifested their
intention against severing their employment relationship with petitioner and abandoning their jobs. It is settled that an employee who
forthwith protests his layoff cannot be said to have abandoned his work.

Finally, Article 279 of the Labor Code, provides that a regular employee who is unjustly dismissed from work is 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. If
reinstatement is no longer feasible, separation pay equivalent to one month salary for every year of service should be awarded as an
alternative.

This has been our consistent ruling in the award of separation pay to illegally dismissed employees in lieu of reinstatement. Hence, the
four respondents, Eutiquio, Felicisimo, Jay and Leonardo, Sr., all surnamed Antonio, are entitled to backwages and separation pay in
case their reinstatement is no longer possible.

The petition is DENIED for lack of merit. Petitioner thru its sole proprietor, Enrico Alejo, is ordered (1) to reinstate the four respondents
to their former positions without loss of seniority rights and other privileges or to pay them separation pay in case reinstatement is no
longer possible and (2) to pay them full backwages, in either case, computed from the time their compensation was withheld from
44
them up to the time of their actual reinstatement or up to the time it is determined that reinstatement is no longer possible. The NLRC is
also ordered to RECOMPUTE respondents' backwages and separation pay, as aforementioned, and execute the payments to
respondents. Costs against the petitioner.

16. DOLE PHILIPPINES vs. ESTEVA G.R. No. 161115. November 30, 2006

FACTS: Petitioner is a corporation engaged principally in the production and processing of pineapple for the export market. Respondents
are members of the Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was organized in accordance with Republic Act No. 6938,
otherwise known as the Cooperative Code of the Philippines. Pursuant to the Service Contract, CAMPCO members rendered services
to petitioner. The number of CAMPCO members that report for work and the type of service they performed depended on the needs of
petitioner at any given time.

Although the Service Contract specifically stated that it shall only be for a period of six months, i.e., from 1 July to 31 December 1993,
the parties had apparently extended or renewed the same for the succeeding years without executing another written contract. It was
under these circumstances that respondents came to work for petitioner. DOLE organized a Task Force that conducted an investigation
into the alleged labor-only contracting activities of the cooperatives. The Task Force identified six cooperatives that were engaged in
labor-only contracting, one of which was CAMPCO.

In this case, respondents alleged that they started working for petitioner at various times in the years 1993 and 1994, by virtue of the
Service Contract executed between CAMPCO and petitioner. All of the respondents had already rendered more than one year of service
to petitioner. While some of the respondents were still working for petitioner, others were put on “stay home status” on varying dates in
the years 1994, 1995, and 1996 and were no longer furnished with work thereafter. Together, respondents filed a Complaint with the
NLRC for illegal dismissal, regularization, wage differentials, damages and attorney’s fees.

Petitioner denied that respondents were its employees. It explained that it found the need to engage external services to augment its
regular workforce, which was affected by peaks in operation, work backlogs, absenteeism, and excessive leaves. It used to engage the
services of individual workers for definite periods specified in their employment contracts and never exceeding one year. However, such
an arrangement became the subject of a labor case, in which petitioner was accused of preventing the regularization of such workers.

ISSUES:
Whether or not the court of appeals was correct when it made its own factual findings and disregarded the factual findings of the labor
arbiter and the NLRC.
Whether or not CAMPCO was a mere labor-only contractor.

HELD: The Court in the exercise of its equity jurisdiction may look into the records of the case and re-examine the questioned findings.
As a corollary, this Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds
that their consideration is necessary to arrive at a just decision of the case. The same principles are now necessarily adhered to and are
applied by the Court of Appeals in its expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we see no
error on its part when it made anew a factual determination of the matters and on that basis reversed the ruling of the NLRC.

On the second issue, CAMPCO was a mere labor-only contractor.

First, although petitioner touts the multi-million pesos assets of CAMPCO, it does well to remember that such were amassed in the years
following its establishment. In 1993, when CAMPCO was established and the Service Contract between petitioner and CAMPCO was
entered into, CAMPCO only had P6,600.00 paid-up capital, which could hardly be considered substantial. It only managed to increase its
capitalization and assets in the succeeding years by continually and defiantly engaging in what had been declared by authorized DOLE
officials as labor-only contracting.

Second, CAMPCO did not carry out an independent business from petitioner. It was precisely established to render services to petitioner
to augment its workforce during peak seasons. Petitioner was its only client. Even as CAMPCO had its own office and office equipment,
these were mainly used for administrative purposes; the tools, machineries, and equipment actually used by CAMPCO members when
rendering services to the petitioner belonged to the latter.

Third, petitioner exercised control over the CAMPCO members, including respondents. Petitioner attempts to refute control by alleging
the presence of a CAMPCO supervisor in the work premises. Yet, the mere presence within the premises of a supervisor from the
cooperative did not necessarily mean that CAMPCO had control over its members. Section 8(1), Rule VIII, Book III of the implementing
rules of the Labor Code, as amended, required for permissible job contracting that the contractor undertakes the contract work on his
account, under his own responsibility, according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to the results thereof.

As alleged by the respondents, and unrebutted by petitioner, CAMPCO members, before working for the petitioner, had to undergo
instructions and pass the training provided by petitioner’s personnel. It was petitioner who determined and prepared the work assignments
of the CAMPCO members. CAMPCO members worked within petitioner’s plantation and processing plants alongside regular employees
performing identical jobs, a circumstance recognized as an indicium of a labor-only contractorship.

Fourth, CAMPCO was not engaged to perform a specific and special job or service. In the Service Contract of 1993, CAMPCO agreed to
assist petitioner in its daily operations, and perform odd jobs as may be assigned. CAMPCO complied with this venture by assigning
members to petitioner. Apart from that, no other particular job, work or service was required from CAMPCO, and it is apparent, with such
an arrangement, that CAMPCO merely acted as a recruitment agency for petitioner. Since the undertaking of CAMPCO did not
45
involve the performance of a specific job, but rather the supply of manpower only, CAMPCO clearly conducted itself as a labor -only
contractor.

Lastly, CAMPCO members, including respondents, performed activities directly related to the principal business of petitioner. They worked
as can processing attendant, feeder of canned pineapple and pineapple processing, nata de coco processing attendant, fruit cocktail
processing attendant, and etc., functions which were, not only directly related, but were very vital to petitioner’s business of production
and processing of pineapple products for export. The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-
only contracting, then consequently, an employer-employee relationship is deemed to exist between petitioner and respondents, since
CAMPCO shall be considered as a mere agent or intermediary of petitioner.

Since respondents are now recognized as employees of petitioner, this Court is tasked to determine the nature of their employment. In
consideration of all the attendant circumstances in this case, this Court concludes that respondents are regular employees of petitioner.
As such, they are entitled to security of tenure. They could only be removed based on just and authorized causes as provided for in the
Labor Code, as amended, and after they are accorded procedural due process. Therefore, petitioner’s acts of placing some of the
respondents on “stay home status” and not giving them work assignments for more than six months were already tantamount to
constructive and illegal dismissal.

17. San Miguel Corp. vs. NLRC & Maliksi G.R. No. 147566, December 6, 2006

FACTS: On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel Corporation-Magnolia Division, herein referred
to as SMC and Philippine Software Services and Education Center (PHILSSEC) to compel the said respondents to recognize him as a
regular employee. Later this was amended to include the charge of illegal dismissal because his services were terminated on 31 October
1990. The complainant’s employment record indicates that he rendered service with Lipercon Services from 1 April 1981 to February
1982 as budget head assigned to SMC-Beer Division, then from July 1983 to April 1985 with Skillpower, Inc., as accounting clerk assigned
to SMC-Magnolia Division, then from October 1988 to 1989 also with Skillpower, Inc. as acting clerk assigned to SMC-Magnolia Finance,
and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk.

The complainant considered himself as an employee of SMC-Magnolia. Lipercon Services, Skillpower, Inc. and PHILSSEC are labor-
only contractors and any one of which had never been his employer. His dismissal, according to him, was in retaliation for his filing of the
complaint for regularization in service. His dismissal was illegal there being no just cause for the action. He was not accorded due process
neither was his dismissal reported to the Department of Labor and Employment. PHILSSEC disclaimed liability.

As an entity catering to computer systems and programs for business enterprises, it has contracted with SMC-Magnolia to computerize
the latter’s manual accounting reporting systems of its provincial sales. Complainant Maliksi was one of those employed by PHILSSEC
whose principal function was the manual control of data needed during the computerization. Like all assigned to the project, the
complainant’s work was controlled by PHILSSEC supervisors, his salary paid by the agency and he reported directly to PHILSSEC. The
computerization project was completed on 31 October 1990, and so, the complainant was terminated on the said date.

ISSUE: Whether or not Maliksi was a regular employee of San Miguel Corp.

HELD: In all, it appears that, while under the employ of either Lipercon or Skillpower, Maliksi has undisputedly rendered service with SMC
for at least three years and seven months. Indeed, having served SMC for an aggregate period of more than three (3) years through
employment contracts with these two labor contractors, Maliksi should be considered as SMC’s regular employee. The hard fact is that
he was hired and re-hired by SMC to perform administrative and clerical work that was necessary to SMC’s business on a daily basis.

We understand Maliksi’s desperation in making his point clear to SMC, which unduly refuses to acknowledge his status as a regular
employee. Instead, he was juggled from one employment contract to another in a continuous bid to circumvent labor laws. The act of
hiring and re-hiring workers over a period of time without considering them as regular employees evidences bad faith on the part of the
employer.

Where, from the circumstances, it is apparent that periods have been imposed to preclude the acquisition of tenurial security by the
employee, the policy, agreement or practice should be struck down as contrary to public policy, morals, good customs or public order. In
point of law, any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy
shall be liable for the damage.

In San Miguel Corporation v. MAERC Integrated Services, Inc., we took note of the practice of hiring employees through labor contractors
that catered exclusively to the employment needs of SMC or its divisions or other specific business interests, such that after the specific
SMC business or division ceases to do business, the labor contractor likewise ceases its operations.

Considering, however, the supervening event that SMC’s Magnolia Division has been acquired by another entity, it appears that private
respondent’s reinstatement is no longer feasible. Instead, he should be awarded separation pay as an alternative. Likewise, owing to
petitioner’s bad faith, it should be held liable to pay damages for causing undue injury and inconvenience to the private respondent in its
contractual hiring-firing-rehiring scheme.

46
18. Eparwa Security and janitorial Services, Inc. vs. Liceo de Cagayan
University G.R. No. 150402 November 28, 2006

FACTS: Eparwa and LDCU, through their representatives, entered into a Contract for Security Services. Subsequently security guards
whom Eparwa assigned to LDCU filed a complaint before the NLRC-RAB against both Eparwa and LDCU for underpayment of salary,
legal holiday pay, 13th month pay, rest day, service incentive leave, night shift differential, overtime pay, and payment for attorney's fees.
LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security guards.

The LA found that the security guards are entitled to wage differentials and premium for holiday and rest day work. The LA held Eparwa
and LDCU solidarily liable pursuant to Article 109 of the Labor Code and likewise orderd Eparwa to reimburse LDCU for whatever amount
the latter may be required to pay the security guards. On appeal to the NLRC, Eparwa and LDCU was held solidarily liable for the wage
differentials and premium for holiday and rest day work, but the NLRC did not require Eparwa to reimburse LDCU for its payments to the
security guards.

Upon motion for reconsideration, NLRC declared that although Eparwa and LDCU are solidarily liable to the security guards for the
monetary award, LDCU alone is ultimately liable ordering it to reimburse Eparwa for payments made to the contractual employees. Upon
appeal to the CA, the appellate court allowed LDCU to claim reimbursement from Eparwa. Eparwa then filed an action for certiorari before
the SC.

ISSUE: Whether or not LDCU alone is ultimately liable to the security guards for the wage differentials and premium for holiday and rest
day pay without any right of reimbursement from Eparwa.

HELD: This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of the
provisions therein including the statutory 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 contractor's employees for purposes of paying the employees their
wages should the contractor be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers'
performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution.

For the security guards, the actual source of the payment of their wage differentials and premium for holiday and rest day work does not
matter as long as they are paid. This is the import of Eparwa and LDCU's solidary liability. Creditors, such as the security guards, may
collect from anyone of the solidary debtors. Solidary liability does not mean that, as between themselves, two solidary debtors are liable
for only half of the payment.

LDCU's ultimate liability comes into play because of the expiration of the Contract for Security Services. There is no privity of contract
between the security guards and LDCU, but LDCU's liability to the security guards remains because of Articles 106, 107 and 109 of the
Labor Code. Eparwa is already precluded from asking LDCU for an adjustment in the contract price because of the expiration of the
contract, but Eparwa's liability to the security guards remains because of their employer-employee relationship.

In lieu of an adjustment in the contract price, Eparwa may claim reimbursement from LDCU for any payment it may make to the security
guards. However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to the security guards.

19. LAPANDAY AGRICULTURAL DEVT. CORP. vs. COURT OF

APPEALS G.R. No. 112139. January 31, 2000

FACTS: Private respondent Commando Security Service Agency, Inc. and petitioner Lapanday Agricultural Development Corporation
entered into a Guard Service Contract. 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).”

Private respondent 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. A complaint was filed by private respondent which was opposed by the petitioner contending among others that the rate
adjustment is the obligation of the private respondent as employer of the security guards. Labor Arbiter Newton R. Sancho held both
petitioner and private respondent jointly and solidarily liable to the security guards.

ISSUE: Whether or not petitioner is liable to the private respondent for the wage adjustment provided under Wage Order Nos. 5 and 6.

HELD: No. The Contract of Security Services expressly stipulated that the security guards are employees of the Agency and not of the
petitioner. 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: “Whenever an employer enters into a contract with another person for the performance of

47
the former’s work, the employees of the contractor and of the latter’s 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.” 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.

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. In the instant case, 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.

20. Escario vs. National Labor Relations

Commission G.R. No. 124055 June 8, 2000

FACTS: Private respondents California Marketing Co., Inc. is a domestic corporation principally engaged in the manufacturing of food
products and distribution of such products to wholesalers and retailers. Private respondent Donna Louis Advertising and Marketing
Associates, Inc. is a duly registered promotional firm.

Petitioners alleged that they were employed by CMC as merchandisers. They alleged that the hiring, control and supervision of workers
and the payment of the salaries were all covered by CMC through its agent D.L Admark in order CMC to avoid its liability under the law.
Petitioners filed a case against CMC before the labor arbiter for regularization of their employment status.

During the pendency of the case, D.L Admark terminated the services of the petitioners. The complaint was amended to include alleged
dismissal. CMC filed a motion to implead as party-defendant D.L Admark, the latter filed a motion to intervene. Both motions were granted.
CMC denied being petitioners employer while D.L Admark asserted it is the employer of the petitioners.

The labor arbiter found petitioners as employees of CMC as they were engaged in activities that are necessary and desirable in the usual
business/trade of CMC. On appeal, the NLRC set aside the labor arbiters decision. But ordered the reinstatement of the petitioners in
D.L Admark petitioners filed a motion for consideration before the NLRC which was denied for lack of merit. Hence the petition.

ISSUE: Whether or not D.L Admark is a labor-only contractor or as independent contractor.

HELD: The Supreme Court denied the petition.

There is labor-only contracting when the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal. In labor only contracting, the following elements are present:

a) The person supplying workers to an employer does not have substantial capital or investment in the form of tools,
equipments, machineries, wok premise, among other tools.

b) The workers recruited and placed by such person performing activities which are directly related to the principal business
of the employer.

In contract, there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the
performance / completion of a specific job, work or services within a definite or predetermined period, regardless of whether such job/
services is to be performed or completed within or outside the premises of the principal. In this arrangement, the following conditions
must concur:

a) The contractor carries on a distinct and independent business and undertakes the contract work on his account under the
responsibility according to his own manual and methods, free from the control and direction of his employer or principal in all
matters connected with the performance of his employer work except as to the results thereof; and

b) The contractor has substantial capital / investment which are necessary in the conduct of his business.

The court reiterated that it is not enough to show substantial capitalization on investment. In addition the following factors need be
considered: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term
and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the workers;
the power of the employer with respect to the hiring, firing and payment of workers of the contractor; the control of the premises; the duty
to supply premises, tools, appliances, materials and labor; mode, manner and terms of payment.

Based on the foregoing criteria, the court found that D.L Admark is a legitimate independent contractor. Applying the four-fold test, D.L
Admark was found to be the employer of the petitioners. The Supreme Court affirmed the NLRC’s ruling.

48
21. Aboitiz Haulers, Incorporated vs. Dimapatoi G. R. No. 148619 September 19, 2006

FACTS: Petitioner Aboitiz Haulers, Inc. is a domestic corporation principally engaged in the nationwide and overseas forwarding and
distribution of cargoes. Private respondents Monaorai Dimapatoi, Cecilia Agawin, Raul Mamate, Emmanuel Guerrero and Gemeniano
Bigaw worked as checkers in the Mega Warehouse, which is owned by the petitioner, located at the Tabacalera Compound, United
Nations Avenue, Manila

The parties rendered conflicting recital of facts.

Petitioner claims that respondents are not its employees, rather they are the employees of Grigio Security Agency and General Services
(Grigio), a manpower agency that supplies security guards, checkers and stuffers. It allegedly entered into a Written Contract of Service
with Grigio on 1 March 1994. By virtue of the aforementioned Written Contract of Service, Grigio supplied petitioner with security guards,
checkers and stuffers for petitioner’s Mega Warehouse. The respondents were among the checkers that were assigned to the petitioner’s
warehouse.

Petitioner emphasizes that Grigio retained control over the respondents by providing their own supervisors to oversee Grigio’s personnel,
as well as time cards to monitor the attendance of its personnel. Petitioner also alleges that on 9 May 1996, the respondents left the
warehouse and did not report to work thereafter. As a result of the respondents’ sudden abandonment of their work, there was no orderly
and proper turnover of papers and other company property in connection with the termination of the W ritten Contract for Services.
Respondents, on the other hand, claim that most of them worked as checkers in petitioner’s warehouse even before 1 March 1994.

Respondents maintain that during their employment with the petitioner, they were not paid their regular holiday pay, night shift differential,
5-day service incentive leave, and overtime premium. They also averred that illegal deductions were being made on their wages,
particularly the contributions for a Mutual Assistance Fund, a Cash Bond, and claims for damaged and misrouted cargoes incurred by
petitioner.

Respondents allege that on 15 May 1996, petitioner dismissed them on the pretext that the Written Contract of Service between Grigio
and the petitioner had been terminated. To controvert the allegations of the petitioner that respondents did not report for work starting 9
May 1996, the respondents presented a copy of the pertinent pages of the logbook which served as their daily time record. Respondents
also presented a Certification issued by petitioner’s Warehouse Supervisor in favor of respondent Monaorai Dimapatoi affirming that she
worked with the Petitioner as a Warehouse Checker and Document Clerk until 15 May 1996.

On 17 May 1996, respondent Raul Mamate filed a complaint before the Department of Labor and Employment (DOLE) for nonpayment
of wages and other benefits, as well as illegal deductions. The other respondents filed their own complaints. Since the claims of the
respondents exceeded Five Thousand Pesos (P5,000.00), the case was referred to the NLRC. Thereafter, respondents filed their
complaint for illegal dismissal and other money claims before the Arbitration Branch of the NLRC.

ISSUE: Whether or not the petitioner and its contractor engaged in a ‘labor only contracting’ arrangement.

HELD: Petitioner and its contractor Grigio committed a “labor-only” contracting arrangement.

The allegation of the petitioner that Grigio is an independent job contractor, and, therefore, this case is one of permissible job contracting,
is without basis. In this case, the respondents’ work, as warehouse checkers, is directly related to the principal business of the petitioner.
Petitioner also exercises the right to control and determines not only the end to be achieved, but also the manner and means to be used
in reaching that end. Lastly, petitioner failed to sufficiently prove that Grigio had “substantial capital or investment.”

The respondents, as checkers, were employed to check and inspect these cargoes, a task which is clearly necessary for the petitioner’s
business of forwarding and distributing of cargoes. The petitioner did not dispute the fact that the respondents were hired as checkers as
early as 1992. The fact that they were employed before the Written Contract of Services took effect on 24 February 1994, and continued
with their jobs until 1996, after the said contract had already expired on 24 February 1995 indicates that the respondents’ work was indeed
necessary for the petitioner’s business. In addition, Grigio did not undertake the performance of its service contract according to its own
manner and method, free from the control and supervision of its principal.

The work activities, work shifts, and schedules of the respondents, including the time allowed for “recess” were set under the Written
Contract of Services. This clearly indicates that these matters, which consist of the means and methods by which the work is to be
accomplished, were not within the absolute control of Grigio. By stipulating these matters in a contract, Grigio is constrained to follow
these provisions and would no longer be able to exercise the freedom to alter these work shifts and schedules at its own convenience.
Such being the case, Grigio cannot be considered as an independent job contractor.

Petitioner’s allegation that Grigio retained control over the respondents by providing supervisors to monitor the performance of the
respondents cannot be given much weight. Instead of exercising their own discretion or referring the matter to the officers of Grigio,
Grigio’s supervisors were obligated to refer to petitioner’s supervisors any discrepancy in the performance of the respondents with their
specified duties.

22. GSIS vs. NLRC G.R. No. 157647 October 15, 2007.

Facts: Tomas Lanting, doing business under the name and style of Lanting Security and Watchman Agency (LSWA) entered into a

49
Security Service Contract to provide security guards to the properties of the Government Service Insurance System (GSIS) at the contract
rate of P3,000.00 per guard per month.

During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the contract rate in view of Section 7 of
Wage Order No. 1 and Section 3 of Wage Order No. 2, which were issued by the Regional Tripartite Wages and Productivity Board-NCR
pursuant to Republic Act No. 6727, otherwise known as the Wage Rationalization Act.

Acting on the request of LSWA, the GSIS, through its Board of Trustees and under Board Resolution No. 207, dated May 24, 1991,
approved the upward adjustments of the contract price from P3,000.00 to P3,716.07 per guard, per month effective November 1, 1990
to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31, 1991.

LSWA assigned security guards Daniel Fanila, Hector Moreno, Isauro Ferrer, Rubin Wilfredo, Jesus Delima Jr., Maria Legaspi, Santiago
Noto Jr., and Virgilio Soriano (hereafter complainants) to guard one of GSIS's properties.

On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All the complainants, except Virgilio Soriano, were
absorbed by the incoming security agency.

On March 7, 1994, complainants filed separate complaints against LSWA for underpayment of wages and non-payment of labor standard
benefits from March 1991 to March 15, 1993. Virgilio Soriano also complained of illegal dismissal.

In its Position Paper, LSWA alleged that complainants were estopped from claiming that they were underpaid because they were informed
that the pay and benefits given to them were based on the contract rate of P103.00 per eight hours of work or about P3,100.00 per month.

On August 9, 1994, LSWA filed a Third-Party Complaint against GSIS for underpayment of complainants' wages.

In its Position Paper, GSIS alleged that the Third-Party Complaint states no cause of action against it; that LSWA obligated itself in the
Security Service Contract to be solely liable for the enforcement of and compliance with all existing labor laws, rules and regulations; that
the GSIS Board of Trustees approved the upward adjustment on a month-to-month basis, at P4,200 per guard per month, effective
January 8, 1991 to May 31, 1991, under Board Resolution No. 207 dated May 24, 1991, which was incorporated in the Security Service
Contract; that GSIS fully paid the services of the security guards as agreed upon in the Security Service Contract.

Issues: Whether GSIS is solidarily liable for payment of complainants-respondnents' salary differentials.

Held: Yes. Articles 106 and 107 of the Labor Code provide:

ART. 106. Contractor or subcontractor. — Whenever an employer enters into contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's 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 wage 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.

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.

In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants' salaries by incorporating in the Security Service
Contract the salary rate increases mandated by Wage Order Nos. 1 and 2 by increasing the contract price from P3,000.00 to P3,176.07
per guard per month effective November 1, 1990 to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31, 1991.

In Rosewood Processing, Inc. v. National Labor Relations Commission, 25 the Court explained the rationale for the joint and several
liability of the employer, thus:

The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of the Code,
principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or her status as a
direct employer, and the principal as the indirect employer of the contractor's employees. This liability facilitates, if not
guarantees, payment of the workers' compensation, thus, giving the workers ample protection as mandated by the 1987
Constitution. This is not unduly burdensome to the employer. Should the indirect employer be constrained to pay the workers, it
can recover whatever amount it had paid in accordance with the terms of the service contract between itself and the contractor.

Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed upon the latter because it would be paying
twice for complainants' services. Such fears are unfounded. Under Article 1217 of the Civil Code, if the GSIS should pay the money
claims of complainants, it has the right to recover from LSWA whatever amount it has paid in accordance with the terms of the service
contract between the LSWA and the GSIS.

50
Joint and solidary liability is simply meant to assure aggrieved workers of immediate and sufficient payment of what is due them. This is
in line with the policy of the State to protect and alleviate the plight of the working class.

23. Republic of the Phils., represented by Social Security Commission and Social Security System vs. ASIAPRO
Cooperative, G.R. No. 172101, November 23, 2007

Facts: Before this Court is a Petition for Review on Certiorari under Rule 45 seeking to annul and set aside the Decision and Resolution
of the Court of Appeals which annulled and set aside the Orders of the Social Security Commission (SSC) thereby dismissing the petition-
complaint filed by herein petitioner Social Security System (SSS) against herein respondent.

Respondent Asiapro, a cooperative, is composed of owners-members. Its primary objectives are to provide savings and credit facilities
and to develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent
cooperative entered into several Service Contracts with Stanfilco. The owners-members do not receive compensation or wages from the
respondent cooperative. Instead, they receive a share in the service surplus which the respondent cooperative earns from different areas
of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The owners-members get their income
from the service surplus generated by the quality and amount of services they rendered, which is determined by the Board of Directors
of the respondent cooperative.

Owners-members of the respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register them with
petitioner SSS as self-employed and to remit their contributions as such. To comply with Section 19-A of Republic Act No. 1161, as
amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of both the employer
and the employee.

Petitioner SSS sent a letter to the respondent cooperative informing the latter that based on the Service Contracts it executed with
Stanfilco, respondent cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an
employer of its owners-members working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an
employer and make the corresponding report and remittance of premium contributions in accordance with the Social Security Law of
1997. Respondent cooperative sent an answer to petitioner asserting that it is not an employer because its owners-members are the
cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002, SSS sent a letter to respondent cooperative ordering
the latter to register as an employer and report its owners-members as employees for compulsory coverage with the petitioner SSS.
Respondent cooperative continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition before petitioner SSC against the respondent cooperative and Stanfilco
praying that the respondent cooperative or, in the alternative, Stanfilco be directed to register as an employer and to report respondent
cooperatives owners-members as covered employees under the compulsory coverage of SSS and to remit the necessary contributions
in accordance with the Social Security Law of 1997. On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss
filed by the respondent cooperative. The respondent cooperative moved for the reconsideration of the said Order, but it was likewise
denied. Respondent cooperative filed a Petition for Certiorari before the Court of Appeals wherein its petition was granted. SSS motion
for reconsideration having been denied now goes to the Supreme Court.

Issue: Whether or not an employee-employer relationship exists between respondent cooperative and its owner-member?

Ruling: Applying the four-fold test, SC held:

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in the
selection and engagement of the owners-members as well as its team leaders who will be assigned at Stanfilco.

Second. Wages are defined as remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating the same, which is payable by
an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service
rendered or to be rendered. In this case, the weekly stipends or the so-called shares in the service surplus given by the respondent
cooperative to its owners-members were in reality wages, as the same were equivalent to an amount not lower than that prescribed by
existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same shall not be lower
than the prevailing rates of wages. It cannot be doubted then that those stipends or shares in the service surplus are indeed wages,
because these are given to the owners-members as compensation in rendering services to respondent cooperatives client, Stanfilco.

Third. It is also stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power to investigate,
discipline and remove the owners-members and its team leaders who were rendering services at Stanfilco.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test is the most important. In the case
at bar, it is the respondent cooperative which has the sole control over the manner and means of performing the services under
the Service Contracts with Stanfilco as well as the means and methods of work. Also, the respondent cooperative is solely and
entirely responsible for its owners-members, team leaders and other representatives at Stanfilco. All these clearly prove that, indeed,
there is an employer-employee relationship between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that there shall be no
employer-employee relationship between the respondent cooperative and its owners-members. This Court, however, cannot give the
said provision force and effect.
51
As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent cooperative and its
owners-members. The four elements in the four-fold test for the existence of an employment relationship have been complied with. The
respondent cooperative must not be allowed to deny its employment relationship with its owners-members by invoking the questionable
Service Contracts provision, when in actuality, it does exist. The existence of an employer-employee relationship cannot be negated
by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment
status of a person is defined and prescribed by law and not by what the parties say it should be.

It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement
would have the force of law between them. However, the agreed terms and conditions must not be contrary to law, morals, customs,
public policy or public order. The Service Contract provision in question must be struck down for being contrary to law and public policy
since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its employees, who are
also its owners-members, by the Social Security Law.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative Development Authority.
It has its Board of Directors, which directs and supervises its business; meaning, its Board of Directors is the one in charge in the conduct
and management of its affairs. With that, a cooperative can be likened to a corporation with a personality separate and distinct from its
owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and an employer-employee
relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development Authority,
as evidenced by its Certificate of Registration No. 0-623-2460. In its by-laws, its Board of Directors directs, controls, and supervises the
business and manages the property of the respondent cooperative. Clearly then, the management of the affairs of the respondent
cooperative is vested in its Board of Directors and not in its owners-members as a whole. Therefore, it is completely logical that the
respondent cooperative, as a juridical person represented by its Board of Directors, can enter into an employment with its owners-
members.

Having declared that there is an employer-employee relationship between the respondent cooperative and its owners-member, we
conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS.

24. Almeda vs. Asahi Glass Philippines,Inc.

Facts: Respondent Asahi Glass Phil., Inc, a domestic corporation engaged in glass manufacturing business and San Sebastian Allied
Services, Inc. (SSASI) entered into a service contract on 5 March 2002 whereby the latter undertook to provide the former with the
necessary manpower. Petitioners Almeda et. al as glass cutters and glass quality controller were hired pursuant to such contract and
assigned for respondent. Petitioners worked for respondent for periods ranging from three to 11 years. On 1 December 2002, respondent
terminated its service contract with SSASI, which in turn, terminated the employment of petitioners on the same date. So, petitioners filed
a complaint of illegal dismissal asserting that they should be considered regular employees where their work has been desirable to the
business of respondent working for three to 11 years and that SSASI is a labor-only contractor. Petitioners asserted it is respondent who
asserted control submitting a copy of their work schedule containing the time and manner of performing their jobs dictated by respondent;
and that they worked in respondent’s premises only.

Respondent on one hand, averred that petitioners are not its employees but of SSASI; and that petitioners were hired for intermittent
services only pursuant to an Accreditation Agreement, dated 5 March 2002. A certificate of registration issued by DOLE on 3 January
2003 was presented purporting that SSASI is a legitimate job contractor. Copy of opinions of DOLE dated18 February 2003 were also
shown authorizing respondent to contract out certain activities not necessary or desirable to the business of the company.

The Labor Arbiter in view of the “overwhelming documentary evidence” of respondents refuting the bare allegations of the petitioners,
dismissed the complaint. NLRC reversed the LA’s decision stating that SSASI was engaged in labor-only contracting--since it did not
have substantial capital and investment in the form of tools, equipment and machineries – making petitioners employees of respondent.
On appeal, CA reversed NLRC’s findings. Now on petition for review on certiorari before SC

Issues:
Whether petitioners are employees of respondent
Hinged on the issue: Whether or not it is established that SSASI was a labor-only contractor

Ruling: In labor-only contracting, the statutes create an employer-employee relationship for a comprehensive purpose: to prevent
circumvention of labor laws. The contractor is considered as merely the agent of the principal employer and the latter is responsible to
the employees of the labor-only contractor as if such employees are directly employed by the principal employer.

SSASI is a labor-only contractor, thus respondent shall be considered as the employer of petitioners who must bear the liability for the
dismissal of the latter, if any. The following reasons/circumstances material to the case leading to such conclusion are:

a. Respondent failed to prove that SSASI possessed substantial capital or investment when respondent began contractual relations with
it more than a decade before 2003. No single financial statement or record to attest to the economic status and financial capacity of
SSASI to venture into and sustain its own business independent from petitioner.

b. Petitioners were performing jobs that were directly related to respondent’s main line of business. Respondent being engaged in glass
manufacturing while petitioners worked as quality controller and glass cutters clearly indicate a direct relation between respondent’s
52
business and petitioner’s work. Respondent’s argument that petitioners were required only when there was an increase in the m arket’s
demand with which respondent could not cope, only prove even more that the services rendered by petitioners were indeed part of the
main business of respondent. Respindent’s argument that petitioner’s were hired only intermittently depending on the market is negated
by length and continuity of their performance, lasting for periods ranging from three to 11 years. Thus, petitioner’s services are
indispensable.

c. The crucial element of control over petitioners rested in respondent. The power of control refers to the authority of the employer to
control the employee not only with regard to the result of work to be done, but also to the means and methods by which the work is to be
accomplished. It should be borne in mind that the power of control refers merely to the existence of the power and not to the actual
exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the
former has a right to wield the power.

Petitioners worked at the respondent’s premises, and nowhere else. Petitioners followed the work schedule prepared by respondent.
They were required to observe all rules and regulations of the respondent pertaining to, among other things, the quality of job performance,
regularity of job output, and the manner and method of accomplishing the jobs.

Evidence is lacking that SSASI exercised control over them or their work. The fact that it was SSASI which dismissed petitioners from
employment is irrelevant. It is hardly proof of control, since it was demonstrated only at the end of petitioners’ employment—a mere
consequence of termination of contractual relations of SSASI and respondent.

d. The Certificate of Registration presented to bolster the position that SSASI is a duly registered job contractor was issued only on 3
January 2003. There is no further proof that prior to said date, SSASI had already registered with and had been recognized by the DOLE
as a job contractor. The timing of SSASI’s belated registration is highly suspicious considering that SSASI was already providing
respondent with workers, including petitioners working for respondent for 11 years, long before SSASI was registered with the DOLE as
a job contractor. Petitioners were also dismissed from service only a month prior to the issuance of the Certificate of Registration of
SSASI. The surrounding circumstances indicate that the certificate of registration was merely secured in order to blanket the previous
relations between SSASI and respondent with legality.

The Certificate of Registration issued by the DOLE recognized that SSASI was a legitimate job contractor only as of the date of its
issuance, 3 January 2003. The Certificate can only be used as reference by persons who would consider the services offered by SSASI
subsequent to its issuance. Respondent, who entered into contractual relations with SSASI way before the said Certificate, cannot claim
that it relied thereon.

e. The Accreditation Agreement stipulating that petitioners were to remain employees of SSASI and shall not become regular employees
of the respondent does not govern the status of petitioners. A party cannot dictate, by the mere expedient of a unilateral declaration in a
contract, the character of its business, i.e., whether as labor-only contractor or as job contractor, it being crucial that its character be
measured in terms of and determined by the criteria set by statute.

25. ROLANDO SASAN, SR. et.al. VS. NLRC 4TH DIVISION, EQUITABLE-PCI BANK AND HELPMATE,
INC. G.R. No. 176240, October 17, 2008

Facts: Respondent E-PCIBank entered into a Contract for Services with HI, a domestic corporation primarily engaged in the business of
providing janitorial and messengerial services. Pursuant to their contract, HI shall hire and assign workers to E-PCIBank to perform
janitorial/messengerial and maintenance services. The contract was impliedly renewed year after year. Petitioners Rolando Sasan, Sr,
Leonilo Dayday, Modesto Aguirre, Alejandro Ardimer, Eleuterio Sacil, Wilfredo Juegos, Petronilo Carcedo, and Cesar Peciencia were
among those employed and assigned to E-PCIBank at its branch at Lahug, Cebu City.

On 23 July 2001, petitioners filed with the Arbitration Branch of the NLRC in Cebu City separate complaints[14] against E-PCIBank and
HI for illegal dismissal, with claims for separation pay, service incentive leave pay, allowances, damages, attorney's fees and costs. In its
amended complaint, it included claims for 13th month pay.

Several conciliation hearings were scheduled by Labor Arbiter Gutierrez but the parties still failed to arrive at a mutually beneficial
settlement; hence, Labor Arbiter ordered that they submit their respective position papers.

Petitioners claimed that they had become regular employees of E-PCIBank with respect to the activities for which they were employed,
having continuously rendered janitorial and messengerial services to the bank for more than one year; that E-PCIBank had direct control
and supervision over the means and methods by which they were to perform their jobs; and that their dismissal by HI was null and void
because the latter had no power to do so since they had become regular employees of E-PCIBank.

For its part, E-PCIBank averred that it entered into a Contract for Services with HI, an independent job contractor which hired and assigned
petitioners to the bank to perform janitorial and messengerial services thereat. It was HI that paid petitioners' wages, monitored petitioners'
daily time records (DTR) and uniforms, and exercised direct control and supervision over the petitioners and that therefore HI has every
right to terminate their services legally. E-PCIBank could not be held liable for whatever misdeed HI had
committed against its employees.

HI, on the other hand, asserted that it was an independent job contractor engaged in the business of providing janitorial and related
services to business establishments, and E-PCIBank was one of its clients. Petitioners were its employees, part of its pool of
janitors/messengers assigned to E-PCIBank. The Contract for Services between HI and E-PCIBank expired on 15 July 2000. E-
53
PCIBank no longer renewed said contract with HI and, instead, bidded out its janitorial requirements to two other job contractors, Able
Services and Puritan. HI designated petitioners to new work assignments, but the latter refused to comply with the same. Petitioners were
not dismissed by HI, whether actually or constructively, thus, petitioners' complaints before the NLRC were without basis.

Labor Arbiter rendered a Decision finding that HI was not a legitimate job contractor on the ground that it did not possess the required
substantial capital or investment to actually perform the job, work, or service under its own account and responsibility as required under
the Labor Code. HI is therefore a labor-only contractor and the real employer of petitioners is E-PCIBank which is held liable to petitioners.

Judgment was rendered directing the respondents Equitable PCI Bank and Helpmate, Inc. to pay jointly and solidarily the complainants.

E-PCIBank and HI appealed the same to the NLRC. The NLRC took into consideration the documentary evidence presented by HI for
the first time on appeal and, on the basis thereof, declared HI as a highly capitalized venture with sufficient capitalization, which cannot
be considered engaged in "labor-only contracting. The NLRC deleted Labor Arbiter’s award of backwages and separation pay, but
affirmed his award for 13th month pay and attorney's fees.

Court of Appeals affirmed the findings of the NLRC that HI was a legitimate job contractor and that it did not illegally dismiss petitioners.

ISSUE: Whether or not NLRC erred in considering new evidence presented first time on appeal. WON HI is legitimate contractor. WON
the petitioners are illegally dismissed.

RULING: Our jurisprudence is already replete with cases allowing the NLRC to admit evidence, not presented before the Labor Arbiter,
and submitted to the NLRC for the first time on appeal. Technical rules of evidence are not binding in labor cases. Labor officials should
use every reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or
procedure, all in the interest of due process.

In the case at bar, we find substantial evidence to support the finding of the NLRC, affirmed by the Court of Appeals, that HI is a legitimate
job contractor. We take note that HI has been issued by the Department of Labor and Employment (DOLE) Certificate of Registration
Numbered VII-859-1297-048. Having been issued by a public officer, this certification carries with it the presumption that it was issued in
the regular performance of official duty. In the absence of proof, petitioner's bare assertion cannot prevail over this presumption.

The evidence on record also shows that HI is carrying on a distinct and independent business from E-PCIBank. The employees of HI are
assigned to clients to perform janitorial and messengerial services, clearly distinguishable from the banking services in which E-
PCIBank is engaged.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipments,
implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or
completion of the job, work or service contracted out. An independent contractor must have either substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others. The law does not require both substantial capital and investment
in the form of tools, equipment, machineries, etc. It is enough that it has substantial capital.

In the case of HI, it has proven both. The services rendered by the petitioners as janitors, messengers and drivers are considered not
necessary in the conduct of its (E-PCIBANK's) principal business. Etched in an unending stream of cases are four standards in
determining the existence of an employer-employee relationship, namely:
(a) the manner of selection and engagement of the putative employee;
(b) the mode of payment of wages;
(c) the presence or absence of power of dismissal; and
(d) the presence or absence of control of the putative employee's conduct.

Most determinative among these factors is the so-called "control test."

On the power to control the employee's conduct, and the fourth requisite regarding the power of dismissal, again E-PCIBank did not have
the power to control petitioners with respect to the means and methods by which their work was to be accomplished. It likewise had no
power of dismissal over the petitioners. All that E-PCIBank could do was to report to HI any untoward act, negligence, misconduct or
malfeasance of any employee assigned to the premises.

In view of the preceding conclusions, petitioners will never become regular employees of E-PCIBank regardless of how long they were
working for the latter.

We further rule that petitioners were not illegally dismissed by HI. Upon the termination of the Contract of Service between HI and E-
PCIBank, petitioners cannot insist to continue to work for the latter. Their pull-out from E-PCIBank did not constitute illegal dismissal
since, first, petitioners were not employees of E-PCIBank; and second, they were pulled out from said assignment due to the non-renewal
of the Contract of Service between HI and E-PCIBank. At the time they filed their complaints with the Labor Arbiter, petitioners were not
even dismissed by HI; they were only "off-detail" pending their re-assignment by HI to another client. And when they were actually given
new assignments by HI with other clients, petitioners even refused the same. As the NLRC pronounced, petitioners' complaint for illegal
dismissal is apparently premature.

54
26. PUREFOODS CORPORATION VS NLRC G.R. No. 172241 November 20, 2008

FACTS: Neri filed a claim for nonpayment of additional wage increase, regularization, nonpayment of service incentive leave,
underpayment of 13th month pay, and nonpayment of premium pay for holiday and holiday pay against Purefoods Corporation
(Purefoods). Neri was thereafter dismissed from her work as a Deli-Attendant. Subsequently, Neri filed an amended complaint charging
Purefoods with illegal dismissal. The Labor Arbiter then declared Neri as Purefoods' regular employee; and Neri as having been illegally
dismissed and entitled to reinstatement with payment of backwages. Purefoods filed a partial appeal, praying that the case be remanded
for formal hearing on the merits and to implead D.L. Admark as a party-respondent. The NLRC granted the appeal and remanded the
case for further hearings on the factual issues.

The case was remanded to a Labor Arbiter, who, after finding that Neri is not an employee of petitioner, but rather of D.L. Admark, an
independent labor contractor, dismissed the complaint. Neri appealed to the NLRC, which ruled in complainants' favor and reversed and
set aside the labor arbiter's decision. Hence, Purefoods recourse to the CA.

The CA held that D.L. Admark is a legitimate independent contractor. However, it ruled that complainants are regular employees of
Purefoods. Citing Art. 280 of the Labor Code, the appellate court found that complainants were engaged to perform activities which are
usually necessary or desirable in the usual business or trade of Purefoods, and that they were under the control and supervision of
Purefoods' supervisors, and not of D.L. Admark's. It noted that in the Promotions Agreements between D.L. Admark and Purefoods, there
was no mention of the list of D.L. Admark employees who will handle particular promotions for petitioner, and that complainants' periods
of employment are not fully covered by the Promotions Agreements.

Thus, this petition.

In the present petition for review, Purefoods maintains that Neri is not an employee of Purefoods, but of D.L. Admark, an independent job
contractor. Thus, it cannot be held liable for illegal dismissal. Finally, it claims that Article 280 of the Labor Code is not applicable in a
trilateral relationship involving a principal, an independent job contractor, and the latter's employees.

ISSUE: Whether or not Neri is an employee of Purefoods

HELD: Not an employee.

The Court agrees with Purefoods' argument that Art. 280 of the Labor Code finds no application in a trilateral relationship involving a
principal, an independent job contractor, and the latter's employees. Indeed, the Court has ruled that said provision is not the yardstick
for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to
security of tenure; it does not apply where the existence of an employment relationship is in dispute. It is therefore erroneous on the part
of the Court of Appeals to rely on Art. 280 in determining whether an employer-employee relationship exists between respondent Neri
and Purefoods.

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor
or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period regardless of
whether such job, work or service is to be performed or completed within or outside the premises of the principal. In this arrangement,
the following conditions must be met: (a) the contractor carries on a distinct and independent business and undertakes the contract work
on his account under his own responsibility according to his own manner and method, free from the control and direction of his employer
or principal in all matters connected with the performance of his work except as to the results thereof; (b) the contractor has substantial
capital or investment; and (c) the agreement between the principal and contractor or subcontractor assures the contractual employees'
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and
social welfare benefits.

In the first place, D.L. Admark's status as a legitimate independent contractor has already been established in Escario v. NLRC. In the
said case, complainants, through D.L. Admark, worked as merchandisers for California Manufacturing Corporation (CMC). They filed a
case before the labor arbiter for the regularization of their employment status with CMC, and while the case was pending, D.L. Admark
sent termination letters to complainants. The complainants thereafter amended their complaint to include illegal dismissal. The Court
considered the following circumstances as tending to establish D.L. Admark's status as a legitimate job contractor:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional, advertising, marketing and
merchandising activities.

2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the supply of sales
promoting merchandising services rather than one of manpower placement.

3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions, marketing and
merchandising. It had several merchandising contracts with companies like Purefoods, Corona Supply, Nabisco Biscuits, and
Licron. It was likewise engaged in the publication business as evidenced by its magazine the "Phenomenon."

55
 4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to P6 million and is
therefore a highly capitalized venture. It had an authorized capital stock of P500,000.00. It owned several motor vehicles and
other tools, materials and equipment to service its clients. It paid rentals of P30,020 for the office space it occupied.

Moreover, applying the four-fold test used in determining employer-employee relationship, the Court found that: the employees therein
were selected and hired by D.L. Admark; D.L. Admark paid their salaries, as evidenced by the payroll prepared by D.L. Admark and
sample contribution forms; D.L. Admark had the power of dismissal as it admitted that it was the one who terminated the employment of
the employees; and finally, it was D.L. Admark who exercised control and supervision over the employees.

Furthermore, it is evident from the Promotions Agreements entered into by Purefoods that D.L. Admark is a legitimate labor contractor.
The agreements confirm that D.L. Admark is an independent contractor which Purefoods had engaged to supply general promotion
services, and not mere manpower services, to it. The provisions expressly permit D.L. Admark to handle and implement Purefoods'
project, and categorically state that there shall be no employer-employee relationship between D.L. Admark's employees and Purefoods.
While it may be true that complainants were required to submit regular reports and were introduced as Purefoods merchandisers, these
are not enough to establish Purefoods' control over them. Even if the report requirements are somehow considered as control measures,
they were imposed only to ensure the effectiveness of the promotion services rendered by D.L. Admark. It would be a rare contract of
service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the
engagement. Indeed, it would be foolhardy for any company to completely give the reins and totally ignore the operations it has contracted
out.

We also note that Neri herself admitted in her Sinumpaang Salaysay and in the hearings that she applied with D.L. Admark and that she
worked for Purefoods through D.L. Admark. Neri was aware from the start that D.L. Admark was her employer and not Purefoods. She
had kept her contract with D.L. Admark, and inquired about her employment status with D.L. Admark. It was D.L. Admark, as her employer,
which had the final say in, and which actually effected, her termination.

27. Maranaw Hotels and Resort vs Court of Appelas, et al., GR No. 149660, jan. 20, 2009

FACTS: The present proceedings emanate from a complaint for regularization, subsequently converted into one for illegal dismissal, filed
before Labor Arbiter Madjayran H. Ajan by private respondent Sheryl Oabel.

It appears that private respondent Oabel was initially hired by petitioner as an extra beverage attendant on April 24, 1995. This lasted
until February 7, 1997. Respondent worked in Century Park Hotel, an establishment owned by the petitioner.

On September 16, 1996, petitioner contracted with Manila Resource Development Corporation. Subsequently, private respondent Oabel
was transferred to MANRED, with the latter deporting itself as her employer. MANRED has intervened at all stages of these proceedings
and has consistently claimed to be the employer of private respondent Oabel.

Private respondent filed before the Labor Arbiter a petition for regularization of employment against the petitioner. On August 1, 1998,
however, private respondent Oabel was dismissed from employment. Respondent converted her petition for regularization into a
complaint for illegal dismissal.

LABOR ARBITER’s decision: dismissing the complaint against the petitioner.

NLRC’s decision: It reversed the ruling of the Labor Arbiter and held that: (1) MANRED is a labor-only contractor, and (2) private
respondent was illegally dismissed. Of the first holding, the NLRC observed that under the very terms of the service contract, MANRED
shall provide the petitioner not specific jobs or services but personnel and that MANRED had insufficient capitalization and was not
sufficiently equipped to provide specific jobs. The NLRC likewise observed that the activities performed by the private respondent were
directly related to and usually necessary or desirable in the business of the petitioner. With respect to the termination of private
respondent’s employment, the NLRC held that it was not effected for a valid or just cause and was therefore illegal.

CA’s decision: The appellate court dismissed the petition on account of the failure of the petitioner to append the board resolution
authorizing the counsel for petitioner to file the petition before the Court of Appeals.

ISSUES:
1. Whether there is a need of certification of non forum shopping which must be signed by duly authorized officers of a corporation.
2. Whether there is employer-employee relationship between petitioner and private respondent, Oabel.

SC RULING: On the first issue

Well-settled is the rule that the certificate of non-forum shopping is a mandatory requirement. Substantial compliance applies only with
respect to the contents of the certificate but not as to its presence in the pleading wherein it is required.

Petitioner’s contention that the filing of a motion for reconsideration with an appended certificate of non forum-shopping suffices to cure
the defect in the pleading is absolutely specious. It negates the very purpose for which the certification against forum shopping is required:
to inform the Court of the pendency of any other case which may present similar issues and involve similar parties as the one before it.
The requirement applies to both natural and juridical persons.

56
Petitioner relies upon this Court’s ruling in Digital Microwave Corp. v. Court of Appeals to show that its Personnel Director has been duly
authorized to sign pleadings for and in behalf of the petitioner. Petitioner, however, has taken the ruling in Digital Microwave out of context.
The portion of the ruling in Digital Microwave upon which petitioner relies was in response to the issue of impossibility of compliance by
juridical persons with the requirements of Circular 28-91. The Court’s identification of duly authorized officers or directors as the proper
signatories of a certificate of non forum-shopping was in response to that issue. The ruling does not, however, ipso facto clothe a corporate
officer or director with authority to execute a certificate of non-forum shopping by virtue of the former’s position alone.

Any doubt on the matter has been resolved by the Court’s ruling in BPI Leasing Corp. v. Court of Appeals where this Court emphasized
that the lawyer acting for the corporation must be specifically authorized to sign pleadings for the corporation. Specific authorization, the
Court held, could only come in the form of a board resolution issued by the Board of Directors that specifically authorizes the counsel to
institute the petition and execute the certification, to make his actions binding on his principal, i.e., the corporation.

This Court has not wavered in stressing the need for strict adherence to procedural requirements. The rules of procedure exist to ensure
the orderly administration of justice. They are not to be trifled with lightly.

On the second issue

Petitioner posits that it has entered into a service agreement with intervenor MANRED. The latter, in turn, maintains that private
respondent Oabel is its employee and subsequently holds itself out as the employer and offers the reinstatement of private respondent.

Notably, private respondent’s purported employment with MANRED commenced only in 1996, way after she was hired by the petitioner
as extra beverage attendant on April 24, 1995. There is thus much credence in the private respondent’s claim that the service agreement
executed between the petitioner and MANRED is a mere ploy to circumvent the law on employment, in particular that which pertains on
regularization.

In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not cease with the end of each event or
function and that there is an ever present need for individuals to perform certain tasks necessary in the petitioner’s business. Thus,
although the tasks themselves may vary, the need for sufficient manpower to carry them out does not. In any event, as borne out by the
findings of the NLRC, the petitioner determines the nature of the tasks to be performed by the private respondent, in the process exercising
control.

This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a labor-only contractor. Concordantly,
the real employer of private respondent Oabel is the petitioner.

It appears further that private respondent has already rendered more than one year of service to the petitioner, for the period 1995-1998,
for which she must already be considered a regular employee, pursuant to Article 280 of the Labor Code:

Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the
employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect
to the activity in which he is employed and his employment shall continue while such activity exists.

28. COCA-COLA BOTTLERS PHILS., INC. vs. ALAN M. AGITO, et al

GR No. 179546, February 13, 2009

FACTS: Petitioner (Coke) is a domestic corporation engaged in manufacturing, bottling and distributing soft drink beverages and other
allied products. Respondents were salesmen assigned at Coke Lagro Sales Office for years but were not regularized. Coke averred that
respondents were employees of Interserve who were tasked to perform contracted services in accordance with the provisions of the
Contract of Services executed between Coke and Interserve on 23 March 2002. Said Contract constituted legitimate job contracting,
given that the latter was a bona fide independent contractor with substantial capital or investment in the form of tools, equipment, and
machinery necessary in the conduct of its business.

To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the Articles of
Incorporation of Interserve; (2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue; (3) the Income Tax Return,
with Audited Financial Statements, of Interserve for 2001; and (4) the Certificate of Registration of Interserve as an independent job
contractor, issued by the Department of Labor and Employment (DOLE).

As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid their wages,
and supervised their work, as proven by: (1) respondents’ Personal Data Files in the records of Interserve; (2) respondents’ Contract of
Temporary Employment with Interserve; and (3) the payroll records of Interserve.

ISSUES:
57
 1. Whether or not Inteserve is a labor-only contractor;
2. Whether or not an employer-employee relationship exists between petitioner Coca-Cola Bottlers Phils. Inc. and
respondents.

RULING: At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting to P2,000,000.00, only
P625,000.00 thereof was paid up as of 31 December 2001. The Court does not set an absolute figure for what it considers substantial
capital for an independent job contractor, but it measures the same against the type of work which the contractor is obligated to perform
for the principal. However, this is rendered impossible in this case since the Contract between petitioner and Interserve does not even
specify the work or the project that needs to be performed or completed by the latter’s employees, and uses the dubious phrase “tasks
and activities that are considered contractible under existing laws and regulations.” Even in its pleadings, petitioner carefully sidesteps
identifying or describing the exact nature of the services that Interserve was obligated to render to petitioner. The importance of identifying
with particularity the work or task which Interserve was supposed to accomplish for petitioner becomes even more evident, considering
that the Articles of Incorporation of Interserve states that its primary purpose is to operate, conduct, and maintain the business of janitorial
and allied services. But respondents were hired as salesmen and leadman for petitioner. The Court cannot, under such ambiguous
circumstances, make a reasonable determination if Interserve had substantial capital or investment to undertake the job it was contracting
with petitioner.

[In] Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or investment in the form of tools, equipment,
machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were to the effect that in
determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily
confined to, whether the contractor was carrying on an independent business; the nature and extent of the work; the skill required; the
term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the
workers; the power of the employer with respect to the hiring, firing and payment of the workers of the contractor; the control of the
premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.

In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and
respondents, its supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident
that Interserve falls under the definition of a “labor-only” contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the
Rules Implementing Articles 106-109 of the Labor Code, as amended. It is also apparent that Interserve is a labor-only contractor under
Section 5(ii) of the Rules Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control the
performance of the work of respondents.

The lack of control of Interserve over the respondents can be gleaned from the Contract of Services between Interserve (as the
CONTRACTOR) and petitioner (as the CLIENT). The Contract of Services between Interserve and petitioner did not identify the work
needed to be performed and the final result required to be accomplished. Instead, the Contract specified the type of workers Interserve
must provide petitioner (“Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD”) and their qualifications (technical/vocational
course graduates, physically fit, of good moral character, and have not been convicted of any crime). The Contract also states that, “to
carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the necessary personnel,”
thus, acknowledging that Interserve did not yet have in its employ the personnel needed by petitioner and would still pick out such
personnel based on the criteria provided by petitioner. In other words, Interserve did not obligate itself to perform an identifiable job, work,
or service for petitioner, but merely bound itself to provide the latter with specific types of employees. These contractual provisions strongly
indicated that Interserve was merely a recruiting and manpower agency providing petitioner with workers performing tasks directly related
to the latter’s principal business.

The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this Court to take it at face
value, since the primary purpose stated in the Articles of Incorporation of Interserve is misleading. According to its Articles of Incorporation,
the principal business of Interserve is to provide janitorial and allied services. The delivery and distribution of Coca-Cola products, the
work for which respondents were employed and assigned to petitioner, were in no way allied to janitorial services. While the DOLE may
have found that the capital and/or investments in tools and equipment of Interserve were sufficient for an independent contractor for
janitorial services, this does not mean that such capital and/or investments were likewise sufficient to maintain an independent contracting
business for the delivery and distribution of Coca-Cola products.

With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer of
respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes, none of which
were alleged or proven to exist in this case, the only defense of petitioner against the charge of illegal dismissal being that respondents
were not its employees. Records also failed to show that petitioner afforded respondents the twin requirements of procedural due process,
i.e., notice and hearing, prior to their dismissal. Respondents were not served notices informing them of the particular acts for which their
dismissal was sought. Nor were they required to give their side regarding the charges made against them. Certainly, the respondents’
dismissal was not carried out in accordance with law and, therefore, illegal.

29. SOUTH DAVAO DEVELOPMENT CO. VS. GAMO ET AL. G.R. No. 171814, May 8, 2009

FACTS: South Davao Development Company (“SDDC”) is the operator of a coconut and mango farm in Davao Oriental and Davao del
Sur. In 1963, SDDC hired Sergio Gamo (“Gamo”) as a foreman. Sometime in 1987, SDDC appointed Gamo as a copra maker contractor.
Some of the copra workers of SDDC were later transferred by SDDC to Gamo as his copraceros.

58
From 1987 to 1999, Gamo and SDDC entered into a profit-sharing agreement wherein 70% of the net proceeds of the sale of copra went
to SDDC and 30% to Gamo. In this arrangement, the copra workers were paid by Gamo from his 30% share. Subsequently, SDDC
wanted to standardize payments to its “contractors” in its coconut farms. However, SDDC and Gamo were not able to agree on a new
payment scheme. Despite this, Gamo and his copraceros started to do harvesting work. SDDC, upon notice, told them to stop. Eventually,
Gamo and SDDC agreed that Gamo may continue with the harvest provided that it would be his last “contract” with SDDC. Gamo
suggested to SDDC to look for a new “contractor” since he was not amenable to the new payment scheme that it proposed.

Since SDDC did not renew the “contract” of Gamo, the latter and his copra workers alleged that they were illegally dismissed. The labor
arbiter dismissed the complaint ruling that there was no employer-employee relationship between SDDC and Gamo et al. The NLRC
shared the position with the labor arbiter and ruled that the nature of the job of Gamo et al. could not result in an employer-employee
relationship. On the other hand, the Court of Appeals ruled that an employer-employee relationship existed.

SSDC’s alleges that the current business practice in the coconut industry treats copraceros as independent contractors.

ISSUES:
(1) Whether or not the Court of Appeals failed to take judicial notice of the accepted practice of independent contractors in the coconut
industry.
(2) Whether or not Gamo is an independent contractor.
(3) Whether or not there is an employer-employee relationship between SDDC and Gamo et al.

HELD: (1) NO. According to Expertravel vs. CA, matters of judicial notice have three material requisites: (i) the matter must be one of
common and general knowledge; (ii) it must be well and authoritatively settled and not doubtful or uncertain; and (iii) it must be known to
be within the limits of the jurisdiction of the court.

An invocation that the Court take judicial notice of certain facts should satisfy the requisites, a mere prayer for its application shall not
suffice. In this case, the Court cannot take judicial notice of the alleged business practices in the copra industry. The record is bereft of
any indication that the matter is of common knowledge to the public and that it has the characteristic of notoriety.

(2) NO. In Escario v. NLRC, it was held that to establish the existence of an independent contractor, the following conditions must exist:
(i) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with
the performance of the work except to the result thereof; and (ii) the contractor has substantial capital or investments in the form of tools,
equipment, machineries, work premises and other materials which are necessary in the conduct of his business.

The Implementing Rules of the Labor Code defines investment as tools, equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the performance or completion of the job, work, or service contracted out. The
investment must be sufficient to carry out the job at hand.

Gamo and the copra workers did not exercise independent judgment in the performance of their tasks. The tools used by Gamo and his
copra workers like the karit, bolo, pangbunot, panglugit and pangtapok are not sufficient to enable them to complete the job. Reliance on
these primitive tools is not enough. In fact, the accomplishment of their task required more expensive machineries and equipment, like
the trucks to haul the harvests and the drying facility, which SDDC owns.

(3) YES. In order to determine the existence of an employer-employee relationship, the Court has frequently applied the four-fold test:
(i) the selection and engagement of the employee; (ii) the payment of wages; (iii) the power of dismissal; and (iv) the power to control
the employee’s conduct, or the so called “control test,” which is considered the most important element.

From the time the copraceros were hired by SDDC up to the time that they were reassigned to work under Gamo’s supervision, their
status as SDDC’s employees did not cease. Likewise, payment of their wages was merely coursed through Gamo. As to the power of
control, it is sufficient that the power to control the manner of doing the work exists, it does not require the actual exercise of such power.

In this case, SDDC was exercising its power of control when it transferred the copra workers from their previous assignments to work as
Gamo’s copraceros. It was also in the exercise of the same power that SDDC put Gamo in charge of the copra workers although under
a different payment scheme. Thus, it is clear that an employer-employee relationship has existed between SDDC and Gamo et al. since
the beginning and such relationship did not cease despite their reassignments and the change of payment scheme.

30. OLDARICO S. TRAVEÑO vs. BOBONGON BANANA GROWERS MULTI-PURPOSECOOPERATIVE GR No. 164205, Sept. 3,
2009

FACTS: Petitioner Oldarico Traveño and his 16 co-petitioners worked at a banana plantation at Bobongan Santo Tomas, Davao del
Norte. Sometime in 2000, they filed three separate complaints for illegal dismissal, individually and collectively, with the NLRC against
said respondents including respondent Dole Asia Philippines as it then supposedly owned TACOR, for unpaid salaries, overtime pay,
13th month pay, service incentive leave pay, damages, and attorney’s fees. DFI answered for itself and TACOR denied that they hired
petitioners; That it had an arrangement with several landowners for them to extend financial and technical assistance to them for the
development of their lands into a banana plantation on the condition that the bananas produced therein would be sold exclusively to
TACOR and it was the landowners who worked on their own farms and hired laborers to assist them and that the landowners themselves
decided to form a cooperative in order to better attain their business objectives; The Cooperative failed to file a position

59
paper despite due notice, prompting the Labor Arbiter to consider it to have waived its right to adduce evidence in its defense. Nothing
was heard from respondent Dole Asia Philippines.

LABOR ARBITER: Cooperative is guilty of illegal dismissal based on several Orders by the DOLE in an earlier case declaring the
Cooperative as the employer of the 341 workers in the farms of its several members. It dropped the complaints against DFI, TACOR and
Dole Asia Philippines.

NLRC: Sustained the Labor Arbiter’s ruling that the employer of petitioners is the Cooperative. It partially granted petitioners appeal,
however, by ordering the Cooperative to pay them their unpaid wages, wage differentials, service incentive leave pay, and 13th month
pay. It thus remanded the case to the Labor Arbiter for computation of those awards.

CA: Dismissed petitioner’s petition for certiorari on the ground that the accompanying verification and certification against forum shopping
was defective, it having been signed by only 19 of the 22 therein named petitioners.

ISSUES: (1)WON the petition should be dismissed because of the non-signing of the petitioners;

HELD: NO. For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements already
reflected in Altres v Empleo above respecting non-compliance with the requirements on, or submission of defective, verification and
certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on or submission of defective verification, and
non-compliance with the requirement on or submission of defective certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading fatally defective. The
court may order its submission or correction or act on the pleading if the attending circumstances are such that strict compliance
with the Rule may be dispensed with in order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations
in the complaint or petition signs the verification, and when matters alleged in the petition have been made in good faith or are
true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification, is generally not
curable by its subsequent submission or correction thereof, unless there is a need to relax the Rule on the ground of "substantial
compliance" or presence of "special circumstances or compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise, those who did
not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances, however, as when all the plaintiffs
or petitioners share a common interest and invoke a common cause of action or defense, the signature of only one of them in
the certification against forum shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel. If, however, for
reasonable or justifiable reasons, the party-pleader is unable to sign, he must execute a Special Power of Attorney designating
his counsel of record to sign on his behalf. (Emphasis and underscoring supplied)The foregoing restated pronouncements were
lost in the challenged Resolutions of the appellate court. Petitioners’ contention that the appellate court should have dismissed
the petition only as to the non-signing petitioners or merely dropped them as parties to the case is thus in order. Instead of
remanding the case to the appellate court, however, the Court deems it more practical to decide the substantive issue raised in
this petition so as not to further delay the disposition of this case.

ISSUE: (2) won DFI and DPI should be held solidarily liable with Cooperative for petitioner’s illegal dismissal and money claims.

HELD: No they are not solidarily liable. Petition is dismissed. There is no ER-EE relationship between petitioners and Cooperative’s co-
respondents. DFI did not farm out to the Cooperative the performance of a specific job, work, or service. Instead, it entered into a Banana
Production and Purchase Agreement (Contract) with the Cooperative, under which the Cooperative would handle and fund the production
of bananas and operation of the plantation covering lands owned by its members in consideration of DFI’s commitment to provide financial
and technical assistance as needed, including the supply of information and equipment in growing, packing, and shipping bananas. The
Cooperative would hire its own workers and pay their wages and benefits, and sell exclusively to DFI all export quality bananas produced
that meet the specifications agreed upon. To the Court, the Contract between the Cooperative and DFI, far from being a job contracting
arrangement, is in essence a business partnership that partakes of the nature of a joint venture.

The rules on job contracting are, therefore, inapposite. Further, petitioners’ claim of employment relationship with the Cooperatives herein
co-respondents must be assessed on the basis of four standards, viz: (a) the manner of their selection and engagement (No employment
contract was; (b) the mode of payment of their wages; (c) the presence or absence of the power of dismissal; and (d) the presence or
absence of control over their conduct. Most determinative among these factors is the so-called "control test."

There is nothing in the records which indicates the presence of any of the foregoing elements of an employer-employee relationship.
While the Court commiserates with petitioners on their loss of employment, especially now that the Cooperative is no longer a going
concern since it has been dissolved, it cannot simply, by default, hold the Cooperative’s co-respondents liable for their claims without any
factual and legal justification therefor. The social justice policy of labor laws and the Constitution is not meant to be oppressive of

60
capital. En passant, petitioners are not precluded from pursuing any available remedies against the former members of the def unct
Cooperative as their individual circumstances may warrant.

31. Locsin et al., vs PLDT, GR No. 185251, Oct. 2, 2009

Facts: On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation
of the Philippines (SSCP) entered into a Security Services Agreement (Agreement) whereby SSCP would provide armed security guards
to PLDT to be assigned to its various offices. Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other
security guards, were posted at a PLDT office.

On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective October 1, 2001. Despite
the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They were allegedly
directed to remain at their post by representatives of respondent. In support of their contention, petitioners provided the Labor Arbiter with
copies of petitioner Locsin’s pay slips for the period of January to September 2002.

Then, on September 30, 2002, petitioners’ services were terminated. Thus, petitioners filed a complaint before the Labor Arbiter for illegal
dismissal and recovery of money claims such as overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave
pay, Emergency Cost of Living Allowance, and moral and exemplary damages against PLDT.

The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were
found to be employees of PLDT and not of SSCP. Such conclusion was arrived at with the factual finding that petitioners continued to
serve as guards of PLDT’s offices. As such employees, petitioners were entitled to substantive and procedural due process before
termination of employment.

Issue: Is there employer-employee relationship?

Ruling: Yes. From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the
instructions of respondent. We can further conclude that respondent dictated upon petitioners that the latter perform their regular duties
to secure the premises during operating hours. This, to our mind and under the circumstances, is sufficient to establish the existence of
an employer-employee relationship.

To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the Agreement, petitioners remained
at their post securing the premises of respondent while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes no
sense, and the denials proffered by respondent do not shed any light to the situation. It is but reasonable to conclude that, with the behest
and, presumably, directive of respondent, petitioners continued with their services. Evidently, such are indicia of control that respondent
exercised over petitioners.

Evidently, respondent having the power of control over petitioners must be considered as petitioners’ employer––from the termination of
the Agreement onwards––as this was the only time that any evidence of control was exhibited by respondent over petitioners and in light
of our ruling in Abella. Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and benefits of employees of respondent,
including due process requirements in the termination of their services.

Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to do so,
respondent is guilty of illegal dismissal.

32. Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al. G.R. No. 160506, March 9, 2010

Facts: Petitioners worked as merchandisers of P&G. They all individually signed employment contracts with either Promm-Gem or SAPS
for periods of more or less five months at a time.They were assigned at different outlets, supermarkets and stores where they handled all
the products of P&G. They received their wages from Promm-Gem or SAPS. Subsequently, petitioners filed a complaintagainst P&G for
regularization, service incentive leave pay and other benefits with damages. The complaint was later amendedto include the matter of
their subsequent dismissal.

The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-employee relationship between
petitioners and P&G. He found that the selection and engagement of the petitioners, the payment of their wages, the power of dismissal
and control with respect to the means and methods by which their work was accomplished, were all done and exercised by Promm-
Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors. On appeal to the NLRC, the NlRC
affirmed the decision of the labor arbiter. Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However, said petition was also denied by the
CA.

Issues:
1.) Is P&G the employer of petitioners?
2.) Were petitioners illegally dismissed?

Ruling: Qualify. In order to determine whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-Gem
and SAPS are labor-only contractors or legitimate job contractors. There is "labor-only" contracting where the person supplying
61
workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

The Court held that Promm-Gem cannot be regarded as labor-only contractor but a legitimate independent contractor because the
financial statement of Promm-Gem shows that it has authorized capital stock of P1 million and a paid-in capital, or capital available for
operations, of P500,000.00 as of 1990. It also has long term assets worth P432, 895.28 and current assets of P719, 042.32. Promm-
Gem has also proven that it maintained its own warehouse and office space with a floor area of 870 square meters. It also had under its
name three registered vehicles which were used for its promotional/merchandising business. Promm-Gem also has other clients aside
from P&G.

On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31, 250.00. There is no other evidence
presented to show how much its working capital and assets are. Furthermore, there is no showing of substantial investment in tools,
equipment or other assets. Considering that SAPS has no substantial capital or investment and the workers it recruited are performing
activities which are directly related to the principal business of P&G, the court held that SAPS is engaged in "labor-only contracting". The
contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer.

With regard to the termination letters given by Promm-Gem to its employees uniformly specified the cause of dismissal as grave
misconduct and breach of trust. The court held that there were no valid causes for the dismissal of petitioners-employees of Promm-Gem.

Misconduct to be valid just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the performance of the employee’s
duties; and (c) must show that the employee has become unfit to continue working for the employer. In the case, petitioners-employees
of Promm-Gem may have committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they were
motivated by any wrongful intent in doing so. As such, they are guilty of only simple misconduct for assailing the integrity of Promm-Gem
as a legitimate and independent promotion firm. A misconduct which is not serious or grave, as that existing in the instant case, cannot
be a valid basis for dismissing an employee.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in the
employee by his employer. Ordinary breach will not suffice. Loss of trust and confidence, as a cause for termination of employment, is
premised on the fact that the employee concerned holds a position of responsibility or of trust and confidence. And, in order to constitute
a just cause for dismissal, the act complained of must be work-related and must show that the employee is unfit to continue to work for
the employer. In the case at bar, In the instant case, the petitioners-employees of Promm-Gem have not been shown to be occupying
positions of responsibility or of trust and confidence. Neither is there any evidence to show that they are unfit to continue to work as
merchandisers for Promm-Gem. Hence, no valid cause for dismissal by Promm-Gem against petitioner-employees.

With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal. The records show that upon
receipt by SAPS of P&G’s letter terminating their "Merchandising Services Contact", they in turn verbally informed the concerned
petitioners not to report for work anymore. It must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests
with the employer. In termination cases, the burden of proof rests upon the employer to show that the dismissal is for just and valid cause.
In the instant case, P&G failed to discharge the burden of proving the legality and validity of the dismissals of those petitioners who are
considered its employees. Hence, the dismissals necessarily were not justified and are therefore illegal.

33. San Miguel Corp. vs Semillano et al., GR No. 164257, July 5, 2010

• Test to Determine Independent Contractorship

Petitioner cannot rely either on AMPCO’s Certificate of Registration as an Independent Contractor issued by the proper Regional Office
of the DOLE to prove its claim. It is not conclusive evidence of such status. The fact of registration simply prevents the legal presumption
of being a mere labor-only contractor from arising. In distinguishing between permissible job contracting and prohibited labor-only
contracting, the totality of the facts and the surrounding circumstances of the case are to be considered.

• Solidary Liability
Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO, the labor-only contractor, for all the rightful claims of
respondent. Under this set-up, AMPCO, as the “labor-only” contractor, is deemed an agent of the principal (SMC). The law makes the
principal responsible over the employees of the “labor-only” contractor as if the principal itself directly hired the employees.

34. Manila Water Co. vs Dalumpines, GR No. 175501, Oct. 4, 2010

It should be remembered that the control test merely calls for the existence of the right to control, and not necessarily the exercise thereof.

It is not essential that the employer actually supervises the performance of duties of the employee. It is enough that the former has a right
to wield the power.

The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. In this case, the connection is obvious when we consider the
62
nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Finally, the repeated and
continuing need for the performance of the job is sufficient evidence of the necessity, if not indispensability of the activity to the business.
OR
Employer-employee relationship; test. The elements to determine the existence of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s
conduct. The most important of these elements is the employer’s control of the employee’s conduct, not only as to the result of the work
to be done, but also as to the means and methods to accomplish it. It should be remembered that the control test merely calls for the
existence of the right to control, and not necessarily the exercise thereof. Based on this four-fold test, Manila Water emerges as the
employer of respondent collectors. Respondent bill collectors were individually hired by the contractor, but were under the direct control
and supervision of Manila Water. This control is manifested in the fact that respondent bill collectors reported daily to the branch offices
of Manila Water to remit their collections with the specified monthly targets and comply with the collection reporting procedures prescribed
by the latter. Accordingly, respondent bill collectors are employees of petitioner Manila Water.

Job contracting; conditions. Job contracting is permissible only if the following conditions are met: 1) the contractor carries on an
independent business and undertakes the contract work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof; and 2) the contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of the business. “Substantial capital or investment” refers to capital
stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries, and work premises, actually
and directly used by the contractor or subcontractor in the performance or completion of the job, work, or service contracted out. The
“right to control” refers to the right reserved to the person for whom the services of the contractual workers are performed, to determine
not only the end to be achieved, but also the manner and means to be used in reaching that end.

35. Teng vs Pahagac, GR No. 169704, November 17, 2010

Illegal Dismissal
The respondent worker’s allegation that Teng summarily dismissed them on suspicion that they were not reporting to him the correct
volume of the fish caught in each fishing voyage was never denied by Teng. Unsubstantiated suspicion is not a just cause to terminate
one’s employment under Article 282 of the Labor Code. To allow an employer to dismiss an employee based on mere allegations and
generalities would place the employee at the mercy of his employer, and would emasculate the right to security of tenure. For his failure
to comply with the Labor Code’s substantive requirement on termination of employment, we declare that Teng illegally dismissed the
respondent workers.
In the present case, the maestros did not have any substantial capital or investment. Teng admitted that he solely provided the capital
and equipment, while the maestros supplied the workers. The power of control over the respondent workers was lodged not with the
maestros but with Teng. As checkers, the respondent workers’ main tasks were to count and classify the fish caught and report them to
Teng. They performed tasks that were necessary and desirable in Teng’s fishing business. Taken together, these incidents confirm the
existence of a labor-only contracting which is prohibited in our jurisdiction, as it is considered to be the employer’s attempt to evade
obligations afforded by law to employees.

OR

Employer-employee relationship. Generally, in a business establishment, IDs are issued to identify the holder as a bona fide employee
of the issuing entity. While petitioner Teng alleged that it was the maestros who hired the respondent workers, it was his company that
issued to the respondent workers IDs bearing their names as employees and Teng’s signature as the employer. For the 13 years that the
respondent workers worked for Teng, they received wages on a regular basis, in addition to their shares in the fish caught. More
importantly, the element of control – which we have ruled in a number of cases to be a strong indicator of the existence of an employer-
employee relationship – is present in this case. Teng not only owned the tools and equipment, he directed how the respondent workers
were to perform their job as checkers.

Illegal dismissal; lack of substantive due process. The dismissal of an employee, which the employer must validate, has a two-fold
requirement: one is substantive, the other is procedural. Not only must the dismissal be for a just or an authorized cause, as provided by
law; the rudimentary requirements of due process – the opportunity to be heard and to defend oneself – must be observed as well. The
employer has the burden of proving that the dismissal was for a just cause; failure to show this, as in the present case, would necessarily
mean that the dismissal was unjustified and, therefore, illegal. The respondent worker’s allegation that Teng summarily dismissed them
on suspicion that they were not reporting to him the correct volume of the fish caught in each fishing voyage was never denied by Teng.
Unsubstantiated suspicion is not a just cause to terminate one’s employment under Article 282 of the Labor Code.

Labor-only contracting. Section 5 of the DO No. 18-02, which implements Article 106 of the Labor Code, provides that, ”… labor-only
contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements are present: (i)The contractor or subcontractor does not have
substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed
by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or (ii)The
contractor does not exercise the right to control over the performance of the work of the contractual employee. In the present case, Teng
admitted that he solely provided the capital and equipment, while the maestros supplied the workers. Also, the power of
63
control over the respondent workers was lodged not with the maestros but with Teng. Moreover, they performed tasks that were necessary
and desirable in Teng’s fishing business. Taken together, these incidents confirm the existence of a labor-only contracting which is
prohibited in our jurisdiction. Accordingly, a finding that the maestros are labor-only contractors is equivalent to a finding that an employer-
employee relationship exists between Teng and the respondent workers.

Motion for reconsideration. As amended, Article 263 is now Article 262-A in which the word “unappealable” from Article 263 has been
deleted. Thus, although Art. 262-A makes the voluntary arbitration award final and executory after ten calendar days from receipt of the
copy of the award or decision by the parties, the decision may still be reconsidered by the Voluntary Arbitrator on the basis of a motion
for reconsideration duly filed during that period. The absence of a categorical language in Article 262-A does not preclude the filing of a
motion for reconsideration of the VA’s decision within the 10-day period. Therefore, petitioners’ allegation that the VA’s decision had
become final and executory by the time the respondent workers filed an appeal with the CA fails. It is consequently ruled that the
respondent workers seasonably filed a motion for reconsideration of the VA’s judgment, and the VA erred in denying the motion.

36. GSIS vs NLRC et al., GR No. 180045, November 17, 2010

In any case, even if the appeal was filed one day late, the same should have been entertained by the NLRC. Indeed, the appeal must be
perfected within the statutory or reglementary period. This is not only mandatory, but also jurisdictional. Failure to perfect the appeal on
time renders the assailed decision final and executory and deprives the appellate court or body of the legal authority to alter the final
judgment, much less entertain the appeal. However, this Court has, time and again, ruled that, in exceptional cases, a belated appeal
may be given due course if greater injustice will be visited upon the party should the appeal be denied. The Court has allowed this
extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the greater principles of substantial justice
and equity.
Thus, the date of filing is determinable from two sources: from the post office stamp on the envelope or from the registry receipt, either of
which may suffice to prove the timeliness of the filing of the pleadings. If the date stamped on one is earlier than the other, the former
may be accepted as the date of filing. This presupposes, however, that the envelope or registry receipt and the dates appearing thereon
are duly authenticated before the tribunal where they are presented.

• Liability of GSIS as Indirect Employer

Lastly, we do not agree with petitioner that the enforcement of the decision is impossible because its charter unequivocally exempts it
from execution. As held in Government Service Insurance System v. Regional Trial Court of Pasig City, Branch 71, citing Rubia v. GSIS:
The processual exemption of the GSIS funds and properties under Section 39 of the GSIS Charter, in our view, should be read consistently
with its avowed principal purpose: to maintain actuarial solvency of the GSIS in the protection of assets which are to be used to finance
the retirement, disability and life insurance benefits of its members. Clearly, the exemption should be limited to the purposes and objects
covered. Any interpretation that would give it an expansive construction to exempt all GSIS assets from legal processes absolutely would
be unwarranted.

Furthermore, the declared policy of the State in Section 39 of the GSIS Charter granting GSIS an exemption from tax, lien, attachment,
levy, execution, and other legal processes should be read together with the grant of power to the GSIS to invest its “excess funds” under
Section 36 of the same Act. Under Section 36, the GSIS is granted the ancillary power to invest in business and other ventures for the
benefit of the employees, by using its excess funds for investment purposes. In the exercise of such function and power, the GSIS is
allowed to assume a character similar to a private corporation. Thus, it may sue and be sued, as also, explicitly granted by its charter x x
x.
To be sure, petitioner’s charter should not be used to evade its liabilities to its employees, even to its indirect employees, as mandated
by the Labor Code.

• Liability of Indirect Employer

Petitioner’s liability covers the payment of respondents’ salary differential and 13th month pay during the time they worked for petitioner.
In addition, petitioner is solidarily liable with DNL Security for respondents’ unpaid wages from February 1993 until April 20, 1993. While
it is true that respondents continued working for petitioner after the expiration of their contract, based on the instruction of DNL Security,
petitioner did not object to such assignment and allowed respondents to render service. Thus, petitioner impliedly approved the extension
of respondents’ services. Accordingly, petitioner is bound by the provisions of the Labor Code on indirect employment. Petitioner cannot
be allowed to deny its obligation to respondents after it had benefited from their services. So long as the work, task, job, or project has
been performed for petitioner’s benefit or on its behalf, the liability accrues for such services. The principal is made liable to its indirect
employees because, after all, it can protect itself from irresponsible contractors by withholding payment of such sums that are due the
employees and by paying the employees directly, or by requiring a bond from the contractor or subcontractor for this purpose.

Petitioner’s liability, however, cannot extend to the payment of separation pay. An order to pay separation pay is invested with a punitive
character, such that an indirect employer should not be made liable without a finding that it had conspired in the illegal dismissal of the
employees.

37. Sy et al., vs. Fairland Knitcraft Co Inc. GR No. 189658, December 12, 2011

Fairland is a domestic corporation engaged in garments business, while Susan de Leon (Susan) is the owner/proprietress of Weesan
Garments (Weesan). On the other hand, the complaining workers (the workers) are sewers, trimmers, helpers, a guard and a secretary
who were hired by Weesan as follows: ……………

64
On December 23, 2002, workers Marialy O. Sy, Vivencia Penullar, Aurora Aguinaldo, Gina Aniano, Gemma dela Peña and Efremia
Matias filed with the Arbitration Branch of the NLRC a Complaint for underpayment and/or non-payment of wages, overtime pay, premium
pay for holidays, 13th month pay and other monetary benefits against Susan/Weesan. In January 2003, the rest of the aforementioned
workers also filed similar complaints. Eventually all the cases were consolidated as they involved the same causes of action.

On February 5, 2003, Weesan filed before the Department of Labor and Employment-National Capital Region (DOLE-NCR) a report on
its temporary closure for a period of not less than six months. As the workers were not anymore allowed to work on that same day, they
filed on February 18, 2003 an Amended Complaint, and on March 13, 2003, another pleading entitled Amended Complaints and Position
Paper for Complainants, to include the charge of illegal dismissal and impleaded Fairland and its manager, Debbie Manduabas (Debbie),
as additional respondents.

A Notice of Hearing was thereafter sent to Weesan requesting it to appear before Labor Arbiter Ramon Valentin C. Reyes (Labor Arbiter
Reyes) on April 3, 2003, at 10:00 a.m. On said date and time, Atty. Antonio A. Geronimo (Atty. Geronimo) appeared as counsel for
Weesan and requested for an extension of time to file his client's position paper. On the next hearing on April 28, 2003, Atty. Geronimo
also entered his appearance for Fairland and again requested for an extension of time to file position paper.

On May 16, 2003, Atty. Geronimo filed two separate position papers — one for Fairland and another for Susan/Weesan. The Position
Paper for Fairland was verified by Debbie while the one for Susan/Weesan was verified by Susan. To these pleadings, the workers filed
a Reply.
Atty. Geronimo then filed a Consolidated Reply verified both by Susan and Debbie.

On November 25, 2003, the workers submitted their Rejoinder.

On November 26, 2003, Labor Arbiter Reyes rendered his Decision, the dispositive portion of which reads: Dismissing the complaint for
lack of merit; and ordering the respondents to pay each complainant P5,000.00 by way of financial assistance.

The workers filed their appeal which was granted by the NLRC. The dispositive portion of the NLRC Decision reads: WHEREFORE,
premises considered, the appealed decision is hereby set aside and the dismissal of complainants is declared illegal.

Hence, Atty. Geronimo filed a Motion for Reconsideration. However, Fairland filed another Motion for Reconsideration through Atty.
Melina O. Tecson (Atty. Tecson) assailing the jurisdiction of the Labor Arbiter and the NLRC over it, claiming that it was never summoned
to appear, attend or participate in all the proceedings conducted therein. It also denied that it engaged the services of Atty. Geronimo.

The NLRC however, denied both motions for lack of merit.

Fairland and Susan thus filed their separate Petitions for Certiorari before the CA docketed as CA-G.R. SP No. 93204 and CA-G.R. SP
No. 93860, respectively.

On July 25, 2007, the CA's First Division denied Fairland's petition. It affirmed the NLRC's ruling that the workers were illegally dismissed
and that Weesan and Fairland are solidarily liable to them as labor-only contractor and principal, respectively.

Fairland filed its Motion for Reconsideration as well as a Motion for Voluntary Inhibition of Associate Justices Celia C. Librea-Leagogo
and Regalado E. Maambong from handling the case. As the Motion for Voluntary Inhibition was granted through a Resolution dated
November 8, 2007, the case was transferred to the CA's Special Ninth Division for resolution of Fairland's Motion for Reconsideration.

On May 9, 2008, the CA's Special Ninth Division reversed the First Division's ruling. It held that the labor tribunals did not acquire
jurisdiction over the person of Fairland, and even assuming they did, Fairland is not liable to the workers since Weesan is not a mere
labor-only contractor but a bona fide independent contractor. The Special Ninth Division thus annulled and set aside the assailed NLRC
Decision and Resolution insofar as Fairland is concerned and excluded the latter therefrom. The dispositive portion of said Resolution
reads: WHEREFORE, the Motion for Reconsideration filed by the movant is GRANTED.

Aggrieved, the workers filed before us their Petition for Review on Certiorari docketed as G.R. No. 182915

With regard to Susan's petition, the CA Special Ninth Division issued on May 11, 2006 a Resolution temporarily restraining the NLRC
from enforcing its assailed November 30, 2004 Decision and thereafter the CA Special Eighth Division issued a writ of preliminary
prohibitory injunction. On July 20, 2009, the Special Former Special Eighth Division of the CA resolved the case through a Decision,
the dispositive portion of which reads: WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and
accordingly DISMISSED for lack of merit.

Susan moved for reconsideration which was denied by the CA in its October 1, 2009 Resolution.

Hence, she filed before this Court a Petition for Review on Certiorari docketed as G.R. No. 189658 which was denied in this Court's
December 16, 2009 Resolution on technicality and for failure to sufficiently show any reversible error in the assailed judgment.
Susan and Fairland filed their respective Motions for Reconsideration. But before said motions could be resolved, the Court ordered the
consolidation of Susan's petition with that of the workers

65
One of the grounds for the denial of Susan's petition was her failure to indicate the date of filing her Motion for Reconsideration with the
CA as required under Section 4 (b), Rule 45 of the Rules of Court. However, "failure to comply with the rule on a statement of material
[date] in the petition may be excused [if] the [date is] evident from the records." In the case of Susan, records show that she received the
copy of the Decision of the CA on July 24, 2009. She then timely filed her Motion for Reconsideration via registered mail on August 7,
2009 as shown by the envelope with stamped receipt of the Batangas City Post Office bearing the date August 7, 2009. The fact of such
filing was also stated in the Motion for Extension of Time to File Petition for Review that she filed before this Court which forms part of
the records of this case. Hence, it is clear that Susan seasonably filed her Motion for Reconsideration.

Moreover, while we note that Susan's petition was also denied on the ground of no reversible error committed by the CA, we deem it
proper, in the interest of justice, to take a second look on the merits of Susan's petition and reinstate G.R. No. 189658. This is also to
harmonize our ruling in these consolidated petitions and avoid confusion that may arise in their execution. Hence, we grant Susan's
Motion for Reconsideration and consequently, reinstate her Petition for Review on Certiorari.

As to Fairland's Motion for Reconsideration, we shall treat the same as its comment to Susan's petition, Fairland being one of the
respondents therein.

Issues: In G.R. No. 189658, Susan imputes upon the CA the following errors:

I. THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER IS A LABOR-ONLY CONTRACTOR

ACTING AS AN AGENT OF RESPONDENT FAIRLAND.

II. THE COURT OF APPEALS ERRED IN FINDING THAT THE INDIVIDUAL PRIVATE RESPONDENTS
WERE ILLEGALLY DISMISSED.

III. THE COURT OF APPEALS ERRED IN NOT RESOLVING THE ISSUE RAISED BY PETITIONER IN HER
REPLY DATED JULY 8, 2006 REGARDING THE PROPRIETY OF THE APPEAL TAKEN BY PRIVATE
RESPONDENT RICHON CAINOY APARRE WHO WAS ALREADY DEAD PRIOR TO THE FILING OF
THE MEMORANDUM OF APPEAL BEFORE THE NLRC.

Our Ruling We grant the workers' petition (G.R. No. 182915) but deny the petition of Susan (G.R. No. 189658).

G.R. No. 189658: Susan/Weesan is a mere labor-only contractor.

"There is labor-only contracting when the contractor or subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal. In labor-only contracting, the following elements are present:

(a)The person supplying workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others; and IDESTH

(b)The workers recruited and placed by such person are performing activities which are directly related to the
principal business of the employer."

Here, there is no question that the workers, majority of whom are sewers, were recruited by Susan/Weesan and that they performed
activities which are directly related to Fairland's principal business of garments. What must be determined is whether Susan/Weesan has
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others.

We have examined the records but found nothing therein to show that Weesan has investment in the form of tools, equipment or
machineries. The records show that Fairland has to furnish Weesan with sewing machines for it to be able to provide the sewing needs
of the former. Also, save for the Balance Sheets purportedly submitted by Weesan to the Bureau of Internal Revenue (BIR) indicating its
fixed assets (factory equipment) in the amount of P243,000.00, Weesan was unable to show that apart from the borrowed sewing
machines, it owned and possessed any other tools, equipment, and machineries necessary to its being a contractor or sub-contractor for
garments. Neither was Weesan able to prove that it has substantial capital for its business.

Likewise significant is the fact that there is doubt as to who really owns the work premises occupied by Weesan. As may be recalled, the
workers emphasized in their Appeal Memorandum filed with the NLRC that Susan/Weesan was a labor-only contractor and that Fairland
was its principal. To buttress this, they alleged that the work premises utilized by Weesan is owned by Fairland, which significantly, was
not in the business of renting properties. They also advanced that there was no showing that Susan/Weesan paid any rentals for the use
of the premises. They contended that all that Susan had was a Mayor's Permit for Weesan indicating 715 Ricafort Street, Tondo, Manila
as its address.

Susan failed to refute these allegations before the NLRC and attributed such failure to her former counsel, Atty. Geronimo. But when
Susan's petition for certiorari was given due course by the CA, she finally had the chance to answer the same by denying that Fairland
owned the work premises. Susan instead claimed that Weesan rented the premises from another entity, De Luxe. To support this, she
attached to her petition two Contracts of Lease purportedly entered into by her and De Luxe for the lease of the premises covering the
periods August 1, 1997 to July 31, 2000 and January 1, 2001 to December 31, 2004.

On the other hand, the workers in their Comment filed in CA-G.R. SP No. 93204 (Fairland's petition for certioraribefore the CA), pointed
out that in Fairland's Amended Articles of Incorporation, five out of the seven incorporators listed therein appeared to be residents of
the same 715 Ricafort St., Tondo, Manila. To the workers, this is a clear indication that Fairland indeed owned Weesan's work
66
premises. Fairland, for its part, tried to explain this by saying that its incorporators, just like Weesan, were also mere lessees of a portion
of the multi-storey building owned by De Luxe located at 715 Ricafort St., Tondo, Manila. It also claimed that two years prior to Weesan's
occupation of said premises in 1996, the five incorporators alluded to already transferred.

We cannot, however, ignore the apt observation on the matter made by the CA's Special Former Special Eighth Division in its Decision
in CA-G.R. SP No. 93860, viz.:

The work premises are likewise owned by Fairland, which petitioner tried to disprove by presenting a purported Contract
of Lease with another entity, De Luxe Shirt Factory Co., Inc. However, there is no competent proof it paid the
supposed rentals to said 'owner'. Curiously, under the item 'Rent Expenses' in its audited financial statement,
only equipment rental was listed therein without any disbursement/expense for rental of factory premises,
which only buttressed the claim of private respondents that the place where they reported to and performed sewing
jobs for petitioner [Susan] and Fairland at No. 715 Ricafort St., Tondo, Manila, belonged to Fairland.

Susan contests this pronouncement by pointing out that although only sewing machines were specified under the entry "Rent Expenses"
in its financial statement, the rent for the factory premises is already deemed included therein since the contracts of lease she entered
into with De Luxe referred to both the factory premises and machineries.

We, however, find this contention implausible.

We went over the said contracts of lease and noted that same were principally for the lease of the premises in 715 Ricafort St., Tondo,
Manila. Only incidental thereto is the inclusion therein of the equipment found in said premises. Hence, we cannot see why the rentals
for the work premises, for which Susan even went to the extent of executing a contract with the purported lessor, was not included in the
entry for rent expenses in Weesan's financial statement. Even if we are to concede to Susan's claim that the entry for rent expenses
already includes the rentals for the work premises, we wonder why the rental expenses for the year 2000 which was P396,000.00 is of
the same amount with the rental expenses for the year 2001. As borne out by the Contract of Lease covering the period August 1, 1997
to July 31, 2000, the monthly rent for the work premises was pegged at P25,000.00. However, in January to December 2001, same was
increased to P27,500.00. There being an increase in the rentals for the work premises, how come that Weesan's rental expenses for the
year 2001 is still P396,000.00? This could only mean that said entry really only refers to the rentals of sewing machines and does not
include the rentals for the work premises. Moreover, we note that Susan could have just simply submitted receipts for her payments of
rentals to De Luxe. However, she failed to present even a single receipt evidencing such payment.

In an attempt to prove that it is De Luxe and not Fairland which owned the work premises, Susan attached to her petition the following:
(1) a plain copy of Transfer Certificate of Title (TCT) No. 139790 and Declaration of Real Property both under the name of De Luxe; and,
(2) Real Property Tax receipts issued to De Luxe for the years 2000-2004. However, the Court finds these documents wanting. Nowhere
from the said TCT and Declaration of Real Property can it be inferred that the property they refer to is the same property as that located
at 715 Ricafort St., Tondo, Manila. Although in said Declaration, 715 Ricafort St., Tondo is the indicated address of the declarant (De
Luxe), the address of the property declared is merely "Ricafort, Tondo I-A". The same thing can also be said with regard to the real
property tax receipts. The entry under the box Location of Property in the receipt for 2001 is "I - 718 Ricafort" and in the receipts for 2002,
2003, and 2004, the entries are either "I — Ricafort St., Tondo" or merely "I-Ricafort St."

In sum, the Court finds that Susan's effort to negate Fairland's ownership of the work premises is futile. The logical conclusion now is that
Weesan does not have its own workplace and is only utilizing the workplace of Fairland to whom it supplied workers for its ga rment
business.

Suffice it to say that "[t]he presumption is that a contractor is a labor-only contractor unless such contractor overcomes the burden of
proving that it has substantial capital, investment, tools and the like." As Susan/Weesan was not able to adduce evidence that Weesan
had any substantial capital, investment or assets to perform the work contracted for, the presumption that Weesan is a labor-only
contractor stands.

The National Labor Relations Commission and the Court of Appeals did not err in their findings of illegal dismissal.
To negate illegal dismissal, Susan relies on the due closure of Weesan pursuant to the Establishment Termination Report it submitted to
the DOLE-NCR.

Indeed, Article 283 of the Labor Code allows as a mode of termination of employment the closure or termination of business. "Closure or
cessation of business is the complete or partial cessation of the operations and/or shut-down of the establishment of the employer. It is
carried out to either stave off the financial ruin or promote the business interest of the employer." "The decision to close business [or to
temporarily suspend operation] is a management prerogative exclusive to the employer, the exercise of which no court or tribunal can
meddle with, except only when the employer fails to prove compliance with the requirements of Art. 283, to wit: a) that the
closure/cessation of business is bona fide, i.e., its purpose is to advance the interest of the employer and not to defeat or circumvent the
rights of employees under the law or a valid agreement; b) that written notice was served on the employees and the DOLE at least one
month before the intended date of closure or cessation of business; and c) in case of closure/cessation of business notdue to financial
losses, that the employees affected have been given separation pay equivalent to 1/2 month pay for every year of service or one month
pay, whichever is higher."

Here, Weesan filed its Establishment Termination Report allegedly due to serious business losses and other economic reasons.
However, we are mindful of the doubtful character of Weesan's application for closure given the circumstances surrounding the same.

67
First, workers Marialy Sy, Vivencia Penullar, Aurora Aguinaldo, Gina Aniano, Gemma Dela Peña and Efremia Matias filed before the
Labor Arbiter their complaint for underpayment of salary, non-payment of benefits, damages and attorney's fees against Weesan on
December 23, 2002. Summons was accordingly issued and same was received by Susan on January 15, 2003. Meanwhile, other workers
followed suit and filed their respective complaints on January 2, 6, 17 and 28, 2003. Shortly thereafter or merely eight days after the filing
of the last complaint, Weesan filed with the DOLE-NCR its Establishment Termination Report.

Second, the Income Tax Returns for the years 2000, 2001 and 2002 attached to the Establishment Termination Report, although bearing
the stamped receipt of the Revenue District Office where they were purportedly filed, contain no signature or initials of the receiving
officer. The same holds true with Weesan's audited financial statements. This engenders doubt as to whether these documents were
indeed filed with the proper authorities.

Third, there was no showing that Weesan served upon the workers written notice at least one month before the intended date of closure
of business, as required under Art. 283 of the Labor Code. In fact, the workers alleged that when Weesan filed its Establishment
Termination Report on February 5, 2003, it already closed the work premises and did not anymore allow them to report for work. This is
the reason why the workers on February 18, 2003 amended their complaint to include the charge of illegal dismissal.

It bears stressing that "[t]he burden of proving that . . . a temporary suspension is bona fide falls upon the employer." Clearly here,
Susan/Weesan was not able to discharge this burden. The documents Weesan submitted to support its claim of severe business losses
cannot be considered as proof of financial crisis to justify the temporary suspension of its operations since they clearly appear to have
not been duly filed with the BIR. Weesan failed to satisfactorily explain why the Income Tax Returns and financial statements it submitted
do not bear the signature of the receiving officers. Also hard to ignore is the absence of the mandatory 30-day prior notice to the workers.

Hence, the Court finds that Susan failed to prove that the suspension of operations of Weesan was bona fide and that it complied with
the mandatory requirement of notice under the law. Susan likewise failed to discharge her burden of proving that the termination of the
workers was for a lawful cause. Therefore, the NLRC and the CA, in CA-G.R. SP No. 93860, did not err in their findings that the workers
were illegally dismissed by Susan/Weesan.

The formal substitution of the deceased worker Richon Aparre is not necessary as his heir voluntarily appeared and
participated in the proceedings before the National Labor Relations Commission.
In Sarsaba v. Fe Vda. de Te, we held that:

The rule on substitution of parties is governed by Section 16, Rule 3 of the [Rules of Court].

Strictly speaking, the rule on substitution by heirs is not a matter of jurisdiction, but a requirement of due process. The
rule on substitution was crafted to protect every party's right to due process. It was designed to ensure that the deceased
party would continue to be properly represented in the suit through his heirs or the duly appointed legal representative
of his estate. Moreover, non-compliance with the Rules results in the denial of the right to due process for the heirs
who, though not duly notified of the proceedings, would be substantially affected by the decision rendered therein.
Thus, it is only when there is a denial of due process, as when the deceased is not represented by any legal
representative or heir, that the court nullifies the trial proceedings and the resulting judgment therein.

Here, the lack of formal substitution of the deceased worker Richon did not result to denial of due process as to affect the validity of the
proceedings before the NLRC since his heir, Luzvilla, was aware of the proceedings therein. In fact, she is considered to have voluntarily
appeared before the said tribunal when she signed the workers' Memorandum of Appeal filed therewith. "This Court has ruled that formal
substitution of parties is not necessary when the heirs themselves voluntarily appeared, participated, and presented evidence during the
proceedings." Hence, the NLRC did not err in giving due course to the appeal with respect to Richon.

Fairland's claim of prescription deserves scant consideration.

Fairland asserts that assuming that the workers have valid claims against it, same only pertain to six out of the 34 workers-complainants.
According to Fairland, these six workers were the only ones who were in the employ of Weesan at the time Fairland and Weesan had
existing contractual relationship in 1996 to 1997. But then, Fairland contends that the claims of these six workers have already been
barred by prescription as they filed their complaint more than four years from the expiration of the alleged contractual relationship in 1997.
However, the Court notes that the records are bereft of anything that provides for such alleged contractual relationship and the period
covered by it. Absent anything to support Fairland's claim, same deserves scant consideration.
Interestingly, we noticed Fairland's letter dated January 31, 2003 informing Weesan that it would temporarily not be availing of the latter's
sewing services and at the same time requesting for the return of the sewing machines it lent to Weesan. Assuming said letter to be true,
why was Fairland terminating Weesan's services only on January 31, 2003 when it is now claiming that its contractual relationship with
the latter only lasted until 1997? Thus, we find the contentions rather abstruse.

G.R. No. 182915

"It is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the respondent without the latter being served with
summons." However, "if there is no valid service of summons, the court can still acquire jurisdiction over the person of the defendant by
virtue of the latter's voluntary appearance."

Although not served with summons, jurisdiction over Fairland and Debbie was acquired through their voluntary
appearance.
It can be recalled that the workers' original complaints for non-payment/underpayment of wages and benefits were only against
Susan/Weesan. For these complaints, the Labor Arbiter issued summons to Susan/Weesan which was received by the latter on
68
January 15, 2003.The workers thereafter amended their then already consolidated complaints to include illegal dismissal as an additional
cause of action as well as Fairland and Debbie as additional respondents. We have, however, scanned the records but found nothing to
indicate that summons with respect to the said amended complaints was ever served upon Weesan, Susan, or Fairland. True to their
claim, Fairland and Debbie were indeed never summoned by the Labor Arbiter.

The crucial question now is: Did Fairland and Debbie voluntarily appear before the Labor Arbiter as to submit themselves to its jurisdiction?
Fairland argued before the CA that it did not engage Atty. Geronimo as its counsel. However, the Court held in Santos v. National Labor
Relations Commission, viz.:

In the instant petition for certiorari, petitioner Santos reiterates that he should not have been adjudged personally liable
by public respondents, the latter not having validly acquired jurisdiction over his person whether by personal service of
summons or by substituted service under Rule 19 of the Rules of Court.

Petitioner's contention is unacceptable. The fact that Atty. Romeo B. Perez has been able to timely ask for a deferment
of the initial hearing on 14 November 1986, coupled with his subsequent active participation in the proceedings, should
disprove the supposed want of service of legal processes. Although as a rule, modes of service of summons are strictly
followed in order that the court may acquire jurisdiction over the person of a defendant, such procedural modes,
however, are liberally construed in quasi-judicial proceedings, substantial compliance with the same being considered
adequate. Moreover, jurisdiction over the person of the defendant in civil cases is acquired not only by service of
summons but also by voluntary appearance in court and submission to its authority. 'Appearance' by a legal advocate
is such 'voluntary submission to a court's jurisdiction'. It may be made not only by actual physical appearance but
likewise by the submission of pleadings in compliance with the order of the court or tribunal.

To say that petitioner did not authorize Atty. Perez to represent him in the case is to unduly tax credulity. Like the
Solicitor General, the Court likewise considers it unlikely that Atty. Perez would have been so irresponsible as to
represent petitioner if he were not, in fact, authorized. Atty. Perez is an officer of the court, and he must be presumed
to have acted with due propriety. The employment of a counsel or the authority to employ an attorney, it might be
pointed out, need not be proved in writing; such fact could [be] inferred from circumstantial evidence. . .

From the records, it appears that Atty. Geronimo first entered his appearance on behalf of Susan/Weesan in the hearing held on April 3,
2003. Being then newly hired, he requested for an extension of time within which to file a position paper for said respondents. On the
next scheduled hearing on April 28, 2003, Atty. Geronimo again asked for another extension to file a position paper for all the respondents
considering that he likewise entered his appearance for Fairland. Thereafter, said counsel filed pleadings such as Respondents' Position
Paper and Respondents' Consolidated Reply on behalf of all the respondents namely, Susan/Weesan, Fairland and Debbie. The fact that
Atty. Geronimo entered his appearance for Fairland and Debbie and that he actively defended them before the Labor Arbiter raised the
presumption that he is authorized to appear for them. As held in Santos, it is unlikely that Atty. Geronimo would have been so irresponsible
as to represent Fairland and Debbie if he were not in fact authorized. As an officer of the Court, Atty. Geronimo is presumed to have
acted with due propriety. Moreover, "[i]t strains credulity that a counsel who has no personal interest in the case would fight for and defend
a case with persistence and vigor if he has not been authorized or employed by the party concerned."

We do not agree with the reasons relied upon by the CA's Special Ninth Division in its May 9, 2008 Resolution in CA-G.R. No. 93204
when it ruled that Fairland, through Atty. Geronimo, did not voluntarily submit itself to the Labor Arbiter's jurisdiction.

In so ruling, the CA noted that Atty. Geronimo has no prior authorization from the board of directors of Fairland to handle the case. Also,
the alleged verification signed by Debbie, who is not one of Fairland's duly authorized directors or officers, is defective as no board
resolution or secretary's certificate authorizing her to sign the same was attached thereto. Because of these, the Special Ninth Division
held that the Labor Arbiter committed grave abuse of discretion in not requiring Atty. Geronimo to show his proof of authority to represent
Fairland considering that the latter is a corporation.

The presumption of authority of counsel to appear on behalf of a client is found both in the Rules of Court and in the New Rules of
Procedure of the NLRC.

Sec. 21, Rule 138 of the Rules of Court provides:

Sec. 21.Authority of attorney to appear. — An attorney is presumed to be properly authorized to represent any cause
in which he appears, and no written power of attorney is required to authorize him to appear in court for his client, but
the presiding judge may, on motion of either party and reasonable grounds therefor being shown, require any attorney
who assumes the right to appear in a case to produce or prove the authority under which he appears, and to disclose
whenever pertinent to any issue, the name of the person who employed him, and may thereupon make such order as
justice requires. An attorney willfully appearing in court for a person without being employed, unless by leave of the
court, may be punished for contempt as an officer of the court who has misbehaved in his official transactions.

On the other hand, Sec. 8, Rule III of the New Rules of Procedure of the NLRC, which is the rules prevailing at that time, states in part:

SECTION 8.APPEARANCES. — An attorney appearing for a party is presumed to be properly authorized for that
purpose. However, he shall be required to indicate in his pleadings his PTR and IBP numbers for the current year.
69
Between the two provisions providing for such authority of counsel to appear, the Labor Arbiter is primarily bound by the latter one, the
NLRC Rules of Procedure being specifically applicable to labor cases. As Atty. Geronimo consistently indicated his PTR and IBP numbers
in the pleadings he filed, there is no reason for the Labor Arbiter not to extend to Atty. Geronimo the presumption that he is authorized to
represent Fairland.

Even if we are to apply Sec. 21, Rule 138 of the Rules of Court, the Labor Arbiter cannot be expected to require Atty. Geronimo to prove
his authority under said provision since there was no motion to that effect from either party showing reasonable grounds therefor.
Moreover, the fact that Debbie signed the verification attached to the position paper filed by Atty. Geronimo, without a secretary's
certificate or board resolution attached thereto, is not sufficient reason for the Labor Arbiter to be on his guard and require Atty. Geronimo
to prove his authority. Debbie, as General Manager of Fairland is one of the officials of the company who can sign the verification without
need of a board resolution because as such, she is in a position to verify the truthfulness and correctness of the allegations in the petition.

Although we note that Fairland filed a disbarment case against Atty. Geronimo due to the former's claim of unauthorized appearance, we
hold that same is not sufficient to overcome the presumption of authority. Such mere filing is not proof of Atty. Geronimo's alleged
unauthorized appearance. Suffice it to say that an attorney's presumption of authority is a strong one. "A mere denial by a party that he
authorized an attorney to appear for him, in the absence of a compelling reason, is insufficient to overcome the presumption, especially
when the denial comes after the rendition of an adverse judgment," such as in the present case.

Citing PNOC Dockyard and Engineering Corporation v. National Labor Relations Commission, the CA likewise emphasized that in labor
cases, both the party and his counsel must be duly served their separate copies of the order, decision or resolution unlike in ordinary
proceedings where notice to counsel is deemed notice to the party. It then quoted Article 224 of the Labor Code as follows:

ARTICLE 224. Execution of decisions, orders or awards. — (a) the Secretary of Labor and Employment or any Regional
Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of
any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and
executory, requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or awards of the
Secretary of Labor and Employment or [R]egional Director, the Commission, the Labor Arbiter or Med-Arbiter, or
Voluntary Arbitrators. In any case, it shall be the duty of the responsible officer to separately furnish immediately the
counsels of record and the parties with copies of said decision, orders or awards. Failure to comply with the duty
prescribed herein shall subject such responsible officer to appropriate administrative sanctions . . . (Emphasis in the
original).

The CA then concluded that since Fairland and its counsel were not separately furnished with a copy of the August 26, 2005 NLRC
Resolution denying the motions for reconsideration of its November 30, 2004 Decision, said Decision cannot be enforced against Fairland.
The CA likewise concluded that because of this, said November 30, 2004 Decision which held Susan/Weesan and Fairland solidarily
liable to the workers, has not attained finality.

We cannot agree. In Ginete v. Sunrise Manning Agency we held that:

The case of PNOC Dockyard and Engineering Corporation vs. NLRC cited by petitioner enunciated that 'in labor cases,
both the party and its counsel must be duly served their separate copies of the order, decision or resolution; unlike in
ordinary judicial proceedings where notice to counsel is deemed notice to the party.' Reference was made therein to
Article 224 of the Labor Code. But, as correctly pointed out by private respondent in its Comment to the petition, Article
224 of the Labor Code does not govern the procedure for filing a petition for certiorari with the Court of Appeals from
the decision of the NLRC but rather, it refers to the execution of 'final decisions, orders or awards' and requires the
sheriff or a duly deputized officer to furnish both the parties and their counsel with copies of the decision or award for
that purpose. There is no reference, express or implied, to the period to appeal or to file a petition for certiorari as
indeed the caption is 'execution of decisions, orders or awards'. Taken in proper context, Article 224 contemplates the
furnishing of copies of 'final decisions, orders or awards' and could not have been intended to refer to the period for
computing the period for appeal to the Court of Appeals from a non-final judgment or order. The period or manner of
'appeal' from the NLRC to the Court of Appeals is governed by Rule 65 pursuant to the ruling of the Court in the case
of St. Martin Funeral Homes vs. NLRC. Section 4 of Rule 65, as amended, states that the 'petition may be filed not
later than sixty (60) days from notice of the judgment, or resolution sought to be assailed'.

Corollarily, Section 4, Rule III of the New Rules of Procedure of the NLRC expressly mandates that '(F)or the purposes
of computing the period of appeal, the same shall be counted from receipt of such decisions, awards or orders by the
counsel of record.' Although this rule explicitly contemplates an appeal before the Labor Arbiter and the NLRC, we do
not see any cogent reason why the same rule should not apply to petitions forcertiorari filed with the Court of Appeals
from decisions of the NLRC. This procedure is in line with the established rule that notice to counsel is notice to
party and when a party is represented by counsel, notices should be made upon the counsel of record at his
given address to which notices of all kinds emanating from the court should be sent. It is to be noted also that
Section 7 of the NLRC Rules of Procedure provides that '(A)ttorneys and other representatives of parties shall
have authority to bind their clients in all matters of procedure'' a provision which is similar to Section 23, Rule
138 of the Rules of Court. More importantly, Section 2, Rule 13 of the 1997 Rules of Civil Procedure analogously
provides that if any party has appeared by counsel, service upon him shall be made upon his counsel. (Citations
omitted; emphasis supplied)

70
To stress, Article 224 contemplates the furnishing of copies of final decisions, orders or awards both to the parties and their counsel in
connection with the execution of such final decisions, orders or awards. However, for the purpose of computing the period for filing an
appeal from the NLRC to the CA, same shall be counted from receipt of the decision, order or award by the counsel of record pursuant
to the established rule that notice to counsel is notice to party. And since the period for filing of an appeal is reckoned from the counsel's
receipt of the decision, order or award, it necessarily follows that the reckoning period for their finality is likewise the counsel's date of
receipt thereof, if a party is represented by counsel. Hence, the date of receipt referred to in Sec. 14, Rule VII of the then in force New
Rules of Procedure of the NLRC which provides that decisions, resolutions or orders of the NLRC shall become executory after 10
calendar days from receipt of the same, refers to the date of receipt by counsel. Thus contrary to the CA's conclusion, the said NLRC
Decision became final, as to Fairland, 10 calendar days after Atty. Tecson's receipt thereof. In sum, we hold that the Labor Arbiter had
validly acquired jurisdiction over Fairland and its manager, Debbie, through the appearance of Atty. Geronimo as their counsel and
likewise, through the latter's filing of pleadings on their behalf.

Fairland is Weesan's principal.

In addition to our discussion in G.R. No. 189658 with respect to the finding that Susan/Weesan is a mere labor-only contractor which we
find to be likewise significant here, a careful examination of the records reveals other telling facts that Fairland is Susan/Weesan's
principal, to wit: (1) aside from sewing machines, Fairland also lent Weesan other equipment such as fire extinguishers, office tables and
chairs, and plastic chairs; (2) no proof evidencing the contractual arrangement between Weesan and Fairland was ever submitted by
Fairland; (3) while both Weesan and Fairland assert that the former had other clients aside from the latter, no proof of Weesan's
contractual relationship with its other alleged client is extant on the records; and (4) there is no showing that any of the workers were
assigned to other clients aside from Fairland. Moreover, as found by the NLRC and affirmed by both the Special Former Special Eighth
Division in CA-G.R. SP No. 93860 and the First Division in CA-G.R. SP No. 93204, the activities, the manner of work and the movement
of the workers were subject to Fairland's control. It bears emphasizing that "factual findings of quasi-judicial agencies like the NLRC,
when affirmed by the Court of Appeals, as in the present case, are conclusive upon the parties and binding on this Court."

Viewed in its entirety, we thus declare that Fairland is the principal of the labor-only contractor, Weesan.

Fairland, therefore, as the principal employer, is solidarily liable with Susan/Weesan, the labor-only contractor, for the rightful claims of
the employees. Under this set-up, Susan/Weesan, as the "labor-only" contractor, is deemed an agent of the principal, Fairland, and the
law makes the principal responsible to the employees of the "labor-only" contractor as if the principal itself directly hired or employed the
employees.

WHEREFORE, the Court,

1) in G.R. No. 189658, DENIES the Petition for Review on Certiorari. The assailed Decision dated July 20, 2009 and Resolution
dated October 1, 2009 of the Special Former Special Eighth Division of the Court of Appeals in CA-G.R. No. 93860 are
AFFIRMED.

2) in G.R. No. 182915, GRANTS the Petition for Review on Certiorari. The assailed Resolution dated May 9, 2008 of the Special
Ninth Division of the Court of Appeals in CA-G.R. No. 93204 is hereby REVERSED and SET ASIDE and the Decision dated
July 25, 2007 of the First Division of the Court of Appeals is REINSTATED and AFFIRMED.

38. Polyfoam-RGC International Corp vs Concepcion GR No. 172349 June 13, 2012

Facts: On February 8, 2000, respondent filed a Complaint for illegal dismissal, non-payment of wages, premium pay for rest day,
separation pay, service incentive leave pay, 13th month pay, damages, and attorney's fees against Polyfoam and Ms. Natividad Cheng
(Cheng). Respondent alleged that he was hired by Polyfoam as an "all-around" factory worker and served as such for almost six years.
On January 14, 2000, he allegedly discovered that his time card was not in the rack and was later informed by the security guard that he
could no longer punch his time card. When he protested to his supervisor, the latter allegedly told him that the management decided to
dismiss him due to an infraction of a company rule. Cheng, the company's manager, also refused to face him. Respondent's counsel later
wrote a letter to Polyfoam's manager requesting that respondent be re-admitted to work, but the request remained unheeded prompting
the latter to file the complaint for illegal dismissal.

On April 28, 2000, Gramaje filed a Motion for Intervention claiming to be the real employer of respondent. On the other hand, Polyfoam
and Cheng filed a Motion to Dismiss on the grounds that the NLRC has no jurisdiction over the case, because of the absence of employer-
employee relationship between Polyfoam and respondent and that the money claims had already prescribed.

On May 24, 2000, Labor Arbiter Adolfo Babiano issued an Order granting Gramaje's motion for intervention, it appearing that she is an
indispensable party and denying Polyfoam and Cheng's motion to dismiss as the lack of employer-employee relationship is only a matter
of defense.

In their Position Paper, Polyfoam and Cheng insisted that the NLRC has no jurisdiction over the case, because respondent was not their
employee. They likewise contended that respondent's money claims had already prescribed. Finally, they fault respondent for including
Cheng as a party-defendant, considering that she is not even a director of the company.

In her Position Paper, Gramaje claimed that P.A. Gramaje Employment Services (PAGES) is a legitimate job contractor who provided
some manpower needs of Polyfoam. It was alleged that respondent was hired as "packer" and assigned to Polyfoam, charged with

71
packing the latter's finished foam products. She argued, however, that respondent was not dismissed from employment, rather, he simply
stopped reporting for work.

On December 14, 2001, Labor Arbiter (LA) Marita V. Padolina rendered a Decision finding respondent to have been illegally dismissed
from employment and holding Polyfoam and Gramaje/PAGES solidarily liable for respondent's money claims. The dispositive portion of
the Decision is quoted below for easy reference:

WHEREFORE, premises considered, judgment is hereby rendered finding complainant to have been illegally
dismissed and respondents Polyfoam-RGC International Corporation, P.A. Gramaje Employment Services/Precilla
A. Gramaje are ordered to pay complainant jointly and severally the following:

1).Separation Pay-P52,000.00
2).Backwages-157,041.38
3).13th Month Pay-17,407.00
4).Moral Damages-5,000.00
5).Exemplary Damages-5,000.00
6).Attorney's fees-23,644.83
–––––––––––
P260,093.21
All other claims are denied for lack of factual basis.

The Labor Arbiter found respondent to have been illegally dismissed from employment and thus is entitled to full backwages inclusive of
allowances. In lieu of reinstatement, the LA awarded respondent separation pay of one month salary for every year of service from April
21, 1994 until promulgation of the decision. The LA further held that petitioners are solidarily liable to respondent for the latter's money
claims, considering that Gramaje (the contractor) was not enrolled as private employment agency in the registry of the Regional Office of
the Department of Labor and Employment (DOLE) and considering further that respondent performed a job directly related to the main
business of Polyfoam.

On appeal by petitioners, the NLRC modified the LA decision by exonerating Polyfoam from liability for respondent's claim for separation
pay and deleting the awards of backwages, 13th month pay, damages, and attorney's fees. The dispositive portion of the decision reads:

WHEREFORE, the appealed decision is modified in that the complaint against respondent-appellant Polyfoam-RGC
International Corp. is dismissed. However, respondent-intervenor-appellant P.A. Gramaje Employment Services is
hereby ordered to pay complainant separation pay of one (1) month salary for every year of service reckoned from April
21, 1996 up to the rendition of this decision, or the sum of P58,5000 (sic).

The awards of backwages, 13th month pay, damages, and attorney's fees are set aside.

The NLRC found Gramaje to be an independent contractor who contracted the packaging aspect of the finished foam products of
Polyfoam. Pursuant to said contract, Gramaje's employees, including respondent, were assigned to Polyfoam but remained under the
control and supervision of Gramaje. It likewise concluded that Gramaje had its own office equipment, tools, and substantial capital and,
in fact, supplied the plastic containers and carton boxes used by her employees in performing their duties. The Commission also found
sufficient evidence to prove that Gramaje paid respondent's wages and benefits and reported the latter to the Social Security System
(SSS) as a covered employee. As to whether there was illegal dismissal, the NLRC answered in the negative, since respondent was not
notified that he had been dismissed nor was he prevented from returning to his work. The NLRC found Gramaje liable for claiming that
respondent abandoned his job. Reinstatement, however, could not be decreed because of the strained relations between the parties;
hence, the award of separation pay. But the NLRC refused to award backwages. The award of moral and exemplary damages was
likewise deleted for lack of evidence.

Aggrieved, respondent elevated the case to the CA in a special civil action for certiorari under Rule 65 of the Rules of Court. On
December 19, 2005, the appellate court rendered the assailed decision, the dispositive portion of which reads:

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The assailed Decision of the National
Labor Relations Commission, First Division dated May 7, 2003 is REVERSED and the decision of Labor Arbiter
Marita Padolina, dated December 14, 2001, is hereby REINSTATED.

The CA agreed with the LA's conclusion that Gramaje is not a legitimate job contractor but only a "labor-only" contractor because of the
following: (1) Gramaje failed to present its Audited Financial Statement that would have shown its financial standing and ownership of
equipment, machineries, and tools necessary to run her own business; (2) Gramaje failed to present a single copy of the purported
contract with Polyfoam as to the packaging aspect of the latter's business; (3) Gramaje's licenses supposedly issued by the DOLE
appeared to be spurious. (4) Gramaje was not registered with DOLE as a private recruitment agency; 30 and (5) Gramaje presented only
one (1) SSS Quarterly Collection List whose authenticity is doubtful. The CA noted that petitioners are represented by only one law firm
though they made it appear that they were represented by different lawyers. These circumstances, says the CA, give rise to the suspicion
that the creation or establishment of Gramaje was just a scheme designed to evade the obligation inherent in an employer-employee
relationship. Thus, respondent was indeed Polyfoam's employee. This relationship was specifically shown by Polyfoam's exercise of
supervision over the work of respondent; the furnishing of a copy of Polyfoam's "Mga Alituntunin at Karampatang Parusa" to serve as
respondent's guide in the performance of his duty; the length of time that respondent had performed activities necessary for
Polyfoam's business; and Polyfoam's act of directly firing respondent. Finally, the appellate court affirmed the LA's findings of illegal
72
dismissal as respondent was dismissed from the service without cause and due process. Consequently, separation pay in lieu of
reinstatement was awarded. The CA quoted with approval the LA conclusions on the award of respondent's other money claims.

Petitioners now come before the Court in this petition for review on certiorari based on the following assigned errors:

I. THE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION FOR CERTIORARI FILED BY HEREIN
RESPONDENT CONSIDERING THE FACT THAT IT WAS CLEARLY FILED OUT OF TIME, HAVING BEEN FILED
ON THE 77TH DAY FROM RECEIPT BY HEREIN RESPONDENT OF THE RESOLUTION OF THE NLRC
DENYING HIS MOTION FOR RECONSIDERATION.

II. THE COURT OF APPEALS ERRED IN NOT UPHOLDING THE DECISION OF THE NLRC AND ITS FINDINGS
THAT A) RESPONDENT CONCEPCION IS AN EMPLOYEE OF P.A. GRAMAJE EMPLOYMENT SERVICES; B)
P.A. GRAMAJE IS A LEGITIMATE JOB CONTRACTOR; C) RESPONDENT CONCEPCION WAS NOT DISMISSED
FROM HIS JOB, CONSIDERING THAT THESE FINDINGS ARE FULLY SUPPORTED BY EVIDENCE.

III. THE COURT OF APPEALS ERRED IN REINSTATING THE DECISION OF THE LABOR ARBITER MARITA
PADOLINA AWARDING RESPONDENT CONCEPCION BACKWAGES, MORAL AND EXEMPLARY DAMAGES
AND ATTORNEY'S FEES. 40

There are three issues for resolution, to wit: (1) whether or not Gramaje is an independent job contractor; (2) whether or not an employer-
employee relationship exists between Polyfoam and respondent; and (3) whether or not respondent was illegally dismissed from
employment.

Gramaje is a Labor-Only Contractor

Article 106 of the Labor Code explains the relations which may arise between an employer, a contractor, and the contractor's employees,
thus:
ART. 106.Contractor or subcontracting. — Whenever an employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

In Sasan, Sr. v. National Labor Relations Commission 4th Division, 41 the Court distinguished permissible job contracting or
subcontracting from "labor-only" contracting, to wit:

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm
out to a contractor or subcontractor the performance or completion of a specific job, work or service within a definite
or predetermined period, regardless of whether such job, work or service is to be performed or completed within or
outside the premises of the principal. A person is considered engaged in legitimate job contracting or subcontracting
if the following conditions concur:

(a)The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its own
manner and method, and free from the control and direction of the principal in all matters connected with
the performance of the work except as to the results thereof;

(b)The contractor or subcontractor has substantial capital or investment; and

(c)The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits.

73
 In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the
following elements are present:

(a)The contractor or subcontractor does not have substantial capital or investment to actually perform the
job, work or service under its own account and responsibility; and

(b)The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.

The test of independent contractorship is "whether one claiming to be an independent contractor has contracted to do the work according
to his own methods and without being subject to the control of the employer, except only as to the results of the work." In San Miguel
Corporation v. Semillano, the Court laid down the criteria in determining the existence of an independent and permissible contractor
relationship, to wit:

. . . [Whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of a specified piece of work;
the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment
of the contractor's workers; the control of the premises; the duty to supply the premises, tools, appliances, materials,
and labor; and the mode, manner and terms of payment. 45

Simply put, the totality of the facts and the surrounding circumstances of the case are to be considered. Each case must be
determined by its own facts and all the features of the relationship are to be considered. 46

Applying the foregoing tests, we agree with the CA's conclusion that Gramaje is not an independent job contractor, but a "labor-only"
contractor.

First, Gramaje has no substantial capital or investment. The presumption is that a contractor is a labor-only contractor unless he
overcomes the burden of proving that it has substantial capital, investment, tools, and the like. The employee should not be expected to
prove the negative fact that the contractor does not have substantial capital, investment and tools to engage in job-contracting.

Gramaje claimed that it has substantial capital of its own as well as investment in its office, equipment and tools. She pointed out that she
furnished the plastic containers and carton boxes used in carrying out the function of packing the mattresses of Polyfoam. She added
that she had placed in Polyfoam's workplace ten (10) sealing machines, twenty (20) hand trucks, and two (2) forklifts to enable respondent
and the other employees of Gramaje assigned at Polyfoam to perform their job. Finally, she explained that she had her own office with
her own staff. 48 However, aside from her own bare statement, neither Gramaje nor Polyfoam presented evidence showing Gramaje's
ownership of the equipment and machineries used in the performance of the alleged contracted job. Considering that these machineries
are found in Polyfoam's premises, there can be no other logical conclusion but that the tools and equipment utilized by Gramaje and her
"employees" are owned by Polyfoam. Neither did Polyfoam nor Gramaje show that the latter had clients other than the former. Since
petitioners failed to adduce evidence that Gramaje had any substantial capital, investment or assets to perform the work contracted for,
the presumption that Gramaje is a labor-only contractor stands. 49

Second, Gramaje did not carry on an independent business or undertake the performance of its service contract according to its own
manner and method, free from the control and supervision of its principal, Polyfoam, its apparent role having been merely to recruit
persons to work for Polyfoam. 50 It is undisputed that respondent had performed his task of packing Polyfoam's foam products in
Polyfoam's premises. As to the recruitment of respondent, petitioners were able to establish only that respondent's application was
referred to Gramaje, but that is all. Prior to his termination, respondent had been performing the same job in Polyfoam's business for
almost six (6) years. He was even furnished a copy of Polyfoam's "Mga Alituntunin at Karampatang Parusa," 51 which embodied
Polyfoam's rules on attendance, the manner of performing the employee's duties, ethical standards, cleanliness, health, safety, peace
and order. These rules carried with them the corresponding penalties in case of violation.

While it is true that petitioners submitted the Affidavit of Polyfoam's supervisor Victor Abadia, claiming that the latter did not exercise
supervision over respondent because the latter was not Polyfoam's but Gramaje's employee, said Affidavit is insufficient to prove such
claim. Petitioners should have presented the person who they claim to have exercised supervision over respondent and their alleged
other employees assigned to Polyfoam. It was never established that Gramaje took entire charge, control and supervision of the work
and service agreed upon. And as aptly observed by the CA, "it is likewise highly unusual and suspect as to the absence of a written
contract specifying the performance of a specified service, the nature and extent of the service or work to be done and the term and
duration of the relationship."52

An Employer-Employee Relationship Exists Between Respondent and Polyfoam

A finding that a contractor is a "labor-only" contractor, as opposed to permissible job contracting, is equivalent to declaring that there is
an employer-employee relationship between the principal and the employees of the supposed contractor, and the "labor-only" contractor
is considered as a mere agent of the principal, the real employer. 53 In this case, Polyfoam is the principal employer and Gramaje is the
labor-only contractor. Polyfoam and Gramaje are, therefore, solidarily liable for the rightful claims of respondent.

Respondent was Illegally Dismissed from Employment

Respondent stated that on January 14, 2000, his time card was suddenly taken off the rack. His supervisor later informed him that
Polyfoam's management decided to dismiss him due to infraction of company rule. In short, respondent insisted that he was dismissed
from employment without just or lawful cause and without due process. Polyfoam did not offer any explanation of such dismissal. It,
74
instead, explained that respondent's real employer is Gramaje. Gramaje, on the other hand, denied the claim of illegal dismis sal. She
shifted the blame on respondent claiming that the latter in fact abandoned his work.

The LA gave credence to respondent's narration of the circumstances of the case. Said conclusion was affirmed by the CA. We find no
reason to depart from such findings.

Abandonment cannot be inferred from the actuations of respondent. When he discovered that his time card was off the rack, he
immediately inquired from his supervisor. He later sought the assistance of his counsel, who wrote a letter addressed to Polyfoam
requesting that he be re-admitted to work. When said request was not acted upon, he filed the instant illegal dismissal case. These
circumstances clearly negate the intention to abandon his work.

Petitioners failed to show any valid or authorized cause under the Labor Code which allowed it to terminate the services of respondent.
Neither was it shown that respondent was given ample opportunity to contest the legality of his dismissal. No notice of termination was
given to him. Clearly, respondent was not afforded due process. Having failed to establish compliance with the requirements of termination
of employment under the Labor Code, the dismissal of respondent was tainted with illegality. 55 Consequently, respondent is 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 up to the time of his actual reinstatement.
However, if reinstatement is no longer feasible as in this case, separation pay equivalent to one month salary for every year of service
shall be awarded as an alternative. 56 Thus, the CA is correct in affirming the LA's award of separation pay with full backwages and other
monetary benefits.

WHEREFORE, premises considered, the petition is hereby DENIED. The Court of Appeals Decision dated December 19, 2005 and
Resolution dated April 25, 2006, in CA-G.R. SP No. 83696, are AFFIRMED. SO ORDERED.

39. Superior Packaging Corp. vs Balagsay et. al. GR 178909 October 10, 2012

The main issue in this case is whether Superior Packaging Corporation (petitioner) may be held solidarily liable with Lancer Staffing &
Services Network, Inc. (Lancer) for respondents' unpaid money claims.

The facts are undisputed.

The petitioner engaged the services of Lancer to provide reliever services to its business, which involves the manufacture and sale of
commercial and industrial corrugated boxes. According to petitioner, the respondents were engaged for four (4) months — from February
to June 1998 — and their tasks included loading, unloading and segregation of corrugated boxes.

Pursuant to a complaint filed by the respondents against the petitioner and its President, Cesar Luz (Luz), for underpayment of wages,
non-payment of premium pay for worked rest, overtime pay and non-payment of salary, the Department of Labor and Employment (DOLE)
conducted an inspection of the petitioner's premises and found several violations, to wit: (1) non-presentation of payrolls and daily time
records; (2) non-submission of annual report of safety organization; (3) medical and accident/illness reports; (4) non-registration of
establishment under Rule 1020 of Occupational and Health Standards; and (5) no trained first aide. 1 Due to the petitioner's failure to
appear in the summary investigations conducted by the DOLE, an Order 2 was issued on June 18, 2003 finding in favor of the respondents
and adopting the computation of the claims submitted. Petitioner and Luz were ordered, among others, to pay respondents their total
claims in the amount of Eight Hundred Forty Thousand Four Hundred Sixty-Three Pesos and 38/100 (P840,463.38). 3

They filed a motion for reconsideration on the ground that respondents are not its employees but of Lancer and that they pay Lancer in
lump sum for the services rendered. The DOLE, however, denied its motion in its Resolution 4 dated February 16, 2004, ruling that the
petitioner failed to support its claim that the respondents are not its employees, and even assuming that they were employed by Lancer,
the petitioner still cannot escape liability as Section 13 of the Department Order No. 10, Series of 1997, makes a principal jointly and
severally liable with the contractor to contractual employees to the extent of the work performed when the contractor fails to pay its
employees' wages.

Their appeal to the Secretary of DOLE was dismissed per Order 5 dated July 30, 2004 and the Order dated June 18, 2003 and Resolution
dated February 16, 2004 were affirmed. 6 Their motion for reconsideration likewise having been dismissed by the Secretary of DOLE in
an Order dated January 21, 2005, 7 petitioner and Luz filed a petition for certiorariwith the Court of Appeals (CA).

On November 17, 2006, the CA affirmed the Secretary of DOLE's orders, with the modification in that Luz was absolved of any personal
liability under the award. 8 The petitioner filed a partial motion for reconsideration insofar as the finding of solidary liability with Lancer is
concerned but it was denied by the CA in a Resolution 9 dated July 10, 2007.
The petitioner is now before the Court on petition for review under Rule 45 of the Rules of Court, alleging that:

I THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING
THE RULING OF THE SECRETARY OF LABOR AND EMPLOYMENT THAT THE COMPANY IS SOLIDARILY
LIABLE WITH THE CONTRACTOR NOTWITHSTANDING THE FACT THAT:
75
 A.THE COMPANY CANNOT BE HELD SOLIDARILY LIABLE WITH THE CONTRACTOR FOR THE
PENALTY OR SANCTION IMPOSED BY WAY OF "DOUBLE INDEMNITY" UNDER REPUBLIC
ACT NO. 6727.

B.THERE IS NO EVIDENCE TO SHOW THAT PRIVATE RESPONDENTS RENDERED OVERTIME WORK

AND ACTUALLY WORKED ON THEIR RESTDAYS FOR THE COMPANY FOR THE PERIOD IN
QUESTION[.]

II THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING
THE FINDINGS OF THE SECRETARY OF LABOR AND EMPLOYMENT THAT THE CONTRACTOR IS
ENGAGED IN LABOR-ONLY CONTRACTING.

On the first ground, the petitioner argues that the DOLE erred in doubling respondents' underpayment of wages and regular holiday pay
under Republic Act No. 6727 (Wage Rationalization Act) inasmuch as the solidary liability of a principal does not extend to a punitive
award against a contractor. 11 The petitioner also contends that there is no evidence showing that the respondents rendered overtime
work and that they actually worked on their rest days for them to be entitled to such pay. 12

On the second ground, the petitioner objects to the finding that it is engaged in labor-only contracting and is consequently an indirect
employer, considering that it is beyond the visitorial and enforcement power of the DOLE to make such conclusion. According to the
petitioner, such conclusion may be made only upon consideration of evidentiary matters and cannot be determined solely through a labor
inspection. 13 The petitioner also refutes respondents' alleged belated argument that the latter are its employees. 14

The petition is bereft of merit.

To begin with, the Court will not resolve or dwell on the petitioner's argument on the doubling of respondents' underpayment of wages
and regular holiday pay by the DOLE for the simple reason that this is the first time that the petitioner raised such contention. From its
pleadings filed in the DOLE and all the way up to the CA, the petitioner never questioned nor discussed such issue. It is only now before
the Court that the petitioner belatedly presented such argument. It is well-settled that points of law, theories, issues and arguments not
brought to the attention of the lower court, administrative agency or quasi-judicial body need not be considered by a reviewing court, as
they cannot be raised for the first time at that late stage. 15 To consider the alleged facts and arguments raised belatedly would amount
to trampling on the basic principles of fair play, justice and due process. 16

With regard to the contention that there is no evidence to support the finding that the respondents rendered overtime work and that they
worked on their rest day, the resolution of this argument requires a review of the factual findings and the evidence presented, which this
Court will not do. This Court is not a trier of facts and this applies with greater force in labor cases. 17 Hence, where the factual findings
of the labor tribunals or agencies conform to, and are affirmed by, the CA, the same are accorded respect and finality, and are binding
upon this Court. 18

Petitioner also questions the authority of the DOLE to make a finding of an employer-employee relationship concomitant to its visitorial
and enforcement power. The Court notes at this juncture that the petitioner, again, did not raise this question in the proceedings before
the DOLE. At best, what the petitioner raised was the sufficiency of evidence proving the existence of an employer-employee relationship
and it was only in its petition for certiorari with the CA that the petitioner sought to have this matter addressed. The CA should have
refrained from resolving said matter as the petitioner was deemed to have waived such argument and was estopped from raising the
same. 19 SDTcAH

At any rate, such argument lacks merit. The DOLE clearly acted within its authority when it determined the existence of an employer-
employee relationship between the petitioner and respondents as it falls within the purview of its visitorial and enforcement power under
Article 128 (b) of the Labor Code, which provides:

Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of
this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized representative shall 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 employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.

In People's Broadcasting (Bombo Radyo Phils., Inc.) v. Secretary of the Department of Labor and Employment, 20 the Court stated that
it can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the
existence of an employer-employee relationship. Such determination, however, is merely preliminary, incidental and collateral to
the DOLE's primary function of enforcing labor standards provisions. Such power was further explained recently by the Court in its
Resolution 21 dated March 6, 2012 issued inPeople's Broadcasting, viz.:

The determination of the existence of an employer-employee relationship by the DOLE must be respected. The
expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the
alleged employer could, by the simple expedient of disputing the employer-employee relationship, force the referral
of the matter to the NLRC. The Court issued the declaration that at least a prima facie showing of the absence of an
76
 employer-employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that will be
faced with that evidence, and it is the DOLE that will weigh it, to see if the same does successfully refute the existence
of an employer-employee relationship.

. . . [T]he power of the DOLE to determine the existence of an employer-employee relationship need not necessarily
result in an affirmative finding. The DOLE may well make the determination that no employer-employee relationship
exists, thus divesting itself of jurisdiction over the case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a determination
as to the existence of an employer-employee relationship in the exercise of its visitorial and enforcement power,
subject to judicial review, not review by the NLRC. 22

Also, the existence of an employer-employee relationship is ultimately a question of fact. 23 The determination made in this case by the
DOLE, albeit provisional, and as affirmed by the Secretary of DOLE and the CA is beyond the ambit of a petition for review on certiorari.
24

The Court now comes to the issue regarding the nature of the relationship between the petitioner and respondents, and the consequent
liability of the petitioner to the respondents under the latter's claim.

It was the consistent conclusion of the DOLE and the CA that Lancer was not an independent contractor but was engaged in "labor-only
contracting"; hence, the petitioner was considered an indirect employer of respondents and liable to the latter for their unpaid money
claims.

At the time of the respondents' employment in 1998, the applicable regulation was DOLE Department Order No. 10, Series of 1997. 25
Under said Department Order, labor-only contracting was defined as follows:

Sec. 9.Labor-only contracting. — (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:
(1)Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and IDSaEA

(2)The workers recruited and placed by such persons are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed.

Labor-only contracting is prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of
the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
26

According to the CA, the totality of the facts and surrounding circumstances of this case point to such conclusion. The Court agrees.
The ratio of Lancer's authorized capital stock of P400,000.00 as against its subscribed and paid-up capital stock of P25,000.00 shows
the inadequacy of its capital investment necessary to maintain its day-to-day operations. And while the Court does not set an absolute
figure for what it considers substantial capital for an independent job contractor, it measures the same against the type of work which
the contractor is obligated to perform for the principal. 27 Moreover, the nature of respondents' work was directly related to the
petitioner's business. The marked disparity between the petitioner's actual capitalization (P25,000.00) and the resources needed to
maintain its business, i.e., "to establish, operate and manage a personnel service company which will conduct and undertake services
for the use of offices, stores, commercial and industrial services of all kinds," supports the finding that Lancer was, indeed, a labor-only
contractor. Aside from these is the undisputed fact that the petitioner failed to produce any written service contract that might serve as
proof of its alleged agreement with Lancer. 28

Finally, a finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee relationship
between the principal and the employees of the supposed contractor, and the "labor-only" contractor is considered as a mere agent of
the principal, the real employer. 29 The former becomes solidarily liable for all the rightful claims of the employees. 30 The petitioner
therefore, being the principal employer and Lancer, being the labor-only contractor, are solidarily liable for respondents' unpaid money
claims.

WHEREFORE, the petition for review is DENIED. SO ORDERED.

40. Digital Telecommunications vs. Digitel Employees Union GR No. 184903-04 October 10, 2012

This treats of the petition for review filed by Digital Telecommunications Philippines, Inc. (Digitel) assailing the 18 June 2008 Decision 1
and 9 October 2008 Resolution of the Court of Appeals 10th Division in CA-G.R. SP No. 91719, which affirms the Order of the Secretary
of Labor and Employment directing Digitel to commence Collective Bargaining Agreement (CBA) negotiations and in CA-G.R. SP No.
94825, which declares the dismissal of affected Digitel employees as illegal.

The facts, as borne by the records, follow.

77
By virtue of a certification election, Digitel Employees Union (Union) became the exclusive bargaining agent of all rank and file employees
of Digitel in 1994. The Union and Digitel then commenced collective bargaining negotiations which resulted in a bargaining deadlock. The
Union threatened to go on strike, but then Acting Labor Secretary Bienvenido E. Laguesma assumed jurisdiction over the dispute and
eventually directed the parties to execute a CBA. 2

However, no CBA was forged between Digitel and the Union. Some Union members abandoned their employment with Digitel. The Union
later became dormant.

Ten (10) years thereafter or on 28 September 2004, Digitel received from Arceo Rafael A. Esplana (Esplana), who identified himself as
President of the Union, a letter containing the list of officers, CBA proposals and ground rules. 3 The officers were respondents Esplana,
Alan D. Licando (Vice-President), Felicito C. Romero, Jr. (Secretary), Arnold D. Gonzales (Treasurer), Reynel Francisco B. Garcia
(Auditor), Zosimo B. Peralta (PRO), Regino T. Unidad (Sgt. at Arms), and Jim L. Javier (Sgt. at Arms).

Digitel was reluctant to negotiate with the Union and demanded that the latter show compliance with the provisions of the Union's
Constitution and By-laws on union membership and election of officers.

On 4 November 2004, Esplana and his group filed a case for Preventive Mediation before the National Conciliation and Mediation Board
based on Digitel's violation of the duty to bargain. On 25 November 2004, Esplana filed a notice of strike.

On 10 March 2005, then Labor Secretary Patricia A. Sto. Tomas issued an Order 4 assuming jurisdiction over the labor dispute.

During the pendency of the controversy, Digitel Service, Inc. (Digiserv), a non-profit enterprise engaged in call center servicing, filed with
the Department of Labor and Employment (DOLE) an Establishment Termination Report stating that it will cease its business operation.
The closure affected at least 100 employees, 42 of whom are members of the herein respondent Union.

Alleging that the affected employees are its members and in reaction to Digiserv's action, Esplana and his group filed another Notice of
Strike for union busting, illegal lock-out, and violation of the assumption order.

On 23 May 2005, the Secretary of Labor ordered the second notice of strike subsumed by the previous Assumption Order. 5
Meanwhile, on 14 March 2005, Digitel filed a petition with the Bureau of Labor Relations (BLR) seeking cancellation of the Union's
registration on the following grounds: 1) failure to file the required reports from 1994-2004; 2) misrepresentation of its alleged officers;
3) membership of the Union is composed of rank and file, supervisory and managerial employees; and 4) substantial number of union
members are not Digitel employees. 6

In a Decision dated 11 May 2005, the Regional Director of the DOLE dismissed the petition for cancellation of union registration for lack
of merit. The Regional Director ruled that it does not have jurisdiction over the issue of non-compliance with the reportorial requirements.
He also held that Digitel failed to adduce substantial evidence to prove misrepresentation and the mixing of non-Digitel employees with
the Union. Finally, he declared that the inclusion of supervisory and managerial employees with the rank and file employees is no longer
a ground for cancellation of the Union's certificate of registration. 7

The appeal filed by Digitel with the BLR was eventually dismissed for lack of merit in a Resolution dated 9 March 2007, thereby affirming
the 11 May 2005 Decision of the Regional Director.

CA-G.R. SP No. 91719

In an Order dated 13 July 2005, the Secretary of Labor directed Digitel to commence the CBA negotiation with the Union. Thus:

WHEREFORE, all the foregoing premises considered, this Office hereby orders:

1.DIGITEL to commence collective bargaining negotiation with DEU without further delay; and,

2.The issue of unfair labor practice, consisting of union-busting, illegal termination/lockout and violation of the
assumption of jurisdiction, specifically the return-to-work aspect of the 10 March 2005 and 03 June
2005 orders, be CERTIFIED for compulsory arbitration to the NLRC. 8

Digitel moved for reconsideration on the contention that the pendency of the petition for cancellation of the Union's certificate of registration
is a prejudicial question that should first be settled before the DOLE could order the parties to bargain collectively. On 19 August 2005,
then Acting Secretary Manuel G. Imson of DOLE denied the motion for reconsideration, affirmed the 13 July 2005 Order and reiterated
the order directing parties to commence collective bargaining negotiations. 9

On 14 October 2005, Digitel filed a petition, docketed as CA-G.R. SP No. 91719, before the Court of Appeals assailing the 13 July and
19 August 2005 Orders of the DOLE Secretary and attributing grave abuse of discretion on the part of the DOLE Secretary for ordering
Digitel to commence bargaining negotiations with the Union despite the pendency of the issue of union legitimacy.

CA-G.R. SP No. 94825

In accordance with the 13 July 2005 Order of the Secretary of Labor, the unfair labor practice issue was certified for compulsory arbitration
before the NLRC, which, on 31 January 2006, rendered a Decision dismissing the unfair labor practice charge against Digitel but declaring
the dismissal of the 13 employees of Digiserv as illegal and ordering their reinstatement. The Union manifested that out of
42 employees, only 13 remained, as most had already accepted separation pay. The dispositive portion of the Decision reads:
78
 WHEREFORE, premises considered, the charge of unfair labor practice is hereby DISMISSED for lack of merit.
However, the dismissal of the remaining thirteen (13) affected employees is hereby declared illegal and DIGITEL is
hereby ORDERED to reinstate them to their former position with full backwages up to the time they are reinstated,
computed as follows:
xxx xxx xxx. 10
Upon motion for reconsideration filed by Digitel, four (4) affected employees, namely Ma. Loreta Eser, Marites Jereza, Leonore Tuliao
and Aline G. Quillopras, were removed from entitlement to the awards pursuant to the deed of quitclaim and release which they all signed.
11
In view of this unfavorable decision, Digitel filed another petition on 9 June 2006 in CA-G.R. SP No. 94825 before the Court of Appeals,
challenging the above NLRC Decision and Resolution and arguing mainly that Digiserv employees are not employees of Digitel.

Ruling of the Court of Appeals

On 18 June 2008, the Tenth Division of the Court of Appeals consolidated the two petitions in CA-G.R. SP No. 91719 and CA-G.R. SP
No. 94825, and disposed as follows:

WHEREFORE, the petition in CA-G.R. SP No. 91719 is DISMISSED. The July 13, 2005 Order and the August 19,
2005 Resolution of the DOLE Secretary are AFFIRMED in toto. With costs.

The petition in CA-G.R. SP No. 94825 is partially GRANTED, with the effect that the assailed dispositions must be
MODIFIED, as follows:

1)In addition to the order directing reinstatement and payment of full backwages to the nine (9) affected
employees, Digital Telecommunications Philippines, Inc. is furthered ORDERED, should reinstatement is no
longer feasible, to pay separation pay equivalent to one (1) month pay, or one-half (1/2) month pay for every
year of service, whichever is higher.

2)The one hundred thousand (PhP100,000.00) peso-fine imposed on Digital Telecommunications Philippines,
Inc. is DELETED. No costs. 12

The Court of Appeals upheld the Secretary of Labor's Order for Digitel to commence CBA negotiations with the Union and emphasized
that the pendency of a petition for the cancellation of a union's registration does not bar the holding of negotiations for a CBA. The Court
of Appeals sustained the finding that Digiserv is engaged in labor-only contracting and that its employees are actually employees of
Digitel.
Digitel filed a motion for reconsideration but was denied in a Resolution dated 9 October 2008.

Hence, this petition for review on certiorari. TCSEcI

Digitel argues that the Court of Appeals seriously erred when it condoned the act of the Secretary of Labor in issuing an assumption order
despite the pendency of an appeal on the issue of union registration. Digitel maintains that it cannot be compelled to negotiate with a
union for purposes of collective bargaining when the very status of the same as the exclusive bargaining agent is in question.

Digitel insists that had the Court of Appeals considered the nature of the activities performed by Digiserv, it would reach the conclusion
that Digiserv is a legitimate contractor. To bolster its claim, Digitel asserts that the affected employees are registered with the Social
Security System, Pag-ibig, Bureau of Internal Revenue and Philhealth with Digiserv as their employer. Digitel further contends that
assuming that the affected Digiserv employees are employees of Digitel, they were nevertheless validly dismissed on the ground of
closure of a department or a part of Digitel's business operation.

The three issues raised in this petition are: 1) whether the Secretary of Labor erred in issuing the assumption order despite the pendency
of the petition for cancellation of union registration; 2) whether Digiserv is a legitimate contractor; and 3) whether there was a valid
dismissal.

The pendency of a petition for cancellation of union registration does not preclude collective bargaining.
The first issue raised by Digitel is not novel. It is well-settled that the pendency of a petition for cancellation of union registration does not
preclude collective bargaining.

The 2005 case of Capitol Medical Center, Inc. v. Hon. Trajano 13 is apropos. The respondent union therein sent a letter to petitioner
requesting a negotiation of their CBA. Petitioner refused to bargain and instead filed a petition for cancellation of the union's certificate of
registration. Petitioner's refusal to bargain forced the union to file a notice of strike. They eventually staged a strike. The Secretary of
Labor assumed jurisdiction over the labor dispute and ordered all striking workers to return to work. Petitioner challenged said order by
contending that its petition for cancellation of union's certificate of registration involves a prejudicial question that should first be settled
before the Secretary of Labor could order the parties to bargain collectively. When the case eventually reached this Court, we agreed
with the Secretary of Labor that the pendency of a petition for cancellation of union registration does not preclude collective bargaining,
thus:

That there is a pending cancellation proceeding against the respondent Union is not a bar to set in motion the mechanics of
collective bargaining. If a certification election may still be ordered despite the pendency of a petition to cancel the union's
registration certificate (National Union of Bank Employees vs. Minister of Labor, 110 SCRA 274), more so should the
collective bargaining process continue despite its pendency. We must emphasize that the majority status of the respondent
Union is not affected by the pendency of the Petition for Cancellation pending against it.
79
 Unless its certificate of registration and its status as the certified bargaining agent are revoked, the Hospital is, by
express provision of the law, duty bound to collectively bargain with the Union. 14

Trajano was reiterated in Legend International Resorts Limited v. Kilusang Manggagawa ng Legenda (KML-Independent). 15 Legend
International Resorts reiterated the rationale for allowing the continuation of either a CBA process or a certification election even during
the pendency of proceedings for the cancellation of the union's certificate of registration. Citing the cases of Association of Court of
Appeals Employees v. Ferrer-Calleja 16 and Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma, 17 it was pointed out at the
time of the filing of the petition for certification election — or a CBA process as in the instant case — the union still had the personality to
file a petition for certification — or to ask for a CBA negotiation — as in the present case.

Digiserv is a labor-only contractor.

Labor-only contracting is expressly prohibited by our labor laws. Article 106 of the Labor Code defines labor-only contracting as
"supplying workers to an employer [who] does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related
to the principal business of such employer."

Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code (Implementing Rules), as amended by Department
Order No. 18-02, expounds on the prohibition against labor-only contracting, thus:

Section 5.Prohibition against labor-only contracting. — Labor-only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal, and any of the following elements are
present:
i)The contractor or subcontractor does not have substantial capital or investment which relates to the job, work
or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or

ii)The contractor does not exercise the right to control over the performance of the work of the contractual
employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.

The "right to control" shall refer to the right reserved to the person for whom, the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end.

The law and its implementing rules allow contracting arrangements for the performance of specific jobs, works or services. Indeed, it is
management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature. However, in
order for such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit
labor-only contracting. 18

After an exhaustive review of the records, there is no showing that first, Digiserv has substantial investment in the form of capital,
equipment or tools. Under the Implementing Rules, substantial capital or investment refers to "capital stocks and subscribed capitalization
in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor
or subcontractor in the performance or completion of the job, work or service contracted out." The NLRC, as echoed by the Court of
Appeals, did not find substantial Digiserv's authorized capital stock of One Million Pesos (P1,000,000.00). It pointed out that only Two
Hundred Fifty Thousand Pesos (P250,000.00) of the authorized capital stock had been subscribed and only Sixty-Two Thousand Five
Hundred Pesos (P62,500.00) had been paid up. There was no increase in capitalization for the last ten (10) years. 19

Moreover, in the Amended Articles of Incorporation, as well as in the General Information Sheets for the years 1994, 2001 and 2005, the
primary purpose of Digiserv is to provide manpower services. In PCI Automation Center, Inc. v. National Labor Relations Commission,
20 the Court made the following distinction: "the legitimate job contractor provides services while the labor-only contractor provides only
manpower. The legitimate job contractor undertakes to perform a specific job for the principal employer while the labor-only contractor
merely provides the personnel to work for the principal employer." The services provided by employees of Digiserv are directly related to
the business of Digitel, as rationalized by the NLRC in this wise: ASTcaE

It is undisputed that as early as March 1994, the affected employees, except for two, were already performing their
job as Traffic Operator which was later renamed as Customer Service Representative (CSR). It is equally undisputed
that all throughout their employment, their function as CSR remains the same until they were terminated effective
May 30, 2005. Their long period of employment as such is an indication that their job is directly related to the main
business of DIGITEL which is telecommunication[s]. Because, if it was not, DIGITEL would not have allowed them
to render services as Customer Service Representative for such a long period of time. 21

Furthermore, Digiserv does not exercise control over the affected employees. The NLRC highlighted the fact that Digiserv shared the
same Human Resources, Accounting, Audit and Legal Departments with Digitel which manifested that it was Digitel who exercised control
over the performance of the affected employees. The NLRC also relied on the letters of commendation, plaques of appreciation and
certification issued by Digitel to the Customer Service Representatives as evidence of control.

80
Considering that Digiserv has been found to be engaged in labor-only contracting, the dismissed employees are deemed employees of
Digitel. Section 7 of the Implementing Rules holds that labor-only contracting would give rise to:
(1) the creation of an employer-employee relationship between the principal and the employees of the contractor or sub-
contractor; and
(2) the solidary liability of the principal and the contractor to the employees in the event of any violation of the Labor Code.

Accordingly, Digitel is considered the principal employer of respondent employees.

The affected employees were illegally dismissed.

In addition to finding that Digiserv is a labor-only contractor, records teem with proof that its dismissed employees are in fact employees
of Digitel. The NLRC enumerated these evidences, thus: aTcESI

That the remaining thirteen (13) affected employees are indeed employees of DIGITEL is sufficiently established by
the facts and evidence on record.

It is undisputed that the remaining affected employees, except for two (2), were already hired by DIGITEL even before
the existence of DIGISERV. (The other two (2) were hired after the existence of DIGISERV). The UNION submitted a
sample copy of their appointment paper (Annex "A" of UNION's Position Paper, Records, Vol. 1, p. 100) showing that
they were appointed on March 1, 1994, almost three (3) months before DIGISERV came into existence on May 30,
1994 (Annex "B", Ibid, Records, Vol. 1, p. 101). On the other hand, not a single appointment paper was submitted by
DIGITEL showing that these remaining affected employees were hired by DIGISERV.

It is equally undisputed that the remaining, affected employees continuously held the position of Customer Service
Representative, which was earlier known as Traffic Operator, from the time they were appointed on March 1, 1994 until
they were terminated on May 30, 2005. The UNION alleges that these Customer Service Representatives were under
the Customer Service Division of DIGITEL. The UNION's allegation is correct. Sample of letter of commendations
issued to Customer Service Representatives (Annexes "C" and "C-1" of UNION's Position Paper, Records, p. 100 and
111) indeed show that DIGITEL has a Customer Service Division which handles its Call Center operations.

Further, the Certificates issued to Customer Service Representative likewise show that they are employees of DIGITEL
(Annexes "C-5", "C-6" - "C-7" of UNION's Position Paper, Records, Vol. l, pp. 115 to 117), Take for example the "Service
Award" issued to Ma. Loretta C. Esen, one of the remaining affected employees (Annex "C-5", Supra). The "Service
Award" was signed by the officers of DIGITEL — the VP-Customer Services Division, the VP-Human Resources
Division and the Group Head-Human Resources Division. It was issued by DIGITEL to Esen thru the above named
officers "In recognition of her seven (7) years continuous and valuable contributions to the achievement of
Digitel's organization objectives". It cannot be gainsaid that it is only the employer that issues service award to its
employees. 22 (Emphasis not supplied)

As a matter of fact, even before the incorporation of Digiserv, the affected employees were already employed by Digitel as Traffic
Operators, later renamed as Customer Service Representatives.

As an alternative argument, Digitel maintains that the affected employees were validly dismissed on the grounds of closure of Digiserv,
a department within Digitel.

In the recent case of Waterfront Cebu City Hotel v. Jimenez, 23 we referred to the closure of a department or division of a company as
retrenchment. The dismissed employees were undoubtedly retrenched with the closure of Digiserv.

For a valid retrenchment, the following elements must be present:

(1)That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are
not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent
as perceived objectively and in good faith by the employer;

(2)That the employer served written notice both to the employees and to the Department of Labor and Employment
at least one month prior to the intended date of retrenchment;

(3)That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least 1/2
month pay for every year of service, whichever is higher;

(4)That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest
and not to defeat or circumvent the employees' right to security of tenure; and

(5)That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be
retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial
hardship for certain workers. 24

Only the first 3 elements of a valid retrenchment had been here satisfied. Indeed, it is management prerogative to close a department of
the company. Digitel's decision to outsource the call center operation of the company is a valid reason to close down the operations
81
of a department under which the affected employees were employed. Digitel cited the decline in the volume of transaction of o perator-
assisted call services as supported by Financial Statements for the years 2003 and 2004, during which Digiserv incurred a deficit of
P163,624.00 and P164,055.00, respectively. 25 All affected employees working under Digiserv were served with individual notices of
termination. DOLE was likewise served with the corresponding notice. All affected employees were offered separation pay. Only 9 out of
the 45 employees refused to accept the separation pay and chose to contest their dismissal before this Court. TDSICH

The fifth element regarding the criteria to be observed by Digitel clearly does not apply because all employees under Digiserv were
dismissed. The instant case is all about the fourth element, that is, whether or not the affected employees were dismissed in good faith.
We find that there was no good faith in the retrenchment.

Prior to the cessation of Digiserv's operations, the Secretary of Labor had issued the first assumption order to enjoin an impending strike.
When Digiserv effected the dismissal of the affected employees, the Union filed another notice of strike. Significantly, the Secretary of
Labor ordered that the second notice of strike be subsumed by the previous assumption order. 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.

The effects of the assumption order issued by the Secretary of Labor are two-fold. It enjoins an impending strike on the part of the
employees and orders the employer to maintain the status quo.

There is no doubt that Digitel defied the assumption order by abruptly closing down Digiserv. The closure of a department is not illegal
per se. What makes it unlawful is when the closure is undertaken in bad faith. In St. John Colleges, Inc. v. St. John Academy Faculty and
Employees Union, 26 bad faith was evidenced by the timing of and reasons for the closure and the timing of and reasons for the
subsequent opening. There, the collective bargaining negotiations between St. John and the Union resulted in a bargaining deadlock that
led to the filing of a notice of strike. The labor dispute was referred to the Secretary of Labor who assumed jurisdiction. Pending resolution
of the dispute, St. John closed the school prompting the Union to file a complaint for illegal dismissal and unfair labor practice. The Union
members alleged that the closure of the high school was done in bad faith in order to get rid of the Union and render useless any decision
of the SOLE on the CBA deadlocked issues. We held that closure was done to defeat the affected employees' security of tenure, thus:
TcIHDa

The determination of whether SJCI acted in bad faith depends on the particular facts as established by the evidence
on record. Bad faith is, after all, an inference which must be drawn from the peculiar circumstances of a case. The two
decisive factors in determining whether SJCI acted in bad faith are (1) the timing of, and reasons for the closure of the
high school, and (2) the timing of, and the reasons for the subsequent opening of a college and elementary department,
and, ultimately, the reopening of the high school department by SJCI after only one year from its closure.

Prior to the closure of the high school by SJCI, the parties agreed to refer the 1997 CBA deadlock to the SOLE for
assumption of jurisdiction under Article 263 of the Labor Code. As a result, the strike ended and classes resumed. After
the SOLE assumed jurisdiction, it required the parties to submit their respective position papers. However, instead of
filing its position paper, SJCI closed its high school, allegedly because of the "irreconcilable differences between the
school management and the Academy's Union particularly the safety of our students and the financial aspect of the
ongoing CBA negotiations." Thereafter, SJCI moved to dismiss the pending labor dispute with the SOLE contending
that it had become moot because of the closure. Nevertheless, a year after said closure, SJCI reopened its high school
and did not rehire the previously terminated employees.

Under these circumstances, it is not difficult to discern that the closure was done to defeat the parties' agreement to
refer the labor dispute to the SOLE; to unilaterally end the bargaining deadlock; to render nugatory any decision of the
SOLE; and to circumvent the Union's right to collective bargaining and its members' right to security of tenure. By
admitting that the closure was due to irreconcilable differences between the Union and school management,
specifically, the financial aspect of the ongoing CBA negotiations, SJCI in effect admitted that it wanted to end the
bargaining deadlock and eliminate the problem of dealing with the demands of the Union. This is precisely what the
Labor Code abhors and punishes as unfair labor practice since the net effect is to defeat the Union's right to
collective bargaining. 27(Emphasis not supplied) CASTDI

As in St. John, bad faith was manifested by the timing of the closure of Digiserv and the rehiring of some employees to Interactive
Technology Solutions, Inc. (I-tech), a corporate arm of Digitel. The assumption order directs employees to return to work, and the employer
to reinstate the employees. The existence of the assumption order should have prompted Digitel to observe the status quo. Instead,
Digitel proceeded to close down Digiserv. The Secretary of Labor had to subsume the second notice of strike in the assumption order.
This order notwithstanding, Digitel proceeded to dismiss the employees.

82
The timing of the creation of I-tech is dubious. It was incorporated on 18 January 2005 while the labor dispute within Digitel was pending.
I-tech's primary purpose was to provide call center/customer contact service, the same service provided by Digiserv. It conducts its
business inside the Digitel office at 110 E. Rodriguez Jr. Avenue, Bagumbayan, Quezon City. The former head of Digiserv, Ms. Teresa
Taniega, is also an officer of I-tech. Thus, when Digiserv was closed down, some of the employees presumably non-union members were
rehired by I-tech.

Thus, the closure of Digiserv pending the existence of an assumption order coupled with the creation of a new corporation performing
similar functions as Digiserv leaves no iota of doubt that the target of the closure are the union member-employees. These factual
circumstances prove that Digitel terminated the services of the affected employees to defeat their security of tenure. The termination of
service was not a valid retrenchment; it was an illegal dismissal of employees.

It needs to be mentioned too that the dismissal constitutes an unfair labor practice under Article 248 (c) of the Labor Code which refers
to contracting 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. At the height of the labor dispute, occasioned by Digitel's reluctance to negotiate with the
Union, I-tech was formed to provide, as it did provide, the same services performed by Digiserv, the Union members' nominal employer.

Under Article 279 of the Labor Code, an illegally dismissed employee is entitled to backwages and reinstatement. Where reinstatement
is no longer viable as an option, as in this case where Digiserv no longer exists, separation pay equivalent to one (1) month salary, or
one-half (1/2) month pay for every year of service, whichever is higher, should be awarded as an alternative. 28 The payment of separation
pay is in addition to payment of backwages. 29

Indeed, while we have found that the closure of Digiserv was undertaken in bad faith, badges thereof evident in the timing of Digiserv's
closure, hand in hand, with I-tech's creation, the closure remains a foregone conclusion. There is no finding, and the Union makes no
such assertion, that Digiserv and I-tech are one and the same corporation. The timing of Digiserv's closure and I-tech's ensuing creation
is doubted, not the legitimacy of I-tech as a business process outsourcing corporation providing both inbound and outbound services to
an expanded local and international clientele.30

The finding of unfair labor practice hinges on Digitel's contracting-out certain services performed by union member-employees to interfere
with, restrain or coerce them in the exercise of their right to self-organization.

We have no basis to direct reinstatement of the affected employees to an ostensibly different corporation. The surrounding circumstance
of the creation of I-tech point to bad faith on the part of Digitel, as well as constitutive of unfair labor practice in targeting the dismissal of
the union member-employees. However, this bad faith does not contradict, much less negate, the impossibility of the employees'
reinstatement because Digiserv has been closed and no longer exists.

Even if it is a possibility that I-tech, as though Digitel, can absorb the dismissed union member-employees as I-tech was incorporated
during the time of the controversy with the same primary purpose as Digiserv, we would be hard pressed to mandate the dismiss ed
employees' reinstatement given the lapse of more than seven (7) years. ACaDTH

This length of time from the date the incident occurred to its resolution 31 coupled with the demonstrated litigiousness of the disputants:
(1) with all sorts of allegations thrown by either party against the other; (2) the two separate filings of a notice of strike by the Union; (3)
the Assumption Orders of the DOLE; (4) our own finding of unfair labor practice by Digitel in targeting the union member-employees,
abundantly show that the relationship between Digitel and the union member-employees is strained. Indeed, such discordance between
the parties can very well be a necessary consequence of the protracted and branched out litigation. We adhere to the oft-quoted doctrine
that separation pay may avail in lieu of reinstatement if reinstatement is no longer practical or in the best interest of the parties. 32

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when
the latter option is no longer desirable or viable. On one hand, such payment liberates the employee from what could be a highly
oppressive work environment. On the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust. 33

Finally, an illegally dismissed employee should be awarded moral and exemplary damages as their dismissal was tainted with unfair labor
practice. 34 Depending on the factual milieu, jurisprudence has awarded varying amounts as moral and exemplary damages to illegally
dismissed employees when the dismissal is attended by bad faith or fraud; or constitutes an act oppressive to labor; or is done in a
manner contrary to good morals, good customs or public policy; or if the dismissal is effected in a wanton, oppressive or malevolent
manner. 35

In Nueva Ecija I Electric Cooperative, Inc. (NEECO I) Employees Association v. National Labor Relations Commission, we intoned:

Unfair labor practices violate the constitutional rights of workers and employees to self-organization, are inimical to the
legitimate interests of both labor and management, including their right to bargain collectively and otherwise deal with
each other in an atmosphere of freedom and mutual respect; and disrupt industrial peace and hinder the promotion of
healthy and stable labor-management relations. As the conscience of the government, it is the Court's sworn duty to
ensure that none trifles with labor rights. 36

We awarded moral damages in the amount of P10,000.00 and likewise awarded P5,000.00 as exemplary damages for each dismissed
employee.
83
In the recent case of Purefoods Corporation v. Nagkakaisang Samahang Manggagawa ng Purefoods Rank-and-File, 37 we awarded the
aggregate amount of P500,000.00 as moral and exemplary damages to the illegally dismissed union member-employees which exact
number was undetermined.

In the case at hand, with the Union's manifestation that only 13 employees remain as respondents, as most had already accepted
separation pay, and consistent with our finding that Digitel committed an unfair labor practice in violation of the employees' constitutional
right to self-organization, we deem it proper to award each of the illegally dismissed union member-employees the amount of P10,000.00
and P5,000.00 as moral and exemplary damages, respectively.

WHEREFORE, the Petition is DENIED. Let this case be REMANDED to the Labor Arbiter for the computation of monetary claims due to
the affected employees.

SO ORDERED.

41. Norkis Trading Corp. vs Buenavista GR No. 182018 October 10, 2012

The petition stems from an amended complaint for illegal suspension, illegal dismissal, unfair labor practice and other monetary claims
filed with the National Labor Relations Commission (NLRC) by herein respondents Joaquin Buenavista (Buenavista), Henry Fabroa
(Fabroa), Ricardo Cape (Cape), Bertuldo Tulod (Tulod), Willy Dondoyano (Dondoyano) and Glen Villariasa (Villariasa) against Norkis
Trading and Panaghiusa sa Kauswagan Multi-Purpose Cooperative (PASAKA). The complaint was docketed as NLRC-RAB-VII Case
No. 09-1402-99.
During the proceedings a quo, herein respondents submitted the following averments: TIcEDC
The respondents were hired by Norkis Trading, a domestic corporation engaged in the business of manufacturing and marketing of
Yamaha motorcycles and multi-purpose vehicles, on separate dates and for various positions, particularly: …………… xxxxx
Although they worked for Norkis Trading as skilled workers assigned in the operation of industrial and welding machines owned and
used by Norkis Trading for its business, they were not treated as regular employees by Norkis Trading. Instead, they were regarded
by Norkis Trading as members of PASAKA, a cooperative organized under the Cooperative Code of the Philippines, and which was
deemed an independent contractor that merely deployed the respondents to render services for Norkis Trading. 4 The respondents
nonetheless believed that they were regular employees of Norkis Trading, citing in their Position Paper 5 the following circumstances
that allegedly characterized their employment with the company:
The work of the operators involves operating industrial machines, such as, press machine, hydraulic machine, and
spotweld machine. On the other hand, the welders used the welding machines. The machines used by complainants
[herein respondents] in their work are all owned by respondent Norkis [Trading] [herein petitioner] and these are
installed and located in the working area of the complainants inside the company's premises.
The complainants produced steel crates which are exported directly by respondent Norkis [Trading] to Japan. These
crates are used as containers of motorcycle machines and are shipped from Japan back to respondent Norkis
[Trading].
The materials and supplies used by complainants in their work are supplied by respondent Norkis [Trading] through
Benjamin Gulbin, the company's Stockman, upon the request of Tirso Maslog, a Leadman also employed by
respondent Norkis [Trading]. HDTSCc
Respondent Norkis [Trading] gave instructions and supervised the work of complainants through Edwin Ponce and
Kiven Alilin, who are both Leadmen, and Rico Cabanas, who is the Production Supervisor, of the former.
The salaries of complainants are paid inside the premises of respondent Norkis [Trading] by Dalia Rojo and Belen
Rubio, who are also employees of the said company assigned at the accounting office.
Despite having served respondent Norkis [Trading] for many years and performing the same functions as regular
employees, complainants were not accorded regular status. It was made to appear that complainants are not
employees of said company but that of respondent PASAKA. 6
Against the foregoing scenario, the respondents, together with several other complainants, 7 filed on June 9, 1999 with the Department
of Labor and Employment (DOLE) a complaint against Norkis Trading and PASAKA for labor-only contracting and non-payment of
minimum wage and overtime pay. The complaint was docketed as LSED Case No. RO700-9906-CI-CS-168.
The filing of the complaint for labor-only contracting allegedly led to the suspension of the respondents' membership with PASAKA. On
July 22, 1999, they were served by PASAKA with memoranda charging them with a violation of the rule against commission of acts
injurious or prejudicial to the interest or welfare of the cooperative. The memoranda cited that the respondents' filing of a case against
Norkis Trading had greatly prejudiced the interest and welfare of the cooperative. 8 In their answer 9 to the memoranda, the respondents
explained that they merely wanted to be recognized as regular employees of Norkis Trading. The case records include copies of the
memoranda sent to respondents Buenavista, Fabroa and Dondoyano. 10
On August 16, 1999, the respondents received another set of memoranda from PASAKA, now charging them with the following violations
of the cooperative's rules and regulations: (1) serious misconduct or willful disobedience of superior's instructions or orders;
(2) gross and habitual neglect of duties by abandoning work without permission; (3) absences without filing leave of absence; and (4)
84
wasting time or loitering on company's time or leaving their post temporarily without permission during office hours. 11 Copies of the
memoranda 12 sent to Fabroa and Cape form part of the records.
On August 26, 1999, PASAKA informed the respondents of the cooperative's decision to suspend them for fifteen (15) working days, to
be effective from September 1 to 21, 1999, for violation of PASAKA rules. The records include copies of the memoranda 13 sent to Fabroa
and Cape. The suspension prompted the respondents to file with the NLRC the complaint for illegal suspension against Norkis Trading
and PASAKA. cTECIA
The 15-day suspension of the respondents was extended for another period of 15 days, from September 22, 1999 to October 12, 1999.
14 Copies of PASAKA's separate letters 15 to Buenavista, Fabroa, Cape and Dondoyano on the cooperative's decision to extend the
suspension form part of the records.
On October 13, 1999, the respondents were to report back to work but during the hearing in their NLRC case, they were informed by
PASAKA that they would be transferred to Norkis Tradings' sister company, Porta Coeli Industrial Corporation (Porta Coeli), as washers
of Multicab vehicles. The respondents opposed the transfer as it would allegedly result in a change of employers, from Norkis Trading to
Porta Coeli. The respondents also believed that the transfer would result in a demotion since from being skilled workers in Norkis Trading,
they would be reduced to being utility workers. These circumstances made the respondents amend their complaint for illegal suspension,
to include the charges of unfair labor practice, illegal dismissal, damages and attorney's fees.
For their part, both Norkis Trading and PASAKA claimed that the respondents were not employees of Norkis Trading. They insisted that
the respondents were members of PASAKA, which served as an independent contractor that merely supplied services to Norkis
International Co., Inc. (Norkis International) pursuant to a job contract 16 which PASAKA and Norkis International executed on January
14, 1999 for 121,500 pieces of F/GF-Series Reinforcement Production. After PASAKA received reports from its coordinator at Norkis
International of the respondents' low efficiency and violation of the cooperative's rules, and after giving said respondents the chance to
present their side, a penalty of suspension was imposed upon them by the cooperative. The illegal suspension being complained of was
then not linked to the respondents' employment, but to their membership with PASAKA. TEHIaA
Norkis Trading stressed that the respondents were deployed by PASAKA to Norkis International, a company that is entirely separate and
distinct from Norkis Trading.
The Ruling of the Labor Arbiter
On June 1, 2000, Labor Arbiter Jose G. Gutierrez (LA Gutierrez) dismissed the complaint via a Decision 17 with decretal portion that
reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered DISMISSING this case for lack of
merit. Complainants [herein respondents] are however directed to report back to respondent PASAKA for work
assignment [within] ten (10) days from receipt of this decision. Likewise, respondent PASAKA is directed to accept
the complainants back for work. SO ORDERED. 18
LA Gutierrez sustained the suspension imposed by PASAKA upon the respondents, taking into account the offenses that the said
respondents were found to have committed. He likewise rejected the respondents' claim of illegal dismissal. He ruled that to begin with,
the respondents had failed to prove with convincing evidence that they were dismissed from employment. The Decision reads in part:
Before the legality or illegality of a dismissal can be put in issue, the fact of dismissal itself must, first, be clearly
established. In the instant case, We find that complainant[s] [herein respondents] failed to prove with convincing
evidence the fact that they were dismissed from employment. This observation is derived from their very own
allegation in their position paper. The first paragraph of page 5 of the complainants' position paper clearly show[s]
that they were not yet dismissed from their employment. The said paragraph states: CAcIES
"Convinced that the company is bent on terminating their services, complainants amended their complaint
to include the charges of unfair labor practice, illegal dismissal, damages and attorney's fees."
The truth, as the record would show is that, complainants were only offered another post in order to save the
contractual relations between their cooperative and Norkis [Trading] as the latter finds the complainants' performance
not satisfactory. The [complainants] took this offer as a demotion amounting to dismissal. We do not however, agree
as their transfer to another post was only the best option available in order to save the contractual relations between
their cooperative (PASAKA) and Norkis [Trading]. 19
The allegation of unfair labor practice and claim for monetary awards were likewise rejected by the LA. Feeling aggrieved, the respondents
appealed from the decision of the LA to the NLRC.
In the meantime, DOLE Regional Director Melencio Q. Balanag (Regional Director Balanag) issued on August 22, 2000 his Order 20 in
LSED Case No. RO700-9906-CI-CS-168. Regional Director Balanag ruled that PASAKA was engaged in labor-only contracting. 21 The
other findings in his Order that are significant to this case are as follows: (1) PASAKA had failed to prove that it had substantial capital;
22 (2) the machineries, equipment and supplies used by the respondents in the performance of their duties were all owned by Norkis
Trading and not by PASAKA; 23 (3) the respondents' membership with PASAKA as a cooperative was inconsequential to their
employment with Norkis Trading; 24 (4) Norkis Trading and PASAKA failed to prove that their sub-contracting arrangements were covered
by any of the conditions set forth in Section 6 of Department Order No. 10, Series of 1997; 25 (5) Norkis Trading and PASAKA failed to
dispute the respondents' claim that their work was supervised by leadmen and production supervisors of Norkis Trading; 26 and (6) Norkis
Trading and PASAKA failed to dispute the respondents' allegation that their salaries were paid by employees of Norkis Trading. 27 Norkis
Trading and PASAKA were then declared solidarily liable for the monetary claims of therein complainants, as provided in the dispositive
portion of Regional Director Balanag's Order, to wit: aSIATD
WHEREFORE, respondent PANAGHIUSA SA KAUSWAGAN MULTIPURPOSE COOPERATIVE and/orNORKIS
85
 TRADING CORPORATION are hereby ORDERED to pay solidarily the amount of THREE HUNDRED THIRTEEN
THOUSAND THREE HUNDRED FIFTY[-]FOUR AND 50/100 ([P]313,354.50)PESOS, Philippine Currency, within
ten (10) calendar days from receipt hereof to herein complainants . . . SO ORDERED. 28
The respondents informed the NLRC of Regional Director Balanag's Order by filing a Manifestation 29 dated September 11, 2000,
attaching thereto a copy of the Order dated August 22, 2000.
It bears mentioning that Regional Director Balanag's Order was later affirmed by then DOLE Secretary Patricia Sto. Tomas (Sec. Sto.
Tomas) in her Orders dated February 7, 2002 and October 14, 2002. 30 When the rulings of the DOLE Secretary were appealed before
the CA via the petitions for certiorari docketed as CA-G.R. SP No. 73880 and CA-G.R. SP No. 74619, the CA affirmed the Orders of the
DOLE Secretary. 31 A motion for reconsideration of the CA decision was denied in a Resolution 32 dated October 9, 2007. The two
petitions docketed as G.R. Nos. 180078-79, which were brought before this Court to question the CA's rulings, were later denied with
finality by this Court in the Resolutions dated December 5, 2007 33 and April 14, 2008. 34
The Ruling of the NLRC
On April 18, 2002, the NLRC rendered its Decision 35 affirming with modification the decision of LA Gutierrez. It held that the respondents
were not illegally suspended from work, as it was their membership in the cooperative that was suspended after they were found to have
violated the cooperative's rules and regulations. It also declared that the respondents' dismissal was not established by substantial
evidence. The NLRC however declared that the LA had no jurisdiction over the dispute because the respondents were not employees,
but members of PASAKA. The suspension of the respondents as members of PASAKA for alleged violation of the cooperative's rules
and regulations was not a labor dispute, but an intra-corporate dispute. 36 The complaint was also declared to have been filed against
the wrong party because the respondents were found by the NLRC to have been deployed by PASAKA to Norkis International pursuant
to a job contract. IDESTH
The dispositive portion of the NLRC's Decision reads:
WHEREFORE, the Decision dated June 1, 2000 of the Labor Arbiter is AFFIRMED, with respect to the DISMISSAL
of the complainants [herein respondents] for lack of merit [sic], but deleting the portion directing the complainants to
report back to respondent PASAKA for work assignment and to accept them back to work being an internal concern
of PASAKA. SO ORDERED. 37
The respondents' motion for reconsideration was denied by the NLRC in a Resolution 38 dated December 18, 2003. Undaunted, the
respondents questioned the NLRC's rulings before the CA via a petition for certiorari.
The Ruling of the CA
Finding merit in the petition for certiorari, the CA rendered its decision reversing and setting aside the decision and resolution of the
NLRC. The dispositive portion of its Decision dated May 7, 2007 reads:
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the NLRC, are
herebyREVERSED and SET ASIDE, and a new judgment is hereby rendered ordering the private respondents to:
(1)Reinstate petitioners to their former positions without loss of seniority rights, and to pay full backwages
inclusive of allowances and their other benefits or their monetary equivalent computed from the time of illegal
dismissal to the time of actual reinstatement; and aCcHEI
(2)Alternatively, if reinstatement is not possible, to pay full backwages inclusive of other benefits or their
monetary equivalent from the time of illegal dismissal until the same is paid in full, and pay petitioners'
separation pay equivalent to one month's salary for every year of service. SO ORDERED. 39
The CA rejected the argument of PASAKA and Norkis Trading that by virtue of a job contract executed on January 14, 1999, the
respondents were deployed to Norkis International and not to Norkis Trading. The CA held:
We are not convinced. Private respondents' [among them, herein petitioner] own evidence belie their claim.
In its Comment, NORKIS TRADING attached the Payroll Registers for PANAGHIUSA SA KAUSWAGAN (PASAKA)
MULTIPURPOSE COOPERATIVE - NICI Tin Plate covering the payroll periods "12/28/98 - 01/07/99" and "01/08/99
- 01/14/99". Included among the payees therein were the petitioners [herein respondents]. Why were petitioners
included in said payrolls for said payroll periods when the supposed Contract with NORKIS INTERNATIONAL was
not yet executed? Apparently, private respondents slipped. Thus, we hold that the much ballyhooed January 14,
1999 Contract between PASAKA and NORKIS INTERNATIONAL, is but a mere afterthought, a concoction designed
by private respondents to evade their obligations to petitioners. 40 (Citations omitted and emphasis supplied)
The CA also considered Regional Director Balanag's finding in LSED Case No. RO700-9906-CI-CS-168 that PASAKA was engaged in
labor-only contracting. In ruling that the respondents were illegally dismissed, the CA held that Norkis Trading's refusal to accept the
respondents back to their former positions, offering them instead to accept a new assignment as washers of vehicles in its sister company,
was a demotion that amounted to a constructive dismissal. ECaITc
Norkis Trading's motion for reconsideration was denied by the CA in its Resolution 41 dated March 4, 2008. Hence, this petition.
The Present Petition
The petition is founded on the following grounds:
1)THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS
86
 WHEN IT MADE ITS OWN FACTUAL FINDINGS AND DISREGARDED THE UNIFORM AND CONSISTENT
FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC, WHICH MUST BE ACCORDED GREAT
WEIGHT, RESPECT AND EVEN FINALITY. IN SO DOING, THE COURT OF APPEALS EXCEEDED ITS
AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE RULES OF COURT BECAUSE SUCH FACTUAL
FINDINGS WERE BASED ON SPECULATIONS AND NOT ON OTHER EVIDENCES [SIC] ON RECORD.
2)THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN RULING THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN
ALLEGEDLY IGNORING THE RULING OF THE REGIONAL DIRECTOR.
3)THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN RULING THAT PETITIONER IS THE EMPLOYER OF RESPONDENTS.
4)THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN RULING THAT THE RESPONDENTS WERE CONSTRUCTIVELY DISMISSED
CONTRARY TO THE FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC AND WITHOUT
SHOWING ANY EVIDENCE TO OVERTURN SUCH FINDING OF FACT. 42
The respondents oppose these grounds in their Comment. 43 In support of their arguments, the respondents submit with their Comment
copies of the CA's Decision 44 and Resolution 45 in CA-G.R. SP No. 73880 and CA-G.R. SP No. 74619, and this Court's Resolutions 46
in G.R. Nos. 180078-79. prcd
This Court's Ruling
The Court resolves to deny the petition.
Factual findings of labor officials may be examined by the courts when there is a showing that they were arrived at
arbitrarily or in disregard of evidence on record.
As regards the first ground, the petitioner questions the CA's reversal of LA Gutierrez's and the NLRC's rulings, and argues that said
rulings should have been accorded great weight and finality by the appellate court as these were allegedly supported by substantial
evidence.
On this matter, the settled rule is that factual findings of labor officials, who are deemed to have acquired expertise in matters within their
jurisdiction, are generally accorded not only respect but even finality by the courts when supported by substantial evidence, i.e., the
amount of relevant evidence which a reasonable mind might accept as adequate to support a conclusion. We emphasize, nonetheless,
that these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence on record,
they may be examined by the courts. The CA can then grant a petition for certiorari if it finds that the NLRC, in its assailed decision or
resolution, has made a factual finding that is not supported by substantial evidence. It is within the jurisdiction of the CA, whose jurisdiction
over labor cases has been expanded to review the findings of the NLRC. 47
We have thus explained in Cocomangas Hotel Beach Resort v. Visca 48 that the CA can take cognizance of a petition forcertiorari if it
finds that the NLRC committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence which are
material to or decisive of the controversy. The CA cannot make this determination without looking into the evidence presented by the
parties. The appellate court needs to evaluate the materiality or significance of the evidence, which are alleged to have been capriciously,
whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on record. ACTISE
This case falls within the exception to the general rule that findings of fact of labor officials are to be accorded respect and finality on
appeal. As our discussions in the other grounds that are raised in this petition will demonstrate, the CA has correctly held that the NLRC
has disregarded facts and evidence that are material to the outcome of the respondents' case. No error can be ascribed to the appellate
court for making its own assessment of the facts that are significant to the case to determine the presence or absence of grave abuse of
discretion on the part of the NLRC, even if the CA's findings turn out to be different from the factual findings of both the LA and NLRC.
Norkis Trading is the principalemployer of the respondents,considering that PASAKA is a mere labor-only contractor.
The second and third grounds, being interrelated as they both pertain to the CA's finding that an employer-employee relationship existed
between the petitioner and the respondents, shall be discussed jointly. In its decision, the CA cited the findings of the Regional Director
in LSED Case No. RO700-9906-CI-CS-168 and declared that the NLRC committed a grave abuse of discretion when it ignored said
findings.
The issue of whether or not the respondents shall be regarded as employees of the petitioner hinges mainly on the question of whether
or not PASAKA is a labor-only contractor. Labor-only contracting, a prohibited act, is an arrangement where the contractor or
subcontractor merely recruits, supplies, or places workers to perform a job, work, or service for a principal. In labor-only contracting, the
following elements are present: (a) the contractor or subcontractor does not have substantial capital or investment to actually perform the
job, work, or service under its own account and responsibility; and (b) the employees recruited, supplied or placed by such contractor or
subcontractor perform activities which are directly related to the main business of the principal. These differentiate it from permissible or
legitimate job contracting or subcontracting, which refers to an arrangement whereby a principal agrees to put out or farm out with the
contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period,
regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the principal. A person
is considered engaged in legitimate job contracting or subcontracting if the following conditions concur: (a) the contractor carries on a
distinct and independent business and partakes the contract work on his account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of his
work except as to the results thereof; (b) the contractor has substantial capital or investment; and (c) the agreement between the principal
and the contractor or subcontractor assures the contractual employees' entitlement to all labor and
87
occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits. 49
We emphasize that the petitioner's arguments against the respondents' claim that PASAKA is a labor-only contractor, which is thus to be
regarded as a mere agent of Norkis Trading for which the respondents rendered service, are already mooted by the finality of this Court's
Resolutions dated December 5, 2007 and April 14, 2008 in G.R. Nos. 180078-79, which stems from the CA's and the DOLE Secretary's
review of the DOLE Regional Director's Order dated August 22, 2000 in LSED Case No. RO700-9906-CI-CS-168. EDCcaS
To recapitulate, Regional Director Balanag issued on August 22, 2000 its Order 50 in LSED Case No. RO700-9906-CI-CS-168 and
declared PASAKA as a mere labor-only contractor, and Norkis Trading as the true employer of herein respondents. He explained that
PASAKA failed to prove during the conduct of a summary investigation that the cooperative had substantial capital or investment sufficient
to enable it to perform the functions of an independent contractor. The respondents' claim that the machinery, equipment and supplies
they used to perform their duties were owned by Norkis Trading, and not by PASAKA, was undisputed. While PASAKA reflected in its
Statement of Financial Condition for the year 1996 property and equipment net of accumulated depreciation at P344,273.02, there was
no showing that the properties covered thereby were actually and directly used in the conduct of PASAKA's business. 51The DOLE
Regional Director explained:
[H]erein respondents [among them, herein petitioner] failed to prove that their sub-contracting arrangements fall
under any of the conditions set forth in Sec. 6 of D.O. # 10 S. 1997 to qualify as permissible contracting or
subcontracting as provided for as follows:
Sec. 6.Permissible contracting or subcontracting. — Subject to conditions set forth in Sec. 4 (d) and (e) and
Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the performance
of any of the following:
a.)Works or services temporarily or occasionally needed to meet abnormal increase in the demand
of products or services. . .
b)Works or services temporarily or occasionally needed by the principal for undertakings requiring
expert or highly technical personnel to improve the management or operations of an enterprise;
TSacCH
c)Services temporarily needed for the introduction or promotion of new products. . .;
d)Works or services not directly related or not integral to main business or operation of the principal
including casual work, janitorial, security, landscaping and messengerial services and work not
related to manufacturing processes in manufacturing establishments.
e)Services involving the public display of manufacturers' products. . .;
f)Specialized works involving the use of some particular, unusual or peculiar skills. . . and
g)Unless a reliever system is in place among the regular workforce, substitute services for [absent]
regular employees. . .
It is therefore evident that herein respondents are engaged in "labor-only" contracting as defined in Art. 106 of the
Labor Code. Furthermore, such contracting/sub-contracting arrangement not only falls under labor-only contracting
but also fails to qualify as legitimate subcontracting as defined under Sec. 4 par. e of D.O. #10 S. 1997[,] to wit:
"Sec. 4.Definition of terms. — . . .
d). . . Subject to the provisions of Sections 6, 7 and 8 of this Rule, contracting or subcontracting shall be
legitimate if the following circumstances concur: TAcDHS
i)The contractor or subcontractor carries on a distinct and independent business and undertakes
to perform the job, work or service on its own account and under its own responsibility, according
to its own manner and method, and free from the control and direction of the principal in all
matters connected with the performance of the work except to the results thereof;
ii)The contractor or subcontractor has substantial capital or investment; and
iii)The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational and safety and health standards, free
exercise of the right to self-organization, security of tenure and social and welfare benefits." 52
(Emphasis supplied)
Together with his finding that PASAKA evidently lacked substantial capital or investment required from legitimate job contractors, Regional
Director Balanag ruled that the cooperative failed to dispute the respondents' allegation that officers of Norkis Trading supervised their
work and paid their salaries. In conclusion, PASAKA and Norkis Trading were declared solidarily liable for the monetary awards made in
favor of therein claimants-employees, which included herein respondents. A motion for reconsideration of the Order was denied by the
Regional Director.
Upon appeal, then DOLE Sec. Sto. Tomas affirmed the rulings of Regional Director Balanag. Both Norkis Trading and PASAKA filed their
separate appeals from the orders of the DOLE Secretary to the CA via the petitions for certioraridocketed as CA-G.R. SP Nos. 73880
and 74619, but said petitions were dismissed for lack of merit by the CA in its Decision dated May 7, 2007 and Resolution dated October
9, 2007. The CA held: aHADTC

88
 [T]his Court agrees with the finding of the DOLE Regional Director, as affirmed by the Secretary of Labor in her
assailed Order, that petitioners [among them, herein petitioner] [were] engaged in labor-only contracting.
First. PASAKA failed to prove that it has substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, among others, to qualify as an independent contractor. PASAKA's claim that it has
machineries and equipment worth P344,273.02 as reflected in its Financial Statements and Supplementary
Schedules is belied by private respondents' [among them, herein respondents] evidence which consisted of pictures
showing machineries and [equipment] which were owned [by] and located [at] the premises of petitioner NORKIS
TRADING (as earlier noted, some of the pictures showed some of the private respondents operating said machines).
Indeed it makes one wonder why, if PASAKA indeed had such machineries and equipment worth P344,273.02,
private respondents were using machineries and [equipment] owned [by] and located at the premises of NORKIS
TRADING.
Even granting that indeed PASAKA had machineries and equipment worth P344,273.02, it was not shown that said
machineries and equipment were actually used in the performance or completion of the job, work, or service that it
was contracted to render under its supposed job contract.
xxx xxx xxx
Second. PASAKA likewise did not carry out an independent business from NORKIS TRADING. While PASAKA was
issued its Certificate of Registration on July 18[,] 1991, all it could show to prove that it carried out an independent
business as a job contractor were the Project Contract dated January 2, 1998 with NORKIS TRADING, and the
Project Contract dated December 18, 1998 with NORKIS INTERNATIONAL. However, as earlier discussed, the
Project Contract dated December 18, 1998 with NORKIS INTERNATIONAL is nothing more than an afterthought by
the petitioners to confuse its workers and defeat their rightful claims. The same can be said of the Project Contract
with WICKER and VINE, INC., considering that it was executed only onFebruary 1, 2000. Verily, said contract was
submitted only to strengthen PASAKA's claim that it is a legitimate job contractor. AIECSD

Third. Private respondents performed activities directly related to the principal business of NORKIS TRADING. They
worked as welders and machine operators engaged in the production of steel crates which were sent to Japan for
use as containers of motorcycles that are then sent back to NORKIS TRADING. Private respondents['] functions
therefore are directly related and vital to NORKIS TRADING's business of manufacturing of Yamaha motorcycles.
All the foregoing considerations affirm by more than substantial evidence that NORKIS TRADING and PASAKA
engaged in labor-only contracting. 53 (Citations omitted and emphasis supplied)
When the case was brought before this Court via the petitions for review on certiorari docketed as G.R. Nos. 180078-79, we resolved to
issue on December 5, 2007 our Resolution dismissing the appeal for, among other grounds, the failure of Norkis Trading to sufficiently
show any reversible error in the CA decision. In our Resolution dated April 14, 2008, we denied with finality Norkis Tradings' motion for
reconsideration on the ground that no substantial argument and compelling reason was adduced to warrant a reconsideration of our
dismissal of the petition. This Court's resolutions, affirming the findings of the CA, had then become final and executory.
Applying the doctrine of res judicata, all matters that have been fully resolved with finality by this Court's dismissal of the appeal that
stemmed from Regional Director Balanag's Order dated August 22, 2000 in LSED Case No. RO700-9906-CI-CS-168 are already
conclusive between the parties. Res judicata is defined as a matter adjudged; a thing judicially acted upon or decided; a thing or matter
settled by judgment. Under this doctrine, an existing final judgment or decree rendered on the merits, and without fraud or collusion, by
a court of competent jurisdiction, upon any matter within its jurisdiction, is conclusive of the rights of the parties or their privies, in all other
actions or suits in the same or any other judicial tribunal of concurrent jurisdiction on the points and matters in issue in the first suit. To
state simply, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their
privies in all later suits on all points and matters determined in the former suit. 54
Res judicata has two aspects: bar by prior judgment and conclusiveness of judgment as provided under Section 47 (b) and (c), Rule 39,
respectively, of the Rules of Court. 55 Under the doctrine of conclusiveness of judgment, facts and issues actually and directly resolved
in a former suit cannot be raised in any future case between the same parties, even if the latter suit may involve a different cause of
action. 56
Clearly, res judicata in the concept of conclusiveness of judgment has set in. In the proceedings before the Regional Director and the LA,
there were identity of parties and identity of issues, although the causes of action in the two actions were different. First, herein
respondents on the one hand, and Norkis Trading on the other hand, were all parties in the two cases, being therein complainants and
respondent, respectively. As to the second requisite, the issue of whether PASAKA was a labor-only contractor which would make Norkis
Trading the true employer of the respondents was the main issue in the two cases, especially since Norkis Trading had been arguing in
both proceedings that it could not be regarded as the herein respondents' employer, harping on the defense that PASAKA was a legitimate
job contractor. cHATSI
Similarly, in Dole Philippines, Inc. v. Esteva, 57 we held that the finding of the DOLE Regional Director, which had been affirmed by the
Undersecretary of Labor, by authority of the Secretary of Labor, in an Order that has reached finality and which provided that the
cooperative Cannery Multi-Purpose Cooperative (CAMPCO) was engaged in labor-only contracting should bind the NLRC in a case for
illegal dismissal. We ruled:
While the causes of action in the proceedings before the DOLE and the NLRC differ, they are, in fact, very closely
related. The DOLE Regional Office conducted an investigation to determine whether CAMPCO was violating labor
laws, particularly, those on labor-only contracting. Subsequently, it ruled that CAMPCO was indeed engaging in
89
 labor-only contracting activities, and thereafter ordered to cease and desist from doing so. . . . The matter of whether
CAMPCO was a labor-only contractor was already settled and determined in the DOLE proceedings, which should
be conclusive and binding upon the NLRC. What were left for the determination of the NLRC were the issues on
whether there was illegal dismissal and whether respondents should be regularized.
. . . For the NLRC to ignore the findings of DOLE Regional Director Parel and DOLE Undersecretary Trajano is an
unmistakable and serious undermining of the DOLE officials' authority. 58
The rule on conclusiveness of judgment then now precludes this Court from re-opening the issues that were already settled with finality
in G.R. Nos. 180078-79, which effectively affirmed the CA's findings that PASAKA was engaged in labor-only contracting, and that Norkis
Trading shall be treated as the employer of the respondents.
In the present petition, Norkis Trading still argues that the NLRC committed no grave abuse of discretion in ignoring the findings of
Regional Director Balanag considering that his Order had not yet reached finality at the time the NLRC resolved the appeal from the
decision of the LA. This notwithstanding, this Court holds that the CA still committed no error in finding grave abuse of discretion on the
part of the NLRC by the latter's utter disregard of the findings of the Regional Director that Norkis Trading should be considered the
employer of herein respondents. As correctly observed by the CA in the assailed Decision dated May 7, 2007: aTICAc
Surprisingly, the NLRC failed to consider or even make reference to the said August 22, 2000 Order of the DOLE
Regional Director. Considering the significance of the DOLE Regional Director's findings, the same cannot
just be perfunctorily rejected. For the NLRC to ignore the findings of DOLE Regional Director is to undermine or
disregard of [sic] the visitorial and enforcement power of the DOLE Secretary and his authorized representatives
under Article 128 of the Labor Code, as amended. It was grave abuse of discretion then on the part of the NLRC
to ignore or simply sweep under the rug the findings of the DOLE Regional Director. 59 (Citation omitted and
emphasis ours)
A reading of the NLRC's Resolution 60 dated December 18, 2003 indicates that while it was confronted with opposing findings of the
Regional Director and the LA on the material issue of labor-only contracting, it failed to even attempt to review thoroughly the matter, look
into the records, reconcile the differing judgments and make its own appreciation of the evidence presented by the parties. Instead, it
simply brushed aside the rulings of the Regional Director, without due consideration of the circumstance that said labor official had the
jurisdiction to rule on the issue pursuant to the visitorial and enforcement powers of the DOLE Secretary and his duly authorized
representatives under Article 128 61 of the Labor Code.
The rule in appeals in labor cases provides that the CA can grant a petition for certiorari if it finds that the NLRC, in its assailed decision
or resolution, committed grave abuse of discretion by capriciously, whimsically or arbitrarily disregarding evidence which is material or
decisive of the controversy. 62 Significantly, the Secretary of Labor had already affirmed Regional Director Balanag's Order when the
appeal from the LA's rulings was resolved. In the NLRC Resolution dated December 18, 2003, the Commission nonetheless merely held:
The photocopies of the Order of the Honorable Secretary of the Department of Labor and Employment dated
February 7, 2002 and the Order of the Regional Director of the Regional Office of the Department of Labor and
Employment finding the existence of labor-only contracting between respondent NORKIS [Trading] and respondent
PASAKA do not provide sufficient basis to disturb Our Decision. We are not convinced that the facts and evidence,
which are totally distinct from this case and which were presented in a separate proceedings and before another
Office, would be a sufficient and valid basis to divest the Labor Arbiter a quo of his authority which undoubtedly the
law vests upon him as his exclusive jurisdiction. The jurisdiction conferred by Article 217 of the Labor Code upon the
Labor Arbiter is "original and exclusive", and his authority to hear and decide case[s] vested upon him is to the
exclusion of any other court or quasi-judicial body. By reason of their training, experience, and expertise, Labor
Arbiters are in a better position to resolve controversies, for which they are conferred original and exclusive
jurisdiction by law. Even Article 218 of the Labor Code does not empower the Regional Director of the Department
of Labor and Employment to share original and exclusive jurisdiction conferred on the Labor Arbiter by Article 217 .
..
Such utter disregard by the NLRC of the findings of the Regional Director and DOLE Secretary amounts to grave abuse of discretion
amounting to lack or excess of jurisdiction. As this Court's review of the records would confirm, a judicious study of the evidence presented
by the parties would have supported the finding that Norkis Trading should be treated as the respondents' true employer, with PASAKA
being merely an agent of said employer. PASAKA failed to sufficiently show that it had substantial capital or investment in the form of
tools, equipment, machineries and work premises required from legitimate job contractors. The work required from the respondents, being
welders and/or operators of industrial machines, were also directly related to Norkis Trading's principal business of manufacturing. The
job contract supposedly executed by and between PASAKA and Norkis International in 1999 deserved nil consideration given that the
respondents had claimed early on that they began working for Norkis Trading on various dates from 1993 to 1994. Moreover, the records
confirm that Norkis Trading was still among the clients of PASAKA as of July 1999, as clearly indicated in the memoranda it sent to
respondents Buenavista, Fabroa and Dondoyano on July 22, 1999, which provide:STHDAc
Please take note that the recent action you have done in filing a case against one of our client[s,] Norkis
Trading Co., Inc.[,] has greatly prejudiced the interest and welfare of the Cooperative. 64 (Emphasis ours)
This categorical statement of PASAKA that Norkis Trading was among its clients at the time the memoranda were issued only further
bolsters the respondents' claim, and Regional Director Balanag's finding, that said respondents were deployed by PASAKA to Norkis
Trading. This also contradicts petitioner's argument that its contract with PASAKA had ended in 1998. 65
Finally, contrary to the insinuations of Norkis Trading, the fact that PASAKA was a duly-registered cooperative did not preclude the
possibility that it was engaged in labor-only contracting, as confirmed by the findings of the Regional Director. An entity is characterized
90as a labor-only contractor based on the elements and guidelines established by law and jurisprudence, judging primarily on the
relationship that the said entity has with the company to which the workers are deployed, and not on any special arrangement that the
entity has with said workers.
Termination of an employment for no just or authorized cause amounts to an illegal dismissal.
As to the issue of whether the respondents were illegally dismissed by Norkis Trading, we answer in the affirmative, although not by
constructive dismissal as declared by the CA, but by actual dismissal.
Where an entity is declared to be a labor-only contractor, the employees supplied by said contractor to the principal employer become
regular employees of the latter. Having gained regular status, the employees are entitled to security of tenure and can only be dismissed
for just or authorized causes and after they had been afforded due process. 66Termination of employment without just or authorized
cause and without observing procedural due process is illegal. IcaEDC
In claiming that they were illegally dismissed from their employment, the respondents alleged having been informed by PASAKA that they
would be transferred, upon the behest of Norkis Trading, as Multicab washers or utility workers to Porta Coeli, a sister company of Norkis
Trading. Norkis Trading does not dispute that such job transfer was relayed by PASAKA unto the respondents, although the company
contends that the transfer was merely an "offer" that did not constitute a dismissal. It bears mentioning, however, that the respondents
were not given any other option by PASAKA and Norkis Trading but to accede to said transfer. In fact, there is no showing that Norkis
Trading would still willingly accept the respondents to work for the company. Worse, it still vehemently denies that the respondents had
ever worked for it. Again, all defenses of Norkis Trading that anchor on the alleged lack of employer-employee relationship between it
and the respondents no longer merit any consideration, given that this Court's findings in G.R. Nos. 180078-79 have become conclusive.
Thus, the respondents' transfer to Porta Coeli, although relayed to the respondents by PASAKA was effectively an act of Norkis Trading.
Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the
employees of the labor-only contractor. The statute establishes this relationship for a comprehensive purpose: to prevent a circumvention
of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of
the labor-only contractor as if such employees had been directly employed by the principal employer. 67
No further evidence or document should then be required from the respondents to prove such fact of dismissal, especially since Norkis
Trading maintains that it has no duty to admit and treat said respondents as its employees. Considering that Porta Coeli is an entity
separate and distinct from Norkis Trading, the respondents' employment with Norkis Trading was necessarily severed by the change in
work assignment. It then did not even matter whether or not the transfer involved a demotion in the respondents' rank and work functions;
the intention to dismiss, and the actual dismissal of the respondents were sufficiently established.
In the absence of a clear showing that the respondents' dismissal was for just or authorized causes, the termination of the respondents'
employment was illegal. What may be reasonably deduced from the records was that Norkis Trading decided on the transfer, after the
respondents had earlier filed their complaint for labor-only contracting against the company. Even Norkis Trading's contention that the
transfer may be deemed a valid exercise of management prerogative is misplaced. First, the exercise of management prerogative
presupposes that the transfer is only for positions within the business establishment. Second, the exercise of management prerogative
by employers is not absolute, as it is limited by law and the general principles of fair play and justice.
WHEREFORE, premises considered, the petition is DENIED.
SO ORDERED.

GOYA, INC. (Company) vs. GOYA, INC. EMPLOYEES UNION-FFW (Union), G.R. No. 170054. January 21, 2013

FACTS:

Petitioner Goya, Inc. (Company), hired contractual employees from PESO Resources Development Corporation (PESO) to perform
temporary and occasional services in its factory in Marikina. 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 CBA. When the matter remained unresolved, the grievance was referred to the NCMB for voluntary arbitration.
On July 1, 2004, when the amicable settlement was no longer possible, they agreed to submit for resolution by the Voluntary Arbitrator
(VA) the solitary issue of “whether or not the Company is guilty of unfair labor acts, under the existing CBA, laws and jurisprudence, by
engaging the services of PESO, a third party service provider."

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 since the contractual workers engaged have been assigned to work in positions previously handled
by regular workers and Union members.

On the other hand, the Company argued that: (a) the law expressly allows contracting and subcontracting arrangements through (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 (c) Section 4, Article I of the CBA on definition of the categories of employees does not limit Company's right to engage
the services of job contractors or its management prerogative to address temporary/occasional needs in its operation.

The VA dismissed the Union's charge 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. While the Union moved for partial reconsideration of the VA Decision, the

91
Company immediately filed a petition for review before the CA under Rule 43, Revised Rules of Civil Procedure. The CA, however,
dismissed the petition.

Incidentally, on July 16, 2009, the Company filed a Manifestation informing the SC 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
already expired on June 30, 2009. Nevertheless, the Company urged the SC to still resolve the case for future guidance of the bench and
the bar.

ISSUE:

1. W/N the VA is empowered to rule on a matter not covered by the issue submitted for arbitration.

RULING:

The petition fails to convince the Court.

SC confirms 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 the sole issue submitted for resolution by the parties.

The Company also cannot find solace in its cited case of Ludo & Luym Corporation v. Saornido. The Ludo case 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 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 unfair labor practice. It is held that unfair labor
practice is committed only if there is gross violation of the agreement.

Aside from that, what the VA and the CA correctly ruled was that the Company's act of “contracting out” or “outsourcing” is within the
purview of management prerogative. Both did not say, however, that such act is a valid exercise thereof. For 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. This is due to the recognition that the CBA provisions agreed upon by the Company and the Union delimit or restricts the free
exercise of management prerogative pertaining to the hiring of contractual employees. Hence, the VA correctly opined that "the
right of the management to outsource parts of its operations is not totally eliminated but is merely limited by the CBA.”

A collective bargaining agreement is the law between the parties and they are obliged to comply with its provisions. 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.

Thus, 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 so the literal meaning should prevail.

Furthermore, the SC stresses that the exercise of management prerogative is not unlimited; it is subject to the limitations found in:
(a) Law;
(b) CBA; or
(c) General principles of fair play and justice.

Evidently, this case has one of the restrictions — the presence of specific CBA provisions. The SC reiterates that the CBA is the norm
of conduct between the parties and compliance therewith is mandated by the express policy of the law.
WHEREFORE, the petition is DENIED.

Vigillaet al., vs. Phil. College of Criminology Inc., G.R. No. 200094, June 10, 2013

Facts:

PCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor in the Maintenance Department
of PCCr under the supervision and control of Atty. Florante A. Seril (Atty. Seril), PCCr’s Senior Vice President for Administration. The
petitioners, however, were made to understand, upon application with respondent school, that they were Vigilla under MBMSI, a
corporation engaged in providing janitorial services to clients. Atty. Seril is also the President and General Manager of
MBMSI.

Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had been revoked as of July 2, 2003. On March 16,
2009, PCCr, through its President, respondent Gregory Alan F. Bautista (Bautista), citing the revocation, terminated the school’s

92
relationship with MBMSI, resulting in the dismissal of the employees or maintenance personnel under MBMSI, except Alfonso Bongot
(Bongot) who was retired.

In September, 2009, the dismissed employees, led by their supervisor, BenignoVigilla (Vigilla), filed their respective complaints for illegal
dismissal, reinstatement, back wages, separation pay (for Bongot), underpayment of salaries, overtime pay, holiday pay, service incentive
leave, and 13th month pay against MBMSI, Atty. Seril, PCCr, and Bautista.

In their complaints, they alleged that it was the school, not MBMSI, which was their real employer because (a) MBMSI’s certification had
been revoked; (b) PCCr had direct control over MBMSI’s operations; (c) there was no contract between MBMSI and PCCr; and (d) the
selection and hiring of employees were undertaken by PCCr.

On the other hand, PCCr and Bautista contended that (a) PCCr could not have illegally dismissed the complainants because it was not
their direct employer; (b) MBMSI was the one who had complete and direct control over the complainants; and (c) PCCr had a contractual
agreement with MBMSI, thus, making the latter their direct employer.

On September 11, 2009, PCCr submitted several documents before LA Ronaldo Hernandez, including releases, waivers and quitclaims
in favor of MBMSI executed by the complainants to prove that they were employees of MBMSI and not PCCr.

Issue:

Whether or not their claims against the respondents were amicably settled by virtue of the releases, waivers and quitclaims which
they had executed in favor of MBMSI.
o whether or not petitioners executed the said releases, waivers and quitclaims
o whether or not a labor-only contractor is solidarily liable with the employer.

Ruling:

The Releases, Waivers and Quitclaims are Valid

We noted that the individual quitclaims, waivers and releases executed by the complainants showing that they received their
separation pay from MBMSI were duly notarized by a Notary Public. Such notarization gives prima facie evidence of their due execution.
Further, said releases, waivers, and quitclaims were not refuted nor disputed by complainants herein, thus, we have no recourse but to
uphold their due execution

A Labor-only Contractor is Solidarily Liable with the Employer

The issue of whether there is solidary liability between the labor-only contractor and the employer is crucial in this case. If a
labor-only contractor is solidarily liable with the employer, then the releases, waivers and quitclaims in favor of MBMSI will redound to the
benefit of PCCr. On the other hand, if a labor-only contractor is not solidarily liable with the employer, the latter being directly liable, then
the releases, waivers and quitclaims in favor of MBMSI will not extinguish the liability of PCCr.Under the general rule set out in the first
and second paragraphs of Article 106, an employer who enters into a contract with a contractor for the performance of work for the
employer, does not thereby create an employer-employees relationship between himself and the employees of the contractor. Thus, the
employees of the contractor remain the contractor's employees and his alone. Nonetheless when a contractor fails to pay the wages of
his employees in accordance with the Labor Code, the employer who contracted out the job to the contractor becomes jointly and severally
liable with his contractor to the employees of the latter "to the extent of the work performed under the contract" as such employer were
the employer of the contractor's employees.

A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor-i.e "the person or intermediary" -
is considered "merely as an agent of the employer." The employer is made by the statute responsible to the employees of the "labor only"
contractor as if such employees had been directly employed by the employer. Thus, where "labor-only" contracting exists in a given case,
the statute itself implies or establishes an employer-employee relationship between the employer (the owner of the project) and the
employees of the "labor only" contractor, this time for a comprehensive purpose: "employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code." The law in effect holds both the employer and the "laboronly" contractor
responsible to the latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.35

BPI Employees Union-Davao city-FUBU vs. Bank of the Phil Islands et al., G.R. No. 174912, July 24, 2013

Facts:

BOMC, which was created pursuant to Central Bank Circular No. 1388, Series of 1993 (CBP Circular No. 1388, 1993), and primarily
engaged in providing and/or handling support services for banks and other financial institutions, is a subsidiary of the Bank of Philippine
Islands (BPI) operating and functioning as an entirely separate and distinct entity.

A service agreement between BPI and BOMC was initially implemented in BPI’s Metro Manila branches. In this agreement, BOMC
undertook to provide services such as check clearing, delivery of bank statements, fund transfers, card production, operations accounting
and control, and cash servicing, conformably with BSP Circular No. 1388. Not a single BPI employee was displaced and those performing
the functions, which were transferred to BOMC, were given other assignments.

93
The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a complaint for unfair labor practice (ULP). The Labor
Arbiter (LA) decided the case in favor of the union. The decision was, however, reversed on appeal by the NLRC. BPIEU-Metro Manila-
FUBU filed a petition for certiorari before the CA which denied it, holding that BPI transferred the employees in the affected departments
in the pursuit of its legitimate business. The employees were neither demoted nor were their salaries, benefits and other privileges
diminished.

On January 1, 1996, the service agreement was likewise implemented in Davao City. Later, a merger between BPI and Far East Bank
and Trust Company (FEBTC) took effect on April 10, 2000 with BPI as the surviving corporation. Thereafter, BPI’s cashiering function
and FEBTC’s cashiering, distribution and bookkeeping functions were handled by BOMC. Consequently, twelve (12) former FEBTC
employees were transferred to BOMC to complete the latter’s service complement.

BPI Davao’s rank and file collective bargaining agent, BPI Employees Union-Davao City-FUBU (Union), objected to the transfer of the
functions and the twelve (12) personnel to BOMC contending that the functions rightfully belonged to the BPI employees and that the
Union was deprived of membership of former FEBTC personnel who, by virtue of the merger, would have formed part of the bargaining
unit represented by the Union pursuant to its union shop provision in the CBA.7

The Union then filed a formal protest on June 14, 2000 addressed to BPI Vice Presidents Claro M. Reyes and Cecil Conanan reiterating
its objection. It requested the BPI management to submit the BOMC issue to the grievance procedure under the CBA, but BPI did not
consider it as "grievable." Instead, BPI proposed a Labor Management Conference (LMC) between the parties.
Thereafter, the Union demanded that the matter be submitted to the grievance machinery as the resort to the LMC was unsuccessful. As
BPI allegedly ignored the demand, the Union filed a notice of strike before the National Conciliation and Mediation Board (NCMB) on the
following grounds:
a) Contracting out services/functions performed by union members that interfered with, restrained and/or coerced the employees in the
exercise of their right to self-organization;
b) Violation of duty to bargain; and
c) Union busting.

BPI then filed a petition for assumption of jurisdiction/certification with the Secretary of the Department of Labor and Employment (DOLE),
who subsequently issued an order certifying the labor dispute to the NLRC for compulsory arbitration. The DOLE Secretary directed the
parties to cease and desist from committing any act that might exacerbate the situation.

On October 27, 2000, a hearing was conducted. Thereafter, the parties were required to submit their respective position papers

On December 21, 2001, the NLRC came out with a resolution upholding the validity of the service agreement between BPI and BOMC
and dismissing the charge of ULP. It ruled that the engagement by BPI of BOMC to undertake some of its activities was clearly a valid
exercise of its management prerogative. It further stated that the spinning off by BPI to BOMC of certain services and functions did not
interfere with, restrain or coerce employees in the exercise of their right to self-organization. The Union did not present even an iota of
evidence showing that BPI had terminated employees, who were its members. In fact, BPI exerted utmost diligence, care and effort to
see to it that no union member was terminated.13 The NLRC also stressed that Department Order (D.O.) No. 10 series of 1997, strongly
relied upon by the Union, did not apply in this case as BSP Circular No. 1388, series of 1993, was the applicable rule.

After the denial of its motion for reconsideration, the Union elevated its grievance to the CA via a petition for certiorari under Rule 65. The
CA, however, affirmed the NLRC’s December 21, 2001 Resolution with modification that the enumeration of functions listed under BSP
Circular No. 1388 in the said resolution be deleted. The CA noted at the outset that the petition must be dismissed as it merely touched
on factual matters which were beyond the ambit of the remedy availed of.14 Be that as it may, the CA found that the factual findings of
the NLRC were supported by substantial evidence and, thus, entitled to great respect and finality. To the CA, the NLRC did not act with
grave abuse of discretion as to merit the reversal of the resolution.

As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said order did not apply as BPI, being a commercial bank,
its transactions were subject to the rules and regulations of the BSP.

Not satisfied, the Union filed a motion for reconsideration which was, however, denied by the CA.

Hence, the present petition

Issue:

Whether or not the act of BPI to outsource the cashiering, distribution and bookkeeping functions to BOMC is in conformity with the law
and the existing CBA. Particularly in dispute is the validity of the transfer of twelve (12) former FEBTC employees to BOMC, instead of
being absorbed in BPI after the corporate merger.

Ruling:

ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. – x xx Accordingly, violations of a Collective Bargaining
Agreement, except those which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining Agreement
shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement.

Clearly, only gross violations of the economic provisions of the CBA are treated as ULP. Otherwise, they are mere grievances.
94
In the present case, the alleged violation of the union shop agreement in the CBA, even assuming it was malicious and flagrant, is not a
violation of an economic provision in the agreement. The provisions relied upon by the Union were those articles referring to the
recognition of the union as the sole and exclusive bargaining representative of all rank-and-file employees, as well as the articles on union
security, specifically, the maintenance of membership in good standing as a condition for continued employment and the union shop
clause.26 It failed to take into consideration its recognition of the bank’s exclusive rights and prerogatives, likewise provided in the CBA,
which included the hiring of employees, promotion, transfers, and dismissals for just cause and the maintenance of order, discipline and
efficiency in its operations

The Union, however, insists that jobs being outsourced to BOMC were included in the existing bargaining unit, thus, resulting in a reduction
of a number of positions in such unit. The reduction interfered with the employees’ right to self-organization because the power of a union
primarily depends on its strength in number.28

It is incomprehensible how the "reduction of positions in the collective bargaining unit" interferes with the employees’ right to self-
organization because the employees themselves were neither transferred nor dismissed from the service. As the NLRC clearly stated:

In the case at hand, the union has not presented even an iota of evidence that petitioner bank has started to terminate certain employees,
members of the union. In fact, what appears is that the Bank has exerted utmost diligence, care and effort to see to it that no union
member has been terminated. In the process of the consolidation or merger of the two banks which resulted in increased diversification
of functions, some of these non-banking functions were merely transferred to the BOMC without affecting the union member

Alilin et al., vs. Petron Corp., GR No. 177592, June 9, 2014

Facts:

Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the country for receiving, storing and
distributing its petroleum products. In 1968, Romeo D. Gindang Services (RDG), started recruiting laborers for fielding to Petron’s
Mandaue Bulk Plant. Petitioners were among those recruited by Romualdo D. Gindang Contractor and RDG to work in the premises of
the said bulk plant. On June 1, 2000, Petron and RDG entered into a Contract for Services for the period from June 1, 2000 to May 31,
2002, which was extended to September 30, 2002 whereby RDG undertook to provide Petron with utility services in its Mandaue Bulk
Plant. Upon expiration thereof, no further renewal of the service contract was done. Petitioners allege that they were barred fromcontinuing
their services on October 16, 2002. They also allege among others, non-payment of overtime pay, holiday pay, premium pay for holiday,
rest day, 13th month pay, service incentive leave pay, allowances, separation pay, retirement benefits, damages and attorney’s fees
against Petron and RDG.Petitioners claim that the latter is a labor-only contractor, which merely acted as an agent of Petron, their true
employer. They asseverated that their jobs, which are directly related to Petron’s business, entailed them to work inside the premises of
Petron using the required equipment and tools furnished by it and that they were subject to Petron’s supervision. Petron, on the other
hand, maintained that RDG is an independent contractor and the real employer of the petitioners. It was RDG which hired and selected
petitioners, paid their salaries and wages, and directly supervised their work. Petron argued that with the expiration of the service contract
it entered with RDG, petitioners’ term of employment has concomitantly ended. And not being the employer, Petron cannot be held liable
for petitioners’ claim of illegal dismissal.

Issue:

The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon such finding hinges the determination
of whether an employer-employee relationship exists between the parties as to make Petron liable for petitioners’ dismissal.

Held:

In distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of the facts and the surrounding
circumstances of the case shall be considered. Generally, the contractor is presumed to be a labor-only contractor, unless such contractor
overcomes the burden of proving that it has the substantial capital, investment, tools and the like. However, where the principal is the one
claiming that the contractor is a legitimate contractor, as in the present case, said principal has the burden of proving that supposed
status. It is thus incumbent upon Petron, and not upon petitioners as Petron insists, to prove that RDG is an independent contractor.
Petron failed to discharge the burden of proving that RDG is a legitimate contractor. Hence, the presumption that RDG is a labor-only
contractor stands.

The audited financial statements and other financial documents of RDG for the years 1999 to 2001 establish that it does have
sufficient working capital to meet the requirements of its service contract

Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor Code, in force since 1976 and prior to DOLE Department
Order No. 10, series of 1997, provide that for job contracting to be permissible, one of the conditions that has to be met is that the
contractor must have substantial capital or investment. Petron having failed to show that this condition was met by RDG, it can be
concluded, on this score alone, that RDG is a mere labor-only contractor. Otherwise stated, the presumption that RDG is a labor-only
contractor stands due to the failure of Petron to discharge the burden of proving the contrary.

The works performed by petitioners were directly related to Petron’s business, another factor which negates Petron’s claim
that RDG is an independent contractor.

95
 Petron could order petitioners to do work outside of their regular "maintenance/utility" job. Also, petitioners were required to
report for work every day at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety
helmets as prescribed by the safety and security measures being implemented within the bulk plant. All these imply control. In an industry
where safety is of paramount concern, control and supervision over sensitive operations, such as those performed by the petitioners, are
inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and flammable which, if mishandled or not
properly attended to, may cause serious injuries and damage to property and the environment. Naturally, supervision by Petron is
essential in every aspect of its product handling in order not to compromise the integrity, quality and safety of the products that it distributes
to the consuming public.

Petitioners already attained regular status as employees of Petron

The engagement of petitioners for the same works for a long period of time is a strong indication that such works were indeed necessary
to Petron’s business. In view of these, and considering further that petitioners’ length of service entitles them to become regular employees
under the Labor Code, petitioners are deemed by law to have already attained the status as Petron’s regular employees. As such, Petron
could not terminate their services on the pretext that the service contract it entered with RDG has already lapsed. For one, and as
previously discussed, such regular status had already attached to them even before the execution of the service contract in 2000. For
another, the same does not constitute a just or authorized cause for a valid dismissal of regular employees.

Ampeleloquio vs. Jaka Distribution Inc., GR No. 196936, July 2, 2014

FACTS:

Ampeloquio filed anew before the NLRC, a complaint for underpayment of wages, COLA, non-payment of meal and transportation
allowances docketed as NLRC NCR Case No. 00-06-04702-06.

On appeal by JAKA, the NLRC proper, in its Resolution dated 29 November 2007 in NLRC LAC NO. 08-002252-07, noted the exemption
of JAKA from the pertinent Wage Order Nos. 10 & 11, and consequently, modified the amounts ordered by the Labor Arbiter to be paid
by JAKA to Ampeloquio

ISSUE:

The issue for our resolution is the scope viz-a-viz wages of reinstatement "without loss of seniority rights and other privileges

RULING:

The existence of an independent and permissible contractor relationship is generally established by considering the following
determinants: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the
term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision of the
work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises;
the duty to supply the premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.

In this case, JAKA did not claim exceptions to the rule of reinstatement, i.e.,(1) strained relations, or (2) abolition of the position;18 JAKA
immediately complied with the Labor Arbiter’s order of reinstatement.

We note that, specifically, JAKA could have claimed that the position of merchandiser no longer exists and has been abolished with the
contracting of this job function. However, it merely opted to reinstate Ampeloquio to the same position. There is no quarrel that with his
reinstatement, Ampeloquio is now the lone regular merchandiser of JAKA.

The option of reinstatement to a substantially equivalent position does not apply herein as reinstatement to a substantially equivalent
position entails the same or similar job functions and not just same wages or salary. As applied to this case, Ampeloquio cannot be
reinstated to a messengerial position although such is a regular employment enjoying the same employment benefits and privileges. His
employment cannot likewise be converted into a contractual employment as such is actually a downgrade from his regular employment
enjoying security of tenure with JAKA.

FVR Skills & Services Exponenets Inc. vs. Seva, et al., GR No. 200857, Oct. 22, 2014

FACTS:

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

On April 21, 2008, the petitioner entered into a Contract of Janitorial Service8 (service contract) with Robinsons Land Corporation
(Robinsons). Both agreed that the petitioner shall supply janitorial, manpower and sanitation services to Robinsons Place Ermita Mall for
a period of one year - from January 1, 2008 to December 31, 2008. Pursuant to this, the respondents were deployed to Robinsons.

Halfway through the service contract, the petitioner asked the respondents to execute individual contracts which stipulated that their
respective employments shall end on December 31, 2008, unless earlier terminated.
96
The petitioner and Robinsons no longer extended their contract of janitorial services. Consequently, the petitioner dismissed the
respondents as they were project employees whose duration of employment was dependent on the petitioner's service contract with
Robinsons.

The respondents responded to the termination of their employment by filing a complaint for illegal dismissal with the NLRC. They argued
that they were not project employees; they were regular employees who may only be dismissed for just or authorized causes. The
respondents also asked for payment of their unpaid wage differential, 13th month pay differential, service incentive leave pay, holiday
pay and separation pay

ISSUE:

Whether or not the respondents are regular employees

RULING:

The respondents are regular employees, not project employees.

A careful look at the factual circumstances of this case leads us to the legal conclusion that the respondents are regular and not project
employees.

The primary standard in determining regular employment is the reasonable connection between the particular activity performed by the
employee and the employer's business or trade. This connection can be ascertained by considering the nature of the work performed
and its relation to the scheme of the particular business, or the trade in its entirety.

Guided by this test, we conclude that the respondents' work as janitors, service crews and sanitation aides, are necessary or desirable
to the petitioner's business of providing janitorial and manpower services to its clients as an independent contractor.

Also, the respondents had already been working for the petitioner as early as 1998. Even before the service contract with Robinsons, the
respondents were already under the petitioner's employ. They had been doing the same type of work and occupying the same positions
from the time they were hired and until they were dismissed in January 2009.The petitioner did not present any evidence torefute the
respondents' claim that from the time of their hiring until the time of their dismissal, there was no gap in between the projects where
theywere assigned to. The petitioner continuously availed of their servicesby constantly deploying them to its clients.

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

Fonterra Brand Phils vs. Largado et al., GR No. 205300, March 18, 2015

FACTS:

a) Plaintiff-Appellant’s Arguments (FONTERRA BRANDS PHILS., INC. - Win)

- Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing and Promotions Corp. (Zytron) for the marketing
and promotion of its milk and dairy products. Pursuant to the contract, Zytron provided Fonterra with trade merchandising representatives
(TMRs), including respondents Leonardo Largado (Largado) and Teotimo Estrellado (Estrellado).
- On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective June 5, 2006. Fonterra then entered into
an agreement for manpower supply with A.C. Sicat Marketing and Promotional Services (A.C. Sicat).
- Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this petition.

b) Defendant-Appellant’s (LEONARDO LARGADO AND TEOTIMO ESTRELLADO - Lost)

- Desirous of continuing their work as trade merchandising representatives, respondents submitted their job applications with A.C.
Sicat, which hired them for a term of five (5) months, beginning June 7, 2006 up to November 6, 2006.

- When respondents’ 5-month contracts with A.C. Sicat were about to expire, they allegedly sought renewal thereof, but wereallegedly
refused. This prompted respondents to file complaints for illegal dismissal, regularization, non-payment of service incentive leave and
13th month pay, and actual and moral damages, against petitioner, Zytron, and A.C. Sicat.

- The CA held that respondents were illegally dismissed since Fonterra itself failed to prove that their dismissal is lawful. However, the
illegal dismissal should be reckoned from the termination of their supposed employment with Zytron on June 6, 2006. Furthermore,
respondents’ transfer to A.C. Sicat is tantamount to a completely new engagement by another employer. Lastly, the termination of their
contract with A.C. Sicat arose from the expiration of their respective contracts with the latter. The CA, thus, ruled that Fonterra is
97
liable to respondents and ordered the reinstatement of respondents without loss of seniority rights, with full backwages, and other
benefits from the time of their illegal dismissal up to the time of their actual reinstatement.

ISSUE:

(1) whether or not Zytron and A.C. Sicat are labor-only contractors, making Fonterra the employer of herein respondents; and (2)
whether or not respondents were illegally dismissed.

RULING:

Conclusion:
We find merit in the petition.
Rule:

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

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

The contractor or subcontractor has substantial capital or investment; and

The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.

On the other hand, contracting is prohibited when the contractor or subcontractor merely recruits, supplies or places workers to perform
a job, work or service for a principal and if any of the following elements are present, thus:
The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related
to the main business of the principal; or

The contractor does not exercise the right to control over the performance of the work of the contractual employee.

Application:
We give credence to the Labor Arbiter’s conclusion that respondents were the ones who refused to renew their contracts with Zytron, and
the NLRC’s finding that they themselves acquiesced to their transfer to A.C. Sicat.

By refusing to renew their contracts with Zytron, respondents effectively resigned from the latter. Resignation is the voluntary act of
employees who are compelled by personal reasons to dissociate themselves from their employment, done with the intention of
relinquishing an office, accompanied by the act of abandonment.

On the otherhand, A.C. Sicat carries out its merchandising and promotions business, independent of Fonterra’s business. Thus, having
settled that A.C. Sicat is a legitimate job contractor, We now determine whether the termination of respondents’ employment with the
former is valid.

We agree with the findings of the CA that the termination of respondents’ employment with the latter was simply brought about by the
expiration of their employment contracts.

Foremost, respondents were fixed-term employees. As previously held by this Court, fixed-term employment contracts are not limited, as
they are under the present Labor Code, to those by nature seasonal or for specific projects with predetermined dates of completion; they
also include those to which the parties by free choice have assigned a specific date of termination.11 The determining factor of such
contracts is not the duty of the employee but the day certain agreed upon by the parties for the commencement and termination of the
employment relationship.

Conclusion:
Hence petition for review is Granted. CA Decision is reversed and set aside.

98
 B. WORKER’S PREFERENCE

DEVELOPMENT BANK OF THE PHILIPPINES vs. NLRC G.R. No. 108031 March 1, 1995

FACTS: Leonor Ang is the Personnel Officer of Tropical Philippines Wood Industries Inc, a corporation engaged in the manufacture of
and sale of veneer, plywood and sawdust panel board.

DBP as mortgagee of TPWII foreclosed its plant facilities and equipment thus forcing the latter to cease its operation. As a consequence
Ang was terminated by her service.

Ang seasonally filed a petition before the Labor Arbiter a complaint for separation par, 13 th month pay, vacation and sick leave pay,
salaries and allowances against TPWII and herein petitioner.

The Labor Arbiter, as later affirmed by the NLRC, held herein petitioner DBP subsidiary liable with TPWII rationalizing that the right of an
employee to be paid benefits due him from the properties of his employer is superior to the right of DBPs mortgage.

ISSUE: Is declaration of bankruptcy or judicial liquidation required before the worker’s preference may be invoked under Art 110 of the
Labor Code?

HELD: (1) Article 110 should be applied in conjunction with the pertinent provisions of the Civil Code and the Insolvency Law to the extent
that the piece-meal distribution of the assets of the debtor is avoided.A declaration of bankruptcy if a judicial liquidation must be present
before the worker’s preference may be enforced.

(2) To hold that Art 110 to be applicable also to extra-judicial proceeding would be putting the worker in a better position than the State
which could only assert its own prior preference in case of a judicial proceeding.

(3) In the event of bankruptcy if liquidation of an employer’s business, his workers shall enjoy first preference as regards their unpaid
wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall
be paid in full before the claims of the Government and other creditors may be paid.

(4) Original position that the right to preference given to workers under Art110 cannot exist any effective way prior to the time of its
presentation in distribution is still given great weight.

STRONG DISSENT PENNED BY JUSTICE PADILLA:

a) The majority reads into the aforesaid law and implementing rule a QUALIFICATION THAT IS NOT THERE. No where is it stated in
the PRESENT law and its NEW implementing rule that a prior declaration of bankruptcy or judicial liquidation is sine qua non to the
operation of Article 110. In fact such requirement has been deleted in the new implementing rule.

b) The present law is unconditional and unqualified grant of priority to workers monetary claims as against all the assets of an
employer incapable of fully paying his obligation.

BATONG BUHAY GOLD MINES, INC., vs. DELA SERNA G.R. No. 86963 August 6, 1999

FACTS: In a labor case, the employees were awarded to receive unpaid wages and benefits from Batong Buhay Gold Mines, Inc, their
employer. When the petitioners moved for the execution of the judgment, the Regional Director ask respondent to post a bond. When he
failed to do so, Sheriff proceeded against his properties and sold them at public auction.

These properties have been transferred and entrusted to the Asset Privatization Trust (APT) by virtue of Proclamation No. 50. and all the
said assets of BBGMI are covered by real and chattel mortgages executed in favor of the some banks. Eventually Batong Buhay posed
a supersedeas bond and appealing to the Secretary of Labor, the auction sales were declared null and void because the properties were
exempted from execution. Motions for Intervention were filed by MFT Corporation and Salter Holdings, whose title were traced from the
highest bidder in the auction sale. Private respondents contend that even if subject properties were mortgaged to DBP the law grants
preference to money claims of workers over and above all credits of the petitioner.

ISSUE: Whether the auction sales were valid with reference to Art 110 of the Labor Code, despite mortgage over the properties?

HELD: The auction sales were not valid.

Supreme Court held that the workers preference regarding wages and other monetary claims under Article 110 of the Labor Code, as
amended, contemplates bankruptcy or liquidation proceedings of the employer's business. What is more, it does not disregard the
preferential lien of mortgagees considered as preferred credits under the provisions of the New Civil Code on the classification,
concurrence and preference of credits.

Abundio Barayoga vs. Asset Privatization Trust G.R. No. 160073 October 24, 2005
99
FACTS: On December 8, 1980, Respondent Asset Privatization Trust (APT) was created under Proclamation No. 50 and was mandated
to take title, possession of, conserve, manage and dispose of non-performing assets of the Philippine government identified for
privatization and disposition. Pres. Aquino issued Administrative Order No. 14 identifying certain assets of the government institutions to
be transferred to the national government. Among these assets was the financial claim of PNB against Bicolandia Sugar Development
Corp. (BISUDECO), a plantation mill. This claim was in the form of a secured loan. So by virtue of a Trust Agreement between the national
government and APT dated February 27, 1987, the latter became trustee over BISUDECO’s account with PNB.

Because of the continued failure of BISUDECO to pay its loans with PNB, its mortgaged properties were foreclosed and sold at public
auction where APT was the sole bidder.

Meanwhile, BISUDECO contracted the services of Philippine Sugar Corp. (Philsucor) to take over the management of the sugar plantation
and milling operations until August 31, 1992. On October 30, 1992, Bicol-Agro-Industrial Cooperative (BAPCI) purchased BISUDECO’s
foreclosed assets from APT and took over operations under the name Penafrancia Sugar Mill (Pensumil).

On March 2, 1993, the union filed an amended complaint impleading Philsucor, APT, and Pensumil for unfair labor practices, illegal
dismissal, illegal deduction and underpayment of wages and other labor standard benefits plus damages. BISUDECO, Pensumil, and
APT’s defense was lack of employer-employee relationship.

Labor Arbiter and NLRC affirmed APT’s liability for the money claims stating that even when there was no employer-employee
relationship, the assets of BISUDECO had been transferred to the national government through APT, and APT should have treated the
union members’ claims as a lien on the assets of BISUDECO.

CA ruled that APT should not be held liable for the claims since APT was not the employer of the petitioners but was impleaded only for
possessing BISUDECO’s foreclosed properties.

ISSUE: Whether or not respondent APT is liable for petitioner’s money claims.

HELD: No, APT is not liable. The duties and liabilities of BISUDECO, including its monetary liabilities to its employees were not
automatically assumed by APT as purchaser of the foreclosed properties. Any assumption of liability must be specifically and categorically
agreed upon. In Sundowner Development Corp. vs. Drilon, the Court ruled that unless expressly assumed, labor contracts like collective
bargaining agreements are not enforceable against the transferee of an enterprise. Labor contract are in personam and thus binding only
between the parties. No succession of employment rights and obligations have taken place. There is no privity of contract between
BISUDECO’s employees and APT making the latter a substitute employer.

The liability of the previous owner to its employees are not enforceable against the buyer or transferee unless (1) the latter unequivocally
assumes them; or (2) the sale or transfer was made in bad faith.

Furthermore, under Art 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred credit that enjoys preference with respect
to specific or determinate property of the debtor. On the other hand, the worker’s preference under Art 110 of the Labor Code is an
ordinary preferred credit. The worker’s money claim has no preference over special preferred credits.

Being a mortgage credit, APT’s lien on BISUDECO’s mortgaged assets is a special preferred lien that must be satisfied first before the
claims of the workers.

Philippine Airlines, Incorporated vs. Zamora G. R. No. 166996 February 06, 2007

FACTS: Respondent Zamora had been in the employ of petitioner PAL since 9 February 1981 when the former was hired as a Cargo
Representative at petitioner PAL’s Import Operations Division. On 13 November 1995, respondent Zamora was dismissed from service
for having been found by petitioner PAL’s management to be liable for insubordination, neglect of customer, disrespect for authority and
absence without official leave.

On 12 March 1996, respondent Zamora filed a complaint against petitioners PAL and Francisco X. Yngente IV before the NLRC for illegal
dismissal, unfair labor practice, non-payment of wages, damages and attorney’s fees. NLRC found that the dismissal was illegal and
ordered to immediately reinstate complainant Bernardin J. Zamora to his former position as Cargo Representative at the Import
Operations Division of respondent PAL without loss of seniority rights and other privileges and to pay him back salaries and backwages
beginning December 15, 1995 until his actual reinstatement, inclusive of allowances and other benefits and increases thereto.

Claiming that the 26 July 1999 Decision of the NLRC respecting his reinstatement and the payment of his backwages and other monetary
benefits have become final and executory, respondent Zamora, through counsel, wrote petitioner PAL demanding the execution thereof.
PAL now prayed for the reversal of said Order as well as for the suspension of the proceedings in the subject case considering that
petitioner PAL, was, at that time, undergoing rehabilitation of the Securities and Exchange Commission (SEC) appointing a permanent
rehabilitation receiver for petitioner PAL in SEC Case entitled “In the Matter of the Petition for the Approval of Rehabilitation Plan and for
Appointment of a Rehabilitation Receiver.”

100
ISSUE: Whether or not the proceedings in the instant case should have suspended on account of the appointment of its permanent
rehabilitation receiver.

Contentions: Petitioners PAL, et al. are of the view that the proceedings in the instant case should have been suspended on account of
the appointment of its permanent rehabilitation receiver. They posit that the suspension automatically applies on all stages of the
proceedings including enforcement of final and executory judgments. The proceedings shall remain suspended until the receivership
shall have been ordered lifted by the Securities and Exchange Commission. To date, PAL is still under permanent Rehabilitation Receiver.

Respondent Zamora, in his Memorandum, opines that “contrary to the noble purpose of a receivership, that is, preservation of the
distressed company’s assets for ultimate distribution to all creditors and affected parties, petitioner’s Amended and Restated Rehabilitation
Plan (citation omitted) is actually for the restructuring and payment of petitioner’s debts to certain creditors, excluding respondent and
other employee-claimants.”

HELD: Yes. The relevant law dealing with the suspension of actions for claims against corporations is Presidential Decree No. 902-A, as
amended. Particularly, Section 6(c) which reads:

SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following:
c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the
Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary in order
to preserve the rights of the parties-litigants and /or protect the interest of the investing public and creditors: x x x
Provided, finally, That upon appointment of a management committee, the rehabilitation receiver, board or body,
pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management
or receivership pending before any court, tribunal, board or body shall be suspended accordingly.

The term “claim,” as contemplated in Sec. 6 (c) of Presidential Decree No. 902-A, refers “to debts or demands of a pecuniary nature. It
means ‘the assertion of a right to have money paid.’” The reason for suspending actions for claims against the corporation is to enable
the management committee or rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial
interference that might unduly hinder or prevent the “rescue” of the debtor company. To allow such other action to continue would only
add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending
claims against the corporation instead of being directed toward its restructuring and rehabilitation.

The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims for actions “shall
be suspended accordingly.” No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or
exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. In Rubberworld (Phils.), Inc. v. NLRC, we held
that worker’s claims before the NLRC and labor arbiters are included among the actions suspended upon the placing under receivership
of the employer-corporations.

Otherwise stated, no other action may be taken in, including the rendition of judgment during the state of suspension – what are
automatically stayed or suspended are the proceedings of an action or suit and not just the payment of claims during the execution stage
after the case had become final and executory.

The suspension of action for claims against a corporation under rehabilitation receiver or management committee embraces all phases
of the suit, be it before the trial court or any tribunal or before this Court. Furthermore, the actions that are suspended cover all claims
against a distressed corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any
other claims of a pecuniary nature.

Phil. Airlines vs Phil. Airlines Employees Association 525 scra 29 (2007) citing Rubber World vs NLRC, 305 scra 721 (1999)
PHILIPPINE AIRLINES vs. PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION
[525 SCRA 29 June 19, 2007]

Facts: The present petition arose from a labor complaint filed by respondent PALEA against petitioners PAL and one Mary Anne del
Rosario, Director of Personnel of petitioner PAL, on 1 March 1989. The labor complaint charged both petitioners with unfair labor practice
for the alleged non-payment of the 13th month pay of petitioner PAL’s employees who had not been regularized as of the 30 of April
1988, allegedly in contravention of the Collective Bargaining Agreement (CBA) entered into by petitioner PAL and respondent
PALEA.

On 6 February 1987, petitioner PAL and respondent PALEA entered into a CBA covering the period of 1986-1989.

Respondent PALEA assailed the implementation of the guideline on the ground that all employees of PAL, regular or non-regular, must
be paid their 13th month pay. In fact, in a letter dated 16 December 1988, respondent PALEA, through Herbert C. Baldovino informed
petitioner PAL that there were several employees who failed to receive their 13th Month Pay as of the date of the correspondence.

In response thereto, petitioner PAL informed respondent PALEA that rank and file employees who were regularized after 30 April 1988
were not entitled to the 13th month pay as they were already given their Christmas bonuses on 9 December 1988 per the Implementing
Rules of Presidential Decree No. 851.
101
Disagreeing with petitioner PAL, respondent PALEA filed a labor complaint for unfair labor practice against petitioner PAL before the
NLRC on 1 March 1989. The complaint interposed that “the cut-off period for regularization should not be used as the parameter for
granting 13th month pay considering that the law does not distinguish the status of employment instead the law covers all employees.”

In its Position Paper submitted before the Labor Arbiter, petitioner PAL countered that those rank and file employees who were not
regularized by 30 April of a particular year are, in principle, not denied their 13th month pay considering they receive said mandatory
bonus in the form of the Christmas Bonus; that the Christmas Bonus given to all its employees is deemed a compliance with Presidential
Decree No. 851 and the latter’s implementing rules; and that the foregoing has been the practice formally adopted in previous CBAs’ as
early as 1970.

Issue: Whether or not the Court of Appeals committed reversible error in affirming the order of the NLRC for the payment of the 13th
month pay or mid-year bonus to its employees regularized after 30 April 1988.

SC Ruling: In a Resolution dated 19 June 2007, We resolved to suspend the proceedings of the case at bar in view of the on-going
rehabilitation of petitioner PAL as mandated by the Securities and Exchange Commission. On 28 September 2007, however, the SEC
issued an Order granting petitioner PAL’s request to exit from rehabilitation after successfully stabilizing its financial operations. Hence,
the suspension earlier issued by this Court is hereby lifted, making the present Petition ripe for resolution.

A cursory reading of the 1986-1989 CBA of the parties herein will instantly reveal that Art. I, Sec. 3 of said agreement made its provision
applicable to all employees in the bargaining unit. The particular section specifically defined the scope of application of the CBA, thus:
Section 3 – Application. All the terms and conditions of employment of employees within the bargaining unit are embodied in
this Agreement, and the same shall govern the relationship between the Company and such employees. On the other hand, all
such benefits and/or privileges as are not expressly provided for in this Agreement but which are now being accorded in
accordance with the PAL Personnel Policies and Procedures Manual, shall be deemed also part and parcel of the terms and
conditions of employment, or of this Agreement.

Without distinguishing between regular and non-regular employees. As succinctly put by respondent PALEA in its Memorandum: All
employees in PAL are entitled to the same benefit as they are within the same collective bargaining unit and the entitlement to such
benefit spills over to even non-union members.

It is a well-settled doctrine that the benefits of a CBA extend to the laborers and employees in the collective bargaining unit, including
those who do not belong to the chosen bargaining labor organization. Otherwise, it would be a clear case of discrimination.

Hence, to be entitled to the benefits under the CBA, the employees must be members of the bargaining unit, but not necessarily of the
labor organization designated as the bargaining agent. A “bargaining unit” has been defined as a group of employees of a given employer,
comprised of all or less than all of the entire body of employees, which the collective interest of all the employees, consistent with equity
to the employer, indicates to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining
provisions of the law. There is no showing that the non-regular status of the concerned employees by said cut-off date sufficiently
distinguishes their interests from those of the regular employees so as to exclude them from the collective bargaining unit and the benefits
of the CBA.

Having ruled that the benefits provided by the subject CBA are applicable even to non-regular employees who belong to the bargaining
unit concerned, the next and crucial query to be addressed is whether the 13th month pay or mid- year bonus can be equated to the
Christmas bonus.

As far as non-regular employees are concerned, petitioner PAL alleges that their 13th month pay shall be the same as their Christmas
bonus and will be paid according to the terms governing the latter.

We do not agree. From the facts of the present Petition, it is crystal clear that petitioner PAL is claiming an exemption from payment of
the 13th month pay or mid-year bonus provided in the CBA under the guise of paying the Christmas bonus which it claims to be the
equivalent of the 13th month pay under Presidential Decree No. 851.

Presidential Decree No. 851 mandates that all employers must pay all their employees receiving a basic salary of not more than P1,000.00
a month, regardless of the nature of the employment, a 13th month pay not later than 24 December of every year.

While employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of the issuance
of Presidential Decree No. 851 are already exempted from the mandatory coverage of said law, petitioner PAL cannot escape liability in
this case by virtue thereof.

It must be stressed that in the 1986-1989 CBA, petitioner PAL agreed to pay its employees 1) the 13th month pay or the mid-year bonus,
and 2) the Christmas bonus. The 13th month pay, guaranteed by Presidential Decree No. 851, is explicitly covered or provided for as the
mid-year bonus in the CBA, while the Christmas bonus is evidently and distinctly a separate benefit. Petitioner PAL may not be allowed
to brush off said distinction, and unilaterally and arbitrarily declare that for non-regular employees, their Christmas bonus is the same as
or equivalent to the 13th month pay.

102
Presidential Decree No. 851 mandates the payment of the 13th month pay to uniformly provide the low-paid employees with additional
income. It but sets a minimum requirement that employers must comply with. It does not intend, however, to preclude the employers from
voluntarily granting additional bonuses that will benefit their employees. A bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act
of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to
spur the employee to greater efforts for the success of the business and realization of bigger profits. We deem that the Christmas bonus
in this case is of this nature, although, by virtue of its incorporation into the CBA, it has become more than just an act of generosity on
the part of petitioner PAL, but a contractual obligation it has undertaken.

The inclusion of a provision for the continued payment of the Christmas bonus in the 1986-1989 CBA between respondent PALEA and
petitioner PAL contradicts the company’s claim that the grant of such benefit was intended to be credited as compliance with the statutory
mandate to give the 13th month pay. Memorandum Order No. 28, extending Presidential Decree No. 851 to all employees regardless of
the amount of their monthly salaries, was issued on 13 August 1986. As early as said date, therefore, petitioner PAL was already fully
aware that it was lawfully compelled to accord all its employees a 13th month pay. Accordingly, if petitioner PAL truly intended that the
Christmas bonus be treated as the “equivalent” of the 13th month pay required by law, then said intention should have been expressly
declared in their 1986-1989 CBA, or the separate provision therein on the Christmas bonus should have been removed because it would
only be superfluous.

In the case under consideration, the provision for the payment of the Christmas bonus, apart from the 13th month pay, was incorporated
into the 1986-1989 CBA between respondent PALEA and petitioner PAL without any condition. The Christmas bonus, payable in
December of every year, is distinguished from the 13th month pay, due yearly in

May, for which reason it was denominated as the mid-year bonus. Such being the case, the only logical inference that could be derived
therefrom is that petitioner PAL intended to give the members of the bargaining unit, represented by respondent PALEA, a Christmas
bonus over and above its legally mandated obligation to grant the 13th month pay.

The non-regular rank and file employees of petitioner PAL as of 30 April 1988, are not actually seeking more benefits than what the other
member-employees of the same bargaining unit are already enjoying. They are only requesting that all members of the bargaining unit
be treated equally and afforded the same privileges and benefits as agreed upon between respondent PALEA and petitioner PAL in the
CBA.

A collective bargaining agreement refers to a negotiated contract between a legitimate labor organization and the employer concerning
wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all other contracts, the parties to 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.

Garcia vs Phil. Airlines GR No. 164856, January 20, 2009

Facts: Philippine Airlines filed a case against its employees –herein petitioners for allegedly caught in the act of sniffing shabu when a
team of company security personnel and law enforcers raided the PAL Technical Center’s Toolroom Section.

After due notice, PAL dismissed petitioner for transgressing company’s Code of Discipline prompting them to file a Complaint for illegal
dismissal which the Labor Arbiter (LA) in its decision ruled on their favor ordering PAL to immediately comply with the reinstatement
aspect of the decision.

Prior to the judgment, SEC placed PAL under Interim Rehabilitation Receiver who subsequently replaced by Permanent Rehabilitation
Receiver. On appeal, NLRC reversed said decision and dismissed petitioner’s complaint for lack of merit. Subsequently, LA issued a Writ
of Execution respecting the reinstatement aspect of his decision. Respondent filed an Urgent Petition for Injunction with the NLRC. The
NLRC affirmed the validity of the Writ and the Notice issued by LA but suspended and referred the action to the Rehabilitation Receiver
for appropriate action.

On appeal, the appellate court partially granted the petition and effectively reinstated the NLRC resolution insofar as it suspended the
proceedings. By manifestation, respondent informed the Court that SEC issued an Order granting its request to exit from rehabilitation
proceedings.

Issue: Whether or not petitioner may collect their wages during the period between the LA’s Order of reinstatement pending appeal and
the NLRC decision overturning that of the LA, now that PAL has exited from rehabilitation proceedings.

Ruling: A dismissed employee whose case was favorably decided by the LA is entitled to receive wages pending appeal upon
reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial upon the LA to implement the order of
reinstatement and it is mandatory on the employer to comply therewith.

The Court reaffirms the prevailing principle that even if the order of reinstatement of the LA is reversed on appeal, it is obligatory on the
part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher
court. It settles the view that the LA’s order of reinstatement is immediately executory and the employer has to either re-admit them to
103
work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that filing to exercise
the options in the alternative, employer must pay the employee’s salaries.

When reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of the dismissed employee
and his family, it does not contemplate the period when the employer-corporation itself is similarly in a judicially monitored state of being
resuscitated in order to survive.

104
 C. ATTORNEY’S FEES AND APPEARANCE OF LAWYERS

BPI EMPLOYEES UNION-ALU vs NLRC G.R. No. L-69746-47 March 31, 1989

FACTS: In the course of their negotiations with the Bank of the Philippine Islands for a new CBA to replace the one expiring on March
31, 1982, serious differences arose between the BPI Employees Union-Metro Manila and its mother federation, the Associated Labor
Unions. This prompted the former to manifest that it would henceforth negotiate alone with BPI independently of ALU, which in turn,
suspended all the elective officers of BPIEU-Metro Manila led by its president, Carlito Reyes, who was replaced by Rolando Valdez as
acting president. In retaliation, Reyes and his followers, claiming to be the legal and sole representatives of BPIEU-Metro Manila, formally
disaffiliated from ALU on November 16, 1982.

As no agreement could be reached on a wide variety of economic issues, the dispute between BPI and its employees was certified by
the Minister of Labor for compulsory arbitration and docketed in the National Labor Relations Commission as Certified Cases Nos. 0279
and 0281. These cases were later consolidated with the Manifestation and Motion for Interpleader and to Consign Union Dues, which
was filed by BPI in view of the conflicting claims of the Reyes and Valdez groups for the said dues.

On March 22, 1983, the NLRC resolved the bargaining deadlock by fixing the wage increases and other economic benefits and ordering
them to be embodied in a new collective bargaining agreement to be concluded by BPIEU-Metro Manila and ALU with BPI. It did not
decide the intra-union dispute, however, holding that this was under the original jurisdiction of the med-arbiter and the exclusive appellate
jurisdiction of the Bureau of Labor Relations.

Claiming to be the labor union referred to in the decision, the Reyes group filed a petition with the Bureau of Labor Relations for direct
certification on the ground of its disaffiliation from ALU. This petition was denied in a decision dated June 13, 1983, where BLR Director
Cresenciano Trajano held that the disaffiliation was invalid because it was done beyond the freedom period.

The Reyes group then came to this Court in a petition for certiorari, with a prayer for a temporary restraining order, which we issued on
July 11, 1983, to prevent the BLR and the BPI from enforcing the above-cited decision. We eventually dismissed the petition for lack of
merit and lifted the temporary restraining order on February 16, 1985, later denying the motion for reconsideration on March 27, 1985.

HELD: The Court has studied the arguments of the parties and is unable to accept the petitioner's contention. Our finding is that although
the temporary restraining order was strictly speaking addressed only to BPI and ALU, it was entirely proper for the NLRC itself to abide
by it, and not only out of respect for this Court. The decision sought to be enforced called for the conclusion of a collective bargaining
agreement between BPI and the members of BPIEU-ALU. The question precisely before the Court then was which as between the Reyes
and Valdez groups should be recognized as the legitimate representative of the employees in general to negotiate with BPI NLRC had
no jurisdiction to resolve that question. Obviously, its own decision of March 23, 1983, could not be enforced until that question was first
cleared.

Second Issue
As a result of its merger with the Commercial Bank and Trust Company in 1981, the BPI found it necessary to close the COMTRUST
branch in Davao City and transfer it to General Santos City. Pursuant to an earlier understanding, seven of the employees of the said
branch who were absorbed by BPI were transferred to the General Santos City branch. However, three of them, namely Glenna, Ongkiko,
Arturo Napales, and Gregorio Gito, refused to move. After efforts to persuade them failed, BPI dismissed them. This triggered a strike by
the Davao Chapter of the BPIEU-ALU which was followed by sympathy strikes by other local chapters.

On October 19, 1983, the Minister of Labor sustained the transfer of the three employees by the BPI and issued a return-to-work order.
This was ignored by the striking workers, who continued to question the transfer. Another return-to-work order was issued, this time by
the NLRC, which was obeyed by the strikers upon admission by the BPI of the three recalcitrant employees to their original stations in
Davao City. This was done pending the opening of the General Santos City branch.

Upon the inauguration of the said branch, BPI filed a motion to transfer the said employees thereto as sanctioned earlier by the Minister
of Labor. The situation was complicated when another employee, Lennie Aninon who had earlier agreed to transfer, now insisted on
remaining in the Davao City branch. She too was included in the motion, which was granted by the NLRC in its decision dated December
5, 1984. Napales and Gito agreed to move to General Santos City, but the two lady employees, to wit Ongkiko and Aninon remained
adamant.

The petitioners contend that the decision of the NLRC of December 5, 1984, directing the transfer of the four employees is also tainted
with grave abuse of discretion and should be set aside.

This matter need not detain us too long for the issue is hardly debatable. Indeed, the right of the employer to transfer the employees in
the interest of the efficient and economic operation of its business cannot be seriously challenged. That is its prerogative. The only
limitation on the discretion of management in this regard is its mala fides. The only time the employer cannot exercise this right is where
it is vitiated by improper motive and is merely a disguised attempt to remove or punish the employee sought to be transferred.

Such improper motive has not been shown in the case at bar. On the contrary, it has been established that the transfer was necessitated
by the fact that the COMBANK branch in Davao City had to be closed because it was just across the street from the BPI

105
branch. There was certainly no justification to maintain the two branches as they both belonged now to the BPI. Moreover, it is not
disputed that the lateral transfer of the employees involved no demotion in their rank or salary or other benefits.

It is not disputed that General Santos City is in the Southern Mindanao area. G.R. Nos. 76842-44
Following the dismissal of its petition against the BLR the Reyes group, on April 26, 1985, filed a motion with the NLRC for the release to
it of the union dues consigned by BPI. 16 This motion was opposed by the Valdez group, which subsequently filed its own petition for the
payment to it of the said dues, on the ground that it was the legitimate BPIEU recognized by the BLR. 17 In its decision dated September
26, 1986.

The petitioner is obviously in error. As the disaffiliation of the Reyes group was disallowed by the BLR because it was done beyond the
freedom period, the Reyes group could not have claimed an Identity distinct from that of the original BPIEU-Metro Manila. For the same
reason, the Valdez group could not exclude the Reyes group from the same BPIEU-Metro Manila because both of them were still part of
that original local union. In other words, BPIEU-Metro Manila then consisted of the members of the two contending groups whose affiliation
with ALU, as the mother federation, remained intact.

In any event, this issue of dues-sharing has also become moot and academic now because the Reyes group has finally succeeded in
disaffiliating from ALU and is now a separate and independent union. As such, it does not have to share with ALU whatever union dues
it may now collect from its members. But at the time this petition was filed, the issue was very much alive and had to be resolved to
determine who were entitled to the union dues and in what proportion. The NLRC therefore did not commit any grave abuse of discretion
in rendering the challenged decision as we have here interpreted it.

G.R. Nos. 76916-17

On April 7, 1983, the Labor Arbiter issued an order directing the respondent bank to check off the amount of 5 % of the total economic
benefits due its employees under the new collective bargaining agreement between the bank and the union corresponding to the first
year of effectivity thereof and to deliver the amount collected to Atty. Lacsina or to his duly authorized representative.

BPI deducted the amount of P 200.00 from each of the employees who had signed the authorization.

Upon learning about this, the petitioners challenged the said order, on the ground that it was not authorized under the Labor Code. On
April 15, 1983, the NLRC issued a resolution setting aside the order and requiring BPI to safekeep the amounts sought to be deducted
"until the rights thereto of the interested parties shall have been determined in appropriate proceedings. Subsequently, the NLRC issued
an en banc resolution dated September 27, 1983, ordering the release to Lacsina of the amounts deducted "except with respect to any
portion thereof as to which no individual signed authorization has been given by the members concerned or where such authorization
has been withdrawn.

Art. 222. Appearances and Fees.- . . .

(b) No attorney's fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or
conclusions of the collective agreement shall be imposed on any individual member of the contracting union: Provided, however,
that attorney's 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 case of Pacific Banking Corporation v. Clave where the lawyer's fee was taken not from the total economic benefits received by the
workers but from the funds of their labor union.

The Court reads the afore-cited provision as prohibiting the payment of attorney's fees only when it is effected through forced contributions
from the workers from their own funds as distinguished from the union funds. The purpose of the provision is to prevent imposition on the
workers of the duty to individually contribute their respective shares in the fee to be paid the attorney for his services on behalf of the
union in its negotiations with the management. The obligation to pay the attorney's fees belongs to the union and cannot be shunted to
the workers as their direct responsibility. Neither the lawyer nor the union itself may require the individual workers to assume the obligation
to pay the attorney's fees from their own pockets. So categorical is this intent that the law also makes it clear that any agreement to the
contrary shall be null and void ab initio.

The court sees no such imposition in the case at bar. A reading of the above-cited resolution will clearly show that the signatories thereof
have not been in any manner compelled to undertake the obligation they have there assumed. On the contrary it is plain that they were
voluntarily authorizing the check-off of the attorney's fees from their payment of benefits and the turnover to Lacsina of the amounts
deducted, conformably to their agreement with him. There is no compulsion here. And significantly, the authorized deductions affected
only the workers who adopted and signed the resolution and who were the only ones from whose benefits the deductions were made by
BPI. No similar deductions were taken from the other workers who did not sign the resolution and so were not bound by it.

That only those who signed the resolution could be subjected to the authorized deductions was recognized and made clear by the order
itself of the NLRC. It was there categorically declared that the check-off could not be made where "no individual signed authorization has
been given by the members concerned or where such authorization has been withdrawn."

The Pacific Banking Corporation case is not applicable to the present case because there was there no similar agreement as that entered
into between Lacsina and the signatories of the resolution in question. Absent such an agreement, there was no question that the basic
proscription in Article 222 would have to operate.

106
Moreover, the case is covered squarely by the mandatory and explicit prescription of Art. 222 which is another guarantee intended to
protect the employee against unwarranted practices that would diminish his compensation without his knowledge and consent.

A similar recognition was made in Galvadores v. Trajano, where the payment of the attorney's fees from the wages of the employees was
not allowed because: "No check-offs from any amount due to employees may be effected without individual written authorities duly signed
by the employees specifically stating the amount, purpose and beneficiary of the deduction. The required individual authorizations in this
case are wanting."

Finally, the court hold that the agreement in question is in every respect a valid contract as it satisfies all the elements thereof and does
not contravene law, morals, good customs, public order, or public policy. On the contrary, it enables the workers to avail themselves of
the services of the lawyer of their choice and confidence under terms mutually acceptable to the parties and, hopefully, also for their
mutual benefit. The petitions in G.R. Nos. 69746-47, 76842-44, and 76916-17 are DISMISSED.

TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT vs. NLRC G.R. No. 120592. March 14, 1997

FACTS: Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A. Cruz, head of E.N.A. Cruz and
Associates law firm, entered into a retainer agreement whereby the former obligated itself to pay the latter a monthly retainer fee of
P3,000.00 in consideration of the law firm’s undertaking to render the services enumerated in their contract. During the existence of that
agreement, petitioner union referred to private respondent the claims of its members for holiday, mid – year and year – end bonuses
against their employer, Traders Royal Bank.

The NLRC rendered a decision in favor of the employees, awarding them the said differentials. However, pending the hearing of the
application for the writ of execution, TRC challenged the decision of the NLRC before the Supreme Court. The Court modified the decision
of the NLRC by deleting the award of holiday pay differentials. After private respondent received decision, he notified the petitioner union,
the TRB management and the NLRC of his right to exercise and enforce the attorney’s lien over the award of holiday pay differential. He
filed a motion before the Labor Arbiter for the determination of the attorney’s fees, praying that 10% of the total award be declared as his
attorneys fees. The Labor Arbiter granted the motion of the private respondent.

The NLRC affirmed the order. Petitioner maintains that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in
upholding the award of attorney’s fees. It contends that the award for attorney’s fees should have been incorporated in the main case and
not after the Supreme Court had already reviewed and passed upon the decision of the NLRC. All attorney’s fees due to private respondent
were covered by the retainer fee of P3,000.00 which it has been regularly paying to private respondent under their retainer agreement.
Private respondent maintains that his motion to determine attorney’s fees was just an incident of the main case where petitioner was
awarded its money claims. The grant of attorney’s fees was the consequence of his exercise of his attorney’s lien. Private respondent
contends that a retainer fee is not the attorney’s fees contemplated for and commensurate to the services he rendered to petitioner.
Hence, the petition at bar.

ISSUES: Whether or not:

1. Private respondent is entitled to attorney’s fees even if no claim for such was filed before the NLRC.
2. Private respondent is entitled to an additional remuneration under the retainer agreement entered into by him and petitioner.

HELD: 1.Yes. Private respondent is entitled to attorney’s fees.

There are two commonly accepted concepts of attorney’s fee, the so – called ordinary and extraordinary. In its ordinary concept, an
attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis
of this compensation is the fact of his employment by and his agreement with his client.

In its extraordinary concept, an attorney’s fee is an indemnity for damages ordered by the court to be paid by the losing party in litigation.
The basis of this is any of the cases provided by law where such award can be made, such as those authorized under Article 2208, Civil
Code, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof.

A claim for attorney’s fees may be asserted either in the very action in which the services of a lawyer had been rendered or in separate
action. Private respondent was well within his rights when he made his claim and waited for the finality of the judgment for holiday pay
differential, instead of filing it ahead of the award’s complete resolution. To declare that a lawyer may file a claim for fees in the same
action only before the judgment is reviewed by a higher tribunal would deprive him of his options and render ineffective the
pronouncements of the Court.

2. Yes, Private respondent is entitled to an additional remuneration.

There are two kinds of retainer fees a client may pay his lawyer. These are a general retainer, or a retaining fee, and a special retainer.

A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future services as general counsel for any ordinary legal
problem that may arise in the routinary business of the client and referred to him for legal action. The future services of the lawyer are
secured and committed to the retaining client. For this, the client pays the lawyer a fixed retainer fee which could be monthly or

107
otherwise, depending upon their arrangement. The reason for the remuneration is that the lawyer is that the lawyer is deprive d of the
opportunity of rendering services for a fee to the opposing party or other parties. In fine, it is a compensation for lost opportunities.

A special retainer is a fee for a specific case handled or special service rendered by the lawyer for a client. A client may have several
cases demanding special or individual attention. If for every case there is a separate and independent contract for attorney’s fees, each
fee is considered a special retainer.

The P3.000.00 which petitioner pays monthly to private respondent does not cover the services the latter actually rendered before the
labor arbiter and the NLRC in behalf of the former. The P3,000.00 monthly fee provided in the retainer agreement between the union and
the law firm refers to a general retainer, or a retaining fee, as said monthly fee covers only the law firm’s pledge, or as expressly stated
therein, its “commitment to render the legal services enumerated.” The fee is not payment for private respondent’s execution or
performance of the services listed in the contract, subject to some particular qualifications or permutations stated there. It is independent
and different from the compensation which private respondent should receive in payment for his services.

It is not necessary that the parties agree on a definite fee for the special services rendered by private respondent in order that petitioner
may be obligated to pay compensation to the former. Equity and fair play dictate that petitioner should pay the same after it accepted,
availed itself of, and benefited from private respondent’s services.

Whether there is an agreement or not, the courts can fix a reasonable compensation which lawyers should receive for their professional
services.

The measure of compensation for private respondent's services as against his client should properly be addressed by the rule of quantum
meruit long adopted in this jurisdiction. Quantum meruit, meaning "as much as he deserves," is used as the basis for determining the
lawyer's professional fees in the absence of a contract, but recoverable by him from his client. The doctrine of quantum meruit is a device
to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying for it.

Brahm Industries, Inc. vs. NLRC G.R. No. 118853 October 16, 1997

FACTS: Respondents filed a case for illegal suspension, illegal dismissal, illegal layoff, illegal deductions, non-payment of service
incentive leave, 13th month pay and actual,oral and exemplary damages against petitioner before the LA. Petitioner alleged that
respondents were never employed on a regular basis as the latter had their own customers who required them to render home device.

The LA ruled in favor of respondents thus the order for reinstatement and payment of backwages in their favor. Upon appeal by petitioner,
the NLRC affirmed the LA’s decision but modified it with respect to attorney’s fees, hence its reduction to 5% of the total monetary award
(previously 10%). Hence, this petition.

ISSUE: Whether or not petitioners were entitled to attorney’s fees.

HELD: The SC held that despite the fact that the matter on attorney’s fees was touched only once in the dispositive portion of the LA’s
decision and that no discussion or reason was stated thereof, petitioners should be awarded the same. In the LA’s decision, it invoked
Art. 2208 of the Civil Code which allows attorney’s fees to be awarded by a court where its claimant is compelled to litigate with third
persons by reason of unjustified act or omission of the party for whom its is sought.

The SC further ruled that nothing precludes the appellate courts from reducing the award of attorney’s fees where it is found to be
unconscionable or excessive under the circumstances. In this case, the NLRC reduced to 5% the adjudged relief, it appearing that the
substantial portion of

Heirs of Reynaldo Aniban vs. National Labor Relations Commission G.R. No. 116354. December 4, 1997

FACTS: Reynaldo Aniban was employed by the Philippine Transmarine Carriers, Inc. (TRANSMARINE) acting in behalf of its foreign
principal Norwegian Ship Management A/S (NORWEGIAN) as radio operator (R/O) on board the vessel "Kassel" for a contract period of
9 to 11 months. During the period of his employment, Aniban died due to myocardial infarction. He was survived by a pregnant wife and
3 minor children who prayed for death benefits provided under the POEA Standard Employment Contract.

A claim was also made for additional death benefits under the Collective Bargaining Agreement executed between Associated Marine
Officers and Seamen's Union of the Philippines and NORWEGIAN represented by TRANSMARINE which provided for additional
compensation of US$30,000.00 plus US$8,000.00 to each child under the age of 18 years, maximum US$24,000.00 (not exceeding 3
children) in the event of death of an officer due to an occupational injury or disease while serving on board, while traveling to and from
the vessel on Company's business or due to marine peril.

The claim under the CBA was rejected on the ground that myocardial infarction of which R/O Aniban died was not an occupational disease
as to entitle his heirs to the additional death benefits provided therein. Consequently, Brigida Aniban and her children filed a formal
complaint for non-payment of death compensation benefits under the CBA.

108
ISSUES: Two issues are raised before the SC: (a) whether the POEA has jurisdiction to determine the claim of petitioners for death
benefits, and (b) whether myocardial infarction is an occupational disease as to entitle petitioners to the death benefits provided under
the CBA.

HELD: The law applicable at the time the complaint was filed on 13 November 1992 was Art. 20 of the Labor Code as amended which
clearly provided that "original and exclusive jurisdiction over all matters or cases including money claims, involving employer-employee
relations, arising out of or by virtue of any law or contract involving Filipino seamen for overseas employment is vested with the POEA.
On the other hand, the jurisdiction of the Employment Compensation Commission comes into play only when the liability of the State
Insurance Fund is in issue, as correctly suggested by the Solicitor General.

The ECC was created under Title II, Bk. IV, of the Labor Code with the heading of Employees Compensation and State Insurance Fund.
In addition to its powers and duties enumerated in Art. 177, Art. 180 explicitly provides that the Commission exercises appellate jurisdiction
only over decisions rendered by either the GSIS or SSS in the exercise of their respective original and exclusive jurisdictions.

Hence, the ECC may not be considered as having jurisdiction over money claims, albeit death compensation benefits, of overseas
contract workers. Myocardial infarction is an occupational disease. Although it may be conceded in the instant case that the physical
exertion involved in carrying out the functions of a radio operator may have been quite minimal, we cannot discount the pressure and
strain that went with the position of radio operator. As radio operator, Reynaldo Aniban had to place his full attention in hearing the exact
messages received by the vessel and to relay those that needed to be transmitted to the mainland or to other vessels.

We have already recognized that any kind of work or labor produces stress and strain normally resulting in the wear and tear of the human
body. It is not required that the occupation be the only cause of the disease as it is enough that the employment contributed even in a
small degree to its development. It must be stressed that the strict rules of evidence are not applicable in claims for compensation
considering that probability and not the ultimate degree of certainty is the test of proof in compensation proceedings.

VIRGILIO SAPIO vs. UNDALOC CONSTRUCTION [G.R. No. 155034. May 22, 2008]

Facts: The controversy started with a complaint filed by petitioner against Undaloc Construction and/or Engineer Cirilo Undaloc for illegal
dismissal, underpayment of wages and nonpayment of statutory benefits. Respondent Undaloc Construction, a single proprietorship
owned by Cirilo Undaloc, is engaged in road construction business in Cebu City. Petitioner had been employed as watchman from 1 May
1995 to 30 May 1998 when he was terminated on the ground that the project he was assigned to was already finished, he being allegedly
a project employee. But petitioner asserted that he was a regular employee having been engaged to perform works which are "usually
necessary or desirable" in respondents' business.

Issue:
(1) Whether or not the petitioner is a project employee and
(2) whether or not he is entitled to salary differential apart from attorney’s fees.

SC Ruling: That petitioner was a project employee became a non-issue beginning with the decision of the Labor Arbiter. Contested still
is his entitlement to salary differential, apart from attorney's fees. With regards to this issue, the court said that the conclusion of the Labor
Arbiter that entries in the December 1995 payroll sheet could have been altered is utterly baseless. The claim that the December 1995
payroll sheet was written in pencil and was thus rendered it prone to alterations or erasures is clearly non sequitur. The same is true with
respect to the typewritten payroll sheets. In fact, neither the Labor Arbiter nor the NLRC found any alteration or erasure or traces thereat,
whether on the pencil-written or typewritten payroll sheets. Indeed, the most minute examination will not reveal any tampering.
Furthermore, if there is any adverse conclusion as regards the December 1995 payroll sheet, it must be confined only to it and cannot be
applied to the typewritten payroll sheets.

Moreover, absent any evidence to the contrary, good faith must be presumed in this case. Entries in the payroll, being entries in the
course of business, enjoy the presumption of regularity under Rule 130, Section 43 of the Rules of Court. Hence, while as a general rule,
the burden of proving payment of monetary claims rests on the employer, when fraud is alleged in the preparation of the payroll, the
burden of evidence shifts to the employee and it is incumbent upon him to adduce clear and convincing evidence in support of his claim.
Unfortunately, petitioner's bare assertions of fraud do not suffice to overcome the disputable presumption of regularity.

While we adhere to the position of the appellate court that the "tendency" to alter the entries in the payrolls was not substantiated, we
cannot however subscribe to the total deletion of the award of salary differential and attorney's fees, as it so ruled. The award of attorney's
fees is warranted under the circumstances of this case. Thus, the petition is partially granted. Petitioner is awarded the salary differential
in the reduced amount of P13,156.00 and respondents are directed to pay the same, as well as ten percent (10%) of the award as
attorney's fees.

JOSE MAX S. ORTIZ vs. SAN MIGUEL CORPORATION [G.R. Nos. 151983-84 July 31, 2008]

FACTS: The petitioner in this case, Jose Max S. Ortiz, is a member of the Philippine Barwho represented the complainants in NLRC
Cases No. V-0255-94 (hereinafter referred to as the Aguirre Cases) and No. V-0068-95 (hereinafter referred to as the Toquero Case)
instituted against herein private respondent San Miguel Corporation sometime in 1992 and 1993. The complainants in NLRC Cases,
109
Aguirre Cases and Toquero Case were employees at private respondent's Sales Offices in the Province of Negros Occidental.

The complainants of Cases, Aguire and Toquero got a favorable decision in NLRC regarding their money claims against San Miguel
Corporation. In effect, San Miguel Corporation filed a Petitions for Certiorari. While this respondent’s petitions were pending before the
Court of Appeals, all but one of the remaining complainants in Aguirre and Toquero Cases on various dates before two Labor Arbiters
and in the presence of two witnesses, signed separate Deeds of Release, Waiver and Quitclaim in favor of private respondent. Based on
the Deeds they executed, complainants agreed to settle their claims against private respondent for amounts less than what the NLRC
actually awarded. Private respondent withheld 10% of the total amount agreed upon by the parties in the said Deeds as attorney's fees
and handed it over to petitioner. Private respondent then attached the Deeds to its Manifestation and Motion filed before the appellate
court. Then the Court of appeals rendered a decision affirming the NLRC decisions, only in so far as it concerned complainant Alfredo
Gadian, Jr. (complainant Gadian), the only complainant who did not execute a Deed of Release, Waiver and Quitclaim. With respect to
the other complainants in the Aguirre and Toquero Cases, their complaints were dismissed on account of their duly executed Deeds of
Release, Waiver and Quitclaim. In a Resolution dated 9 January 2002, the appellate court denied the motion of complainant Gadian and
his counsel, herein petitioner , that the award of attorney's fees of 10% should be based on the monetary awards adjudged by the NLRC.

Thus, this petition filed before the Court praying to affirm the award of attorney's fees equivalent to 10% of the monetary award adjudged
by the NLRC in its Decisions dated 21 July 1995 and 25 July 1995 in Toquero Case and Aguirre Cases respectively.

ISSUE: Whether he is entitled to the amount of attorney's fees as adjudged by the NLRC in its Decisions in the Aguirre and Toquero
Cases or only to the 10% of the amounts actually paid to his clients, the complainants who signed the Deeds of Release, Waiver and
Quitclaim.

SC RULING: The aforesaid issue evidently involves a question of law. What it needs to do is ascertain and apply the relevant law and
jurisprudence on the award of attorney's fees to the prevailing parties in labor cases

Article 111 of the Labor Code, as amended, specifically provides:

ART. 111. ATTORNEY'S FEES. — (a) In cases of unlawful withholding of wages the culpable party may be assessed
attorney's fees equivalent to ten percent of the amount of wages recovered.

b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the
wages, attorney's fees which exceed ten percent of the amount of wages recovered.

In PCL Shipping Philippines, Inc. v. National Labor Relations Commission citing Dr. Reyes v. Court of Appeals, this Court enunciated that
there are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its ordinary concept, an
attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services the former has rendered to the latter.
The basis of this compensation is the fact of the attorney's employment by and his agreement with the client. In its extraordinary concept,
attorney's fees are deemed indemnity for damages ordered by the court to be paid by the losing party in a litigation. The instances in
which these may be awarded are those enumerated in Article 2208 of the Civil Code, specifically paragraph 7 thereof, which pertains to
actions for recovery of wages, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to
the lawyer as additional compensation or as part thereof. Article 111 of the Labor Code, as amended, contemplates the extraordinary
concept of attorney's fees.

Based on the foregoing, the attorney's fees awarded by the NLRC in its Decisions in the Aguirre and Toquero Cases pertain to the
complainants, petitioner's clients, as indemnity for damages; and not to petitioner as compensation for his legal services. Records show
that the petitioner neither alleged nor proved that his clients, the complainants, willingly agreed that the award of attorney's fees would
accrue to him as an additional compensation or part thereof. What the complainants explicitly agreed to in their individual Deeds of
Release, Waiver, and Quitclaim was that the 10% attorney's fees of the petitioner shall be deducted from the amount of the gross
settlement.

Thus, this Court has no recourse but to interpret the award of attorney's fees by the NLRC in its extraordinary concept. And since the
attorney's fees pertained to the complainants as indemnity for damages, it was totally within the complainants' right to waive the amount
of said attorney's fees and settle for a lesser amount thereof in exchange for the immediate end to litigation. Petitioner cannot prevent
complainants from compromising and/or withdrawing their complaints at any stage of the proceedings just to protect his anticipated
attorney's fees.

Even assuming arguendo that the complainants in the Aguirre and Toquero Cases did indeed agree that the attorney's fees awarded by
the NLRC should be considered in their ordinary concept, i.e., as compensation for petitioner's services, we refer back to Article 111 of
the Labor Code, as amended, which provides that the attorney's fees should be equivalent to 10% of the amount of wages recovered.
Since the complainants decided to settle their complaints against the private respondent, the amounts actually received by them pursuant
to the Deeds of Release, Waiver and Quitclaim are the amounts "recovered" and the proper basis for determining the 10% attorney's
fees.

In the case at bar, it is beyond cavil that the petitioner is not the real party in interest; hence, he cannot file this Petition to recover the
attorney's fees as adjudged by the NLRC in its Decisions dated 21 July 1995 and 25 July 1995 in the Aguirre and Toquero Cases,
respectively. To reiterate, the award of attorney's fees pertain to the prevailing parties in the NLRC cases, namely, the complainants, all
but one of whom no longer pursued their complaints against private respondent after executing Deeds of Release, Waiver and
110
Quitclaim. Not being the party to whom the NLRC awarded the attorney's fees, neither is the petitioner the proper party to question the
non-awarding of the same by the appellate court.

This would show that petitioner has been compensated for the services he rendered the complainants. It may do well for petitioner to
remember that as a lawyer, he is a member of an honorable profession, the primary vision of which is justice. The practice of law is a
decent profession and not a money-making trade. Compensation should be but a mere incident.

If petitioner earnestly believes that the amounts he already received are grossly deficient, petitioner's remedy is not against the private
respondent, but against his own clients, the complainants. He should file a separate action for collection of sum of money against
complainants to recover just compensation for his legal services, and not the present Petition for Review to claim from private respondent
the attorney's fees which were adjudged by the NLRC in favor of complainants as the prevailing parties in the Aguirre and Toquero Cases.

WHEREFORE, the instant Petition is hereby DENIED.

EVANGELINA MASMUD (as substitute complainant for ALEXANDER J. MASMUD) vs. NATIONAL LABOR RELATIONS
COMMISSION (First Division) and ATTY. ROLANDO B. GO, JR. [G.R. No. 183385 February 13, 2009]

FACTS: The late Alexander J. Masmud (Alexander), the husband of Evangelina Masmudn (Evangelina) filed a complaint against First
Victory Shipping Services and Angelakos (Hellas) S.A. on July 9, 2003 for non-payment of permanent disability benefits, medical
expenses, sickness allowance, moral and exemplary damages, and attorney's fees. Alexander engaged the services of Atty. Rolando B.
Go, Jr. (Atty. Go) as his counsel. In consideration of Atty. Go's legal services, Alexander agreed to pay attorney's fees on a contingent
basis, as follows: twenty percent (20%) of total monetary claims as settled or paid and an additional ten percent (10%) in case of appeal.
On November 21, 2003, the Labor Arbiter (LA) rendered a Decision granting the monetary claims of Alexander. Alexander's employer
filed an appeal before the National Labor Relations Commission (NLRC). During the pendency of the proceedings before the NLRC,
Alexander died. After explaining the terms of the lawyer's fees to Evangelina, Atty. Go caused her substitution as complainant. On April
30, 2004, the NLRC rendered a Decision dismissing the appeal of Alexander's employer. On appeal before the CA, the decision of the
LA was affirmed with modification. Thereafter, Alexander’s employer appealed to the Supreme Court. On February 6, 2006, the Court
issued a Resolution dismissing the case for lack of merit.

On January 10, 2005, the LA directed the NLRC Cashier to release the amount of P3,454,079.20 to Evangelina. Out of the said amount,
Evangelina paid Atty. Go the sum of P680,000.00. Dissatisfied, Atty. Go filed a motion to record and enforce the attorney's lien alleging
that Evangelina reneged on their contingent fee agreement. Evangelina paid only the amount of P680,000.00, equivalent to 20% of the
award as attorney's fees, thus, leaving a balance of 10%, plus the award pertaining to the counsel as attorney's fees. In her comment,
Evangelina manifested that Atty. Go's claim for attorney's fees of 40% of the total monetary award was null and void based on Article 111
of the Labor Code.

The Labor Arbiter issued an Order granting Atty. Go's motion. Then, Evangelina questioned the decision of the Labor Arbiter before the
NLRC. However, the NLRC dismissed her appeal. Then, she elevated the case to the Court of Appeals. The CA partially gramted the
petition with some modification declaring that Atty. Go is fully compensated by the amount of P1,347,950.11 that he has already received.
Dissatisfied, Angelina filed this petition.

ISSUE: Whether or not the legal compensation of a lawyer in a labor proceeding should be based on Article 111 of the Labor Code.

SC RULING: There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the reasonable compensation
paid to a lawyer by his client for the legal services rendered to the latter. On the other hand, in its extraordinary concept, attorney's fees
may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party, such that, in any of the
cases provided by law where such award can be made, e.g., those authorized in Article 2208 of the Civil Code, the amount is payable
not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as
part thereof.

Here, we apply the ordinary concept of attorney's fees, or the compensation that Atty. Go is entitled to receive for representing Evangelina,
in substitution of her husband, before the labor tribunals and before the court. The retainer contract between Atty. Go and Evangelina
provides for a contingent fee. The contract shall control in the determination of the amount to be paid, unless found by the court to be
unconscionable or unreasonable. Attorney's fees are unconscionable if they affront one's sense of justice, decency or reasonableness.
The decree of unconscionability or unreasonableness of a stipulated amount in a contingent fee contract will not preclude recovery. It
merely justifies the fixing by the court of a reasonable compensation for the lawyer's services.

Contingent fee contracts are subject to the supervision and close scrutiny of the court in order that clients may be protected from unjust
charges. The amount of contingent fees agreed upon by the parties is subject to the stipulation that counsel will be paid for his legal
services only if the suit or litigation prospers. A much higher compensation is allowed as contingent fees because of the risk that the
lawyer may get nothing if the suit fails. The Court finds nothing illegal in the contingent fee contract between Atty. Go and Evangelina's
husband. The CA committed no error of law when it awarded the attorney's fees of Atty. Go and allowed him to receive an equivalent of
39% of the monetary award.

Considering that Atty. Go successfully represented his client, it is only proper that he should receive adequate compensation for his
efforts. With his capital consisting of his brains and with his skill acquired at tremendous cost not only in money but in expenditure of
111
time and energy, he is entitled to the protection | 61 of any judicial tribunal against any attempt on the part of his client to escape payment
of his just compensation. It would be ironic if after putting forth the best in him to secure justice for his client, he himself would not get his
due.

KAISAHAN vs MWC GR No. 174179 November 16, 2011

The background facts are not disputed and are summarized below.

The Union is the duly-recognized bargaining agent of the rank-and-file employees of the respondent Manila Water Company, Inc.
(Company) while Borela is the Union President. 5 On February 21, 1997, the Metropolitan Waterworks and Sewerage System (MWSS)
entered into a Concession Agreement (Agreement) with the Company to privatize the operations of the MWSS. 6 Article 6.1.3 of the
Agreement provides that "the Concessionaire shall grant [its] employees benefits no less favorable than those granted to MWSS
employees at the time of [their] separation from MWSS." 7Among the benefits enjoyed by the employees of the MWSS were the
amelioration allowance (AA) and the cost-of-living allowance (COLA) granted in August 1979, pursuant to Letter of Implementation No.
97 issued by the Office of the President. 8

The payment of the AA and the COLA was discontinued pursuant to Republic Act No. 6758, otherwise known as the "Salary
Standardization Law," which integrated the allowances into the standardized salary. 9 Nonetheless, in 2001, the Union demanded from
the Company the payment of the AA and the COLA during the renegotiation of the parties' Collective Bargaining Agreement (CBA). 10
The Company initially turned down this demand, however, it subsequently agreed to an amendment of the CBA on the matter, which
provides:

The Company shall implement the payment of the Amelioration Allowance and Cost of Living [A]llowance retroactive
August 1, 1997 should the MWSS decide to pay its employees and all its former employees or upon award of a
favorable order by the MWSS Regulatory Office or upon receipt of [a] final court judgment. 11

Thereafter, the Company integrated the AA into the monthly payroll of all its employees beginning August 1, 2002, payment of the AA
and the COLA after an appropriation was made and approved by the MWSS Board of Trustees. The Company, however, did not
subsequently include the COLA since the Commission on Audit disapproved its payment because the Company had no funds to cover
this benefit. 12 DHTCaI

As a result, the Union and Borela filed on April 15, 2003 a complaint against the Company for payment of the AA, COLA, moral and
exemplary damages, legal interest, and attorney's fees before the National Labor Relations Commission(NLRC). 13

The Compulsory Arbitration Rulings

In his decision of August 20, 2003, Labor Arbiter Aliman D. Mangandog (LA) ruled in favor of the petitioners and ordered the payment of
their AA and COLA, six percent (6%) interest of the total amount awarded, and ten percent (10%) attorney's fees. 14

On appeal by the Company, the NLRC affirmed with modification the LA's decision. 15 It set aside the award of the COLA benefits
because the claim was not proven and established, but ordered the Company to pay the petitioners their accrued AA of about
P107,300,000.00 in lump sum and to continue paying the AA starting August 1, 2002. It also upheld the award of 10% attorney's fees to
the petitioners.

In its Motion for Partial Reconsideration of the NLRC's December 19, 2003 decision, the Company pointed out that the award of ten
percent (10%) attorney's fees to the petitioners is already provided for in their December 19, 2003 Memorandum of Agreement (MOA)
which mandated that attorney's fees shall be deducted from the AA and CBA receivables. 16 This compromise agreement, concluded
between the parties in connection with a notice of strike filed by the Union in 2003, 17 provides among others that: 18

31.Attorney's fees — 10% to be deducted from AA and CBA receivables.

32.All other issues are considered withdrawn. 19

In their Opposition, the petitioners argued that the MOA only covered the payment of their share in the contracted attorney's fees, but did
not include the attorney's fees awarded by the NLRC. To support their claim, the petitioners submitted Borela's affidavit which relevantly
stated:

2.On December 19, 2003, in settlement of the notice of Strike for CBA Deadlock, Manila Water Company, Inc. and
the Union entered into an Agreement settling the deadlock issued (sic) of the CBA negotiation including [the] payment
of the AA and the mode of payment thereof.

3.Considering that the AA payment was included in the Agreement, the Union representation deemed it wise, for
practical reason, to authorize the company to immediately deduct from the benefits that will be received by the
member/employees the 10% attorney's fees in conformity with our contract with our counsel.

112
 4.The 10% attorney's fees paid by the members/employees is separate and distinct from the obligation of
the company to pay the 10% awarded attorney's fees which we also gave to our counsel as part of our
contingent fee agreement.

5.There was no agreement that we are going to shoulder the entire attorney's fees as this would cost us 20% of the
amount we would recover. There was also no agreement that the 10% attorney's fees in the MOA represents the
entire attorney's cost because the said payment represents only our compliance of our share in the attorney's fees
in conformity with our contract. Likewise, we did not waive the awarded 10% attorney's fees because the same
belongs to our counsel and not to us and beyond our authority. 20 (emphasis ours)

The NLRC subsequently denied both parties' Motions for Partial Reconsideration, 21 prompting the Company to elevate the case to the
CA via a petition for certiorari under Rule 65 of the Rules of Court. It charged the NLRC of grave abuse of discretion in sustaining
the award of attorney's fees on the grounds that: (1) it is contrary to the MOA 22concerning the payment of attorney's fees;
(2) there was no finding of unlawful withholding of wages or bad faith on the part of the Company; and (3) the attorney's fees awarded
are unconscionable. SIHCDA

The CA Decision

In its Decision promulgated on March 6, 2006, 23 the CA modified the assailed NLRC rulings by deleting "[t]he order for respondent
MWCI to pay attorney's fees equivalent to 10% of the total judgment awards." The CA recognized the binding effect of the MOA between
the Company and the Union; it stressed that any further award of attorney's fees is unfounded considering that it did not find anything in
the Agreement that is contrary to law, morals, good customs, public policy or public order.

In resolving the issue, the CA cited our ruling in Traders Royal Bank Employees Union-Independent v. NLRC, 24 where we distinguished
between the two commonly accepted concepts of attorney's fees — the ordinary and the extraordinary. We held in that case that under
its ordinary concept, attorney's fees are the reasonable compensation paid to a lawyer by his client for legal services rendered. On the
other hand, we ruled that in its extraordinary concept, attorney's fees represent an indemnity for damages ordered by the court to be paid
by the losing party in a litigation based on what the law provides; it is payable to the client not to the lawyer, unless there is an agreement
to the contrary.

The CA noted that the fees at issue in this case fall under the extraordinary concept — the NLRC having ordered the Company, as losing
party, to pay the Union and its members ten percent (10%) attorney's fees. It found the award without basis under Article 111 of the Labor
Code which provides that attorney's fees equivalent to ten percent (10%) of the amount of wages recovered may be assessed only in
cases of unlawful withholding of wages.

The CA ruled that the facts of the case do not indicate any unlawful withholding of wages or bad faith attributable to the Company. It also
held that the additional grant of 10% attorney's fees violates Article 111 of the Labor Code considering that the MOA between the parties
already ensured the payment of 10% attorney's fees, deductible from the AA and CBA receivables of the Union's members. The CA thus
adjudged the NLRC decision awarding attorney's fees to have been rendered with grave abuse of discretion.

The Union and Borela moved for reconsideration, but the CA denied the motion in its resolution of August 15, 2006. 25Hence, the present
petition.

The Petition

The petitioners seek a reversal of the CA rulings on the sole ground that the appellate court committed a reversible error in reviewing the
factual findings of the NLRC and in substituting its own findings — an action that is not allowed under Rule 65 of the Rules of Court. They
question the CA's re-evaluation of the evidence, particularly the MOA, and its conclusion that there was no unlawful withholding of wages
or bad faith attributable to the Company, thereby contradicting the factual findings of the NLRC. They also submit that a petition for
certiorari under Rule 65 is confined only to issues of jurisdiction or grave abuse of discretion, and does not include the review of the
NLRC's evaluation of the evidence and its factual findings. 26

The petitioners argue that in the present case, all the parties' arguments and evidence relating to the award of attorney's fees were
carefully studied and weighed by the NLRC. As a result, the NLRC gave credence to Borela's affidavit claiming that the attorney's fees
paid by the Union's members are separate and distinct from the attorney's fees awarded by the NLRC. The petitioners stress that whether
the NLRC is correct in giving credence to Borela's affidavit is a question that the CA cannot act upon in a petition for certiorari unless
grave abuse of discretion can be shown. 27

The Case for the Company

In its Memorandum filed on September 7, 2007, 28 the Company argues that the correctness of the NLRC's interpretation of the provision
of the MOA, the reasonableness of the attorney's fees in question, and the application or interpretation of a provision of the Labor Code
on the matter are questions of law which the CA validly inquired into in the certiorari proceedings. It argues that the CA correctly ruled
that the NLRC acted with grave abuse of discretion when it affirmed the LA's award of attorney's fees despite the absence of a finding of
any unlawful withholding of wages or bad faith on the part of the Company. It finally contends that the Union's demand, together with the
NLRC award, is unconscionable as it represents 20% of the amount due or about P21.4 million. DTAESI

113
 Issues

The core issues posed for our resolution are:

(1) whether the CA can review the factual findings of the NLRC in a Rule 65 petition; and
(2) whether the NLRC gravely abused its discretion in awarding ten percent (10%) attorney's fees to the petitioners.

The Court's Ruling

We find the petition and its arguments meritorious.

On the CA's Review of the NLRC's Factual Findings

We agree with the petitioners that as a rule, the CA cannot undertake a re-assessment of the evidence presented in the case in certiorari
proceedings under Rule 65 of the Rules of Court. 29 However, the rule admits of exceptions. InMercado v. AMA Computer College-
Parañaque City, Inc., 30 we held that the CA may examine the factual findings of the NLRC to determine whether or not its conclusions
are supported by substantial evidence, whose absence justifies a finding of grave abuse of discretion. We ruled:

We agree with the petitioners that, as a rule in certiorari proceedings under Rule 65 of the Rules of Court, the CA
does not assess and weigh each piece of evidence introduced in the case. The CA only examines the factual findings
of the NLRC to determine whether or not the conclusions are supported by substantial evidence whose absence
points to grave abuse of discretion amounting to lack or excess of jurisdiction. In the recent case ofProtacio v. Laya
Mananghaya & Co., we emphasized that:

As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does
not assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their
conclusion. The query in this proceeding is limited to the determination of whether or not the NLRC acted
without or in excess of its jurisdiction or with grave abuse of discretion in rendering its decision.However,
as an exception, the appellate court may examine and measure the factual findings of the NLRC if
the same are not supported by substantial evidence. The Court has not hesitated to affirm the
appellate court's reversals of the decisions of labor tribunals if they are not supported by substantial
evidence. 31 (italics and emphasis supplied; citation omitted)

As discussed below, our review of the records and of the CA decision shows that the CA erred in ruling that the NLRC gravely abused its
discretion in awarding the petitioners ten percent (10%) attorney's fees without basis in fact and in law. Corollary to the above-cited rule
is the basic approach in the Rule 45 review of Rule 65 decisions of the CA in labor cases which we articulated in Montoya v. Transmed
Manila Corporation 32 as a guide and reminder to the CA. We laid down that:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for
jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review ofquestions of law
raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from
the prism of whether it correctly determined the presence or absence of grave abuse of discretion in the
NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the case was correct.
In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling in
a labor case. In question form, the question to ask is: Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case? 33 (italics and emphases supplied)

In the present case, we are therefore tasked to determine whether the CA correctly ruled that the NLRC committed grave abuse of
discretion in awarding 10% attorney's fees to the petitioners.

On the Award of Attorney's Fees

Article 111 of the Labor Code, as amended, governs the grant of attorney's fees in labor cases: CSaITD

Art. 111.Attorney's fees. — (a) In cases of unlawful withholding of wages, the culpable party may be assessed
attorney's fees equivalent to ten percent of the amount of wages recovered.
(b)It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the
recovery of wages, attorney's fees which exceed ten percent of the amount of wages recovered.

Section 8, Rule VIII, Book III of its Implementing Rules also provides, viz.:

Section 8.Attorney's fees. — Attorney's fees in any judicial or administrative proceedings for the recovery of
wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount due
the winning party.

We explained in PCL Shipping Philippines, Inc. v. National Labor Relations Commission, 34 that there are two commonly accepted
concepts of attorney's fees — the ordinary and extraordinary. In its ordinary concept, an attorney's fee is the
114
 reasonable compensation paid to a lawyer by his client for the legal services the former renders; compensation is paid for the cost
and/or results of legal services per agreement or as may be assessed. In itsextraordinary concept, attorney's fees are deemed
indemnity for damages ordered by the court to be paid by the losing party to the winning party. The instances when these may
be awarded are enumerated in Article 2208 of the Civil Code, specifically in its paragraph 7 on actions for recovery of wages, and is
payable not to the lawyer but to the client, unless the client and his lawyer have agreed that the award shall accrue to the
lawyer as additional or part of compensation. 35

We also held in PCL Shipping that Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of attorney's
fees and that Article 111 is an exception to the declared policy of strict construction in the award of attorney's fees. Although
an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the
employer acted maliciously or in bad faith when it withheld the wages. In carrying out and interpreting the Labor Code's provisions
and implementing regulations, the employee's welfare should be the primary and paramount consideration. This kind of interpretation
gives meaning and substance to the liberal and compassionate spirit of the law as embodied in Article 4 of the Labor Code (which
provides that "[a]ll doubts in the implementation and interpretation of the provisions of [the Labor Code], including its implementing
rules and regulations, shall be resolved in favor of labor") and Article 1702 of the Civil Code (which provides that "[i]n case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer"). 36

We similarly so ruled in RTG Construction, Inc. v. Facto 37 and in Ortiz v. San Miguel Corporation. 38 In RTG Construction, we
specifically stated:

Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interests, a monetary award by way of attorney's fees is justifiable under Article
111 of the Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules; and paragraph 7, Article 2208 of the
Civil Code. The award of attorney's fees is proper, and there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages
were not paid accordingly. 39 (emphasis ours)

In PCL Shipping, we found the award of attorney's fees due and appropriate since the respondent therein incurred legal expenses after
he was forced to file an action for recovery of his lawful wages and other benefits to protect his rights. 40 From this perspective and the
above precedents, we conclude that the CA erred in ruling that a finding of the employer's malice or bad faith in withholding wages must
precede an award of attorney's fees under Article 111 of the Labor Code. To reiterate, a plain showing that the lawful wages were not
paid without justification is sufficient.

In the present case, we find it undisputed that the union members are entitled to their AA benefits and that these benefits were not paid
by the Company. That the Company had no funds is not a defense as this was not an insuperable cause that was cited and proper ly
invoked. As a consequence, the union members represented by the Union were compelled to litigate and incur legal expenses. On these
bases, we find no difficulty in upholding the NLRC's award of ten percent (10%) attorney's fees.

The more significant issue in this case is the effect of the MOA provision that attorney's fees shall be deducted from the AA and CBA
receivables. In this regard, the CA held that the additional grant of 10% attorney's fees by the NLRC violates Article 111 of the Labor
Code, considering that the MOA between the parties already ensured the payment of 10% attorney's fees deductible from the AA and
CBA receivables of the Union's members. In addition, the Company also argues that the Union's demand, together with the NLRC award,
is unconscionable as it represents 20% of the amount due or about P21.4 million. ATHCDa

In Traders Royal Bank Employees Union-Independent v. NLRC, 41 we expounded on the concept of attorney's fees in the context of
Article 111 of the Labor Code, as follows:

In the first place, the fees mentioned here are the extraordinary attorney's fees recoverable as indemnity for
damages sustained by and payable to the prevailing part[y]. In the second place, the ten percent(10%)
attorney's fees provided for in Article 111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing
Rules is the maximum of the award that may thus be granted. Article 111 thus fixes only the limit on the
amount of attorney's fees the victorious party may recover in any judicial or administrative proceedings and it
does not even prevent the NLRC from fixing an amount lower than the ten percent (10%) ceiling prescribed by the
article when circumstances warrant it. 42 (emphases ours; citation omitted)

In the present case, the ten percent (10%) attorney's fees awarded by the NLRC on the basis of Article 111 of the Labor Code accrue to
the Union's members as indemnity for damages and not to the Union's counsel as compensation for his legal services, unless, they
agreed that the award shall be given to their counsel as additional or part of his compensation; in this case the Union bound
itself to pay 10% attorney's fees to its counsel under the MOA and also gave up the attorney's fees awarded to the Union's members in
favor of their counsel. This is supported by Borela's affidavit which stated that "[t]he 10% attorney's fees paid by the members/employees
is separate and distinct from the obligation of the company to pay the 10% awarded attorney's fees which we also gave to our counsel
as part of our contingent fee agreement." 43 The limit to this agreement is that the indemnity for damages imposed by the NLRC on
the losing party (i.e., the Company) cannot exceed ten percent (10%).

Properly viewed from this perspective, the award cannot be taken to mean an additional grant of attorney's fees, in violation of the ten
percent (10%) limit under Article 111 of the Labor Code since it rests on an entirely different legal obligation than the one contracted
115
under the MOA. Simply stated, the attorney's fees contracted under the MOA do not refer to the amount of attorney's fees awarded
by the NLRC; the MOA provision on attorney's fees does not have any bearing at all to the attorney's fees awarded by the NLRC
under Article 111 of the Labor Code. Based on these considerations, it is clear that the CA erred in ruling that the LA's award of
attorney's fees violated the maximum limit of ten percent (10%) fixed by Article 111 of the Labor Code.

Under this interpretation, the Company's argument that the attorney's fees are unconscionable as they represent 20% of the amount due
or about P21.4 million is more apparent than real. Since the attorney's fees awarded by the LA pertained to the Union's members as
indemnity for damages, it was totally within their right to waive the amount and give it to their counsel as part of their contingent fee
agreement. Beyond the limit fixed by Article 111 of the Labor Code, such as between the lawyer and the client, the attorney's fees may
exceed ten percent (10%) on the basis of quantum meruit, as in the present case. 44

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed decision dated March 6, 2006 and the resolution
dated August 15, 2006 of the Court of Appeals in CA-G.R. SP No. 83654 are REVERSED andSET ASIDE. The Labor Arbiter's award of
attorney's fees equivalent to ten percent (10%) of the total judgment award is hereby REINSTATED.

No pronouncement as to costs. SO ORDERED.

Malvar vs. Kraft Food Phils Inc. et al., G.R. No. 183952, Sept. 9, 2013
FACTS:
-
a) Plaintiff-Appellant’s Arguments (CZARINA T. MALVAR)
b) Defendant-Appellant’s (KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT FOODS INTERNATIONAL)
c) Intervenor (The Law Firm of Dasal, Llasos and Associates, through its of Counsel Retired Supreme Court Associate Justice
Josue N. Bellosillo)

Narration of facts:
1. On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as its Corporate Planning Manager. From then on,
she gradually rose from the ranks, becoming in 1996 the Vice President for Finance in the Southeast Asia Region of Kraft Foods
International (KFI), KFPI's mother company.

2. On November 29, 1999, respondent Bienvenido S. Bautista, as Chairman of the Board of KFPI and concurrently the Vice President
and Area Director for Southeast Asia of KFI, sent Malvar a memo directing her to explain why no administrative sanctions should be
imposed on her for possible breach of trust and confidence and for willful violation of company rules and regulations.

3. On March 16, 2000, petitioner was served a notice of termination.

4. Malvar filed a complaint for illegal suspension and illegal dismissal against KFPI and Bautista in the National Labor Relations
Commission (NLRC). In a decision dated April 30, 2001, the Labor Arbiter found and declared her suspension and dismissal illegal, and
ordered her reinstatement, and the payment of her full backwages, inclusive of allowances and other benefits, plus attorney's fees.

5. On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but additionally ruled that Malvar was entitled to "any and
all stock options and bonuses she was entitled"

6. Respondents sought the reconsideration, but was denied by NLRC.

7. Respondents assailed the adverse outcome before the CA on certiorari.

8. After the judgment in favor of petitioner Malvar became final and executory on March 14, 2006, Malvar moved for the issuance of a
writ of execution.

9. Both parties appealed the computation on several motions.

10. On December 9, 2010, while Malvar's appeal was pending in this Court, Malvar and the respondents entered into a compromise
agreement.

11. Malvar withdrew the appeal for the case.

12. An intervention was entered into by the counsel of Malvar for making both Malvar and Respondents who entered into a compromise
agreement, jointly and severaly ordered to pay the Intevenor's contigent attorney's fee.

13. It appears that in July 2009, to the Intervenor's surprise, Malvar unceremoniously and without any justifiable reason terminated its
legal service and required it to withdraw from the case.
116
14. The Intervenor prays for the following reliefs:

a)Granting the Motion for Intervention to Protect Attorney's Rights in favor of the Intervenor;

b)Directing both Petitioner and Respondents jointly and severally to pay Intervenor its contingent fees;

c)Granting a lien upon all judgments for the payment of money and executions issued in pursuance of such judgments; and

d)Holding in Abeyance in the meantime the Resolution of the Motion to Dismiss/Withdraw Case filed by Petitioner and granting
the Motion only after Intervenor has been fully paid its just compensation; and

e)Other reliefs just and equitable.

ISSUE:

The issues for our consideration and determination are twofold, namely: (a) whether or not Malvar's motion to dismiss the petition on the
ground of the execution of the compromise agreement was proper; and (b) whether or not the Motion for Intervention to protect attorney's
rights can prosper, and, if so, how much could it recover as attorney's fees.

RULING:
Conclusion:

We shall decide the issues accordingly.

Rule:

1st, A compromise agreement is a contract, whereby the parties undertake reciprocal obligations to avoid litigation, or put an end to one
already commenced. 31 The client may enter into a compromise agreement with the adverse party to terminate the litigation before a
judgment is rendered therein. 32 If the compromise agreement is found to be in order and not contrary to law, morals, good customs and
public policy, its judicial approval is in order.

A client may at any time dismiss his attorney or substitute another in his place, but if the contract between client and attorney has been
reduced to writing and the dismissal of the attorney was without justifiable cause, he shall be entitled to recover from the client the full
compensation stipulated in the contract. However, the attorney may, in the discretion of the court, intervene in the case to protect his
rights. For the payment of his compensation the attorney shall have a lien upon all judgments for the payment of money, and executions
issued in pursuance of such judgment, rendered in the case wherein his services had been retained by the client.

2nd, On considerations of equity and fairness, the Court disapproves of the tendencies of clients compromising their cases behind the
backs of their attorneys for the purpose of unreasonably reducing or completely setting to naught the stipulated contingent fees. 39 Thus,
the Court grants the Intervenor's Motion for Intervention to Protect Attorney's Rights as a measure of protecting the Intervenor's right to
its stipulated professional fees that would be denied under the compromise agreement. The Court does so in the interest of protecting
the rights of the practicing Bar rendering professional services on contingent fee basis.

Application:

First of all, the unusual timing of Malvar's letter terminating the Intervenor's legal representation of her, of her Motion to Dismiss/Withdraw
Case, and of the execution of compromise agreement manifested her desire to evade her legal obligation to pay to the Intervenor its
attorney's fees for the legal services rendered. The objective of her withdrawal of the case was to release the respondents from all her
claims and causes of action in consideration of the settlement. In other words, she thereby waived more than what she was lawfully
expected to receive from the respondents.

Secondly, the respondents suddenly turned around from their strong stance of berating her demand as offensive to all precepts of justice
and fair play and as a form of unjust enrichment for her to a surprisingly generous surrender to her demand. Under such circumstances,
it is plausible to conclude that her termination of the Intervenor's services was instigated by their prodding in order to remove the Intervenor
from the picture for being a solid obstruction to the settlement for a much lower liability, and thereby save for themselves and for her some
more amount.

Thirdly, the compromise agreement was silent on the Intervenor's contingent fee, indicating that the objective of the compromise
agreement was to secure a huge discount from its liability towards Malvar.

Conclusion:

The waiver could not negate the Intervenor's right to 10% of the value of the stock options she was legally entitled to under the
decisions of the NLRC and the CA, for that right was expressly stated in the written agreement between her and the Intervenor. Thus,

117
the Intervenor should be declared entitled to recover full compensation in accordance with the written agreement because it did
not assent to the waiver of the stock options, and did not waive its right to that part of its compensation.

WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the Motion for Intervention to Protect Attorney's Rights;
and ORDERS Czarina T. Malvar and respondents Kraft Food Philippines, Inc. and Kraft Foods International to jointly and severally pay
to Intervenor Law Firm, represented by Retired Associate Justice Josue N. Bellosillo, its stipulated contingent fees of 10% of
P41,627,593.75, and the further sum equivalent to 10% of the value of the stock option.

T&H Shopfitters Corporation/Gin Queen Corporation v. T&H Shopfitters Corporation/Gin Queen Corporation Workers

Union Facts:

Respondent filed a complaint of unfair labor practice by way of union busting and illegal lockout with moral and exemplary damages and
attorney’s fees against Petitioners.

The unfair labor practice done by petitioners consisted of (1) not giving respondents regular work assignments; (2) made respondents to
work as grass cutters in Zambales; (3) exclusion of respondents from a company field trip; (4) petitioners putting pressure to respondents
during the certification election of the union; (5) retrenching of petitioner by lowering the work week to 3 days/month after the certification
election.

The LA dismissed the complaint, but on appeal NLRC reversed the decision stating that it may be concluded that the petitioners committed
unfair labor practice acts consisting in interfering with the exercise of the employees’ right to self-organization and discriminating in regard
to conditions of employment in order to discourage union membership. Hence the present petition

Issue: Whether or not Petitioners are liable to the Respondents for Unfair Labor Practice; Whether or not the award of 10% attorney’s
fees in favor of respondents is proper

Held: Petition DENIED; 10% attorney’s fees deleted for respondent’s failure to prove

ON THE UNFAIR LABOR PRACTICE

Indubitably, the various acts of petitioners, taken together, reasonably support an inference that, indeed, such were all orchestrated to
restrict respondents’ free exercise of their right to self-organization. The Court is of the considered view that petitioners’ undisputed
actions prior and immediately before the scheduled certification election, while seemingly innocuous, unduly meddled in the affairs of its
employees in selecting their exclusive bargaining representative.

ON THE 10% ATTORNEY’S FEES

Anent the issue on the award of attorney's fees, the applicable law concerning the grant thereof in labor cases is Article 111 of the Labor
Code. Pursuant thereto, the award of 10% attorney's fees is limited to cases of unlawful withholding of wages. In this case, however, the
Court cannot find any claim or proof that petitioners unlawfully withheld the wages of respondents. Consequently, the grant of 10%
attorney's fees in favor of respondents is not justified under the circumstances. Accordingly, the Court deems it proper to delete the same.

118
 MISCELLANEOUS PROVISIONS
A. SPECIAL TYPES OF WORKERS

MARITES BERNARDO vs. NLRC G.R. No. 122917 July 12, 1999

FACTS: Complainants numbering 43 are deaf-mutes who were hired on various periods from 1988 to 1993 by respondent Far East Bank
and Trust Co. as Money Sorters and Counters through a uniformly worded agreement called "Employment Contract for Handicapped
Workers".

In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989 another two (2); in 1990, nineteen (19); in 1991 six (6); in 1992,
six (6) and in 1993, twenty-one (21). Their employment[s] were renewed every six months such that by the time this case arose, there
were fifty-six (56) deaf-mutes who were employed by respondent under the said employment agreement. The last one was Thelma
Malindoy who was employed in 1992 and whose contract expired on July 1993.

Disclaiming that complainants were regular employees, respondent Far East Bank and Trust Co maintained that complainants who are
special class of workers; the hearing impaired employees were hired temporarily under [a] special employment arrangement which was
a result of overtures made by some civic and political personalities to the respondent Bank; that complainants were hired due to "pakiusap"
which must be considered in the light of the context career and working environment which is to maintain and strengthen a corps of
professionals trained and qualified officers and regular employees who are baccalaureate degree holders from excellent schools which
is an unbending policy in the hiring of regular employees; that in addition to this, training continues so that the regular employee grows in
the corporate ladder; that the idea of hiring handicapped workers was acceptable to them only on a special arrangement basis; that it was
adopted the special program to help tide over a group of workers such as deaf-mutes like the complainants who could do manual work
for the respondent Bank; that the task of counting and sorting of bills which was being performed by tellers could be assigned to deaf-
mutes that the counting and sorting of money are tellering works which were always logically and naturally part and parcel of the tellers'
normal functions; that from the beginning there have been no separate items in the respondent Bank plantilla for sortes or counters; that
the tellers themselves already did the sorting and counting chore as a regular feature and integral part of their duties; that through the
"pakiusap" of Arturo Borjal, the tellers were relieved of this task of counting and sorting bills in favor of deaf-mutes without creating new
positions as there is no position either in the respondent or in any other bank in the Philippines which deals with purely counting and
sorting of bills in banking operations. Petitioners specified when each of them was hired and dimissed, As earlier noted, the LA and NLRC
ruled against herein petitioners.

ISSUES: Whether petitioners have become regular employees.

HELD: The petition is meritorious. However, only the employees, who worked for more than six months and whose contracts were
renewed are deemed regular. Hence, their dismissal from employement was illegal. Petitioners maintain that they should be considered
regular employees, because their task as money sorters and counters was necessary and desirable to the business of respondent bank.
They further allege that their contracts served merely to preclude the application of Article280 and to bar them from becoming regular
employees. Private respondent, on the other hand, submits that petitioners were hired only as "special workers and should not in any
way be considered as part of the regular complement of the Bank."

Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the contracts of 37 of them. In
fact, two of them worked from 1988 to 1993. Verily, the renewal of the contracts of the handicapped workers and the hiring of others lead
to the conclusion that their tasks were beneficial and necessary to the bank. More important, these facts show that they were qualified to
perform the responsibilities of their positions. In other words, their disability did not render them unqualified or unfit for the tasks assigned
to them. In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given the same terms
and conditions of employment as a qualified able-bodied person. Section 5 of the Magna Carta provides:

Sec. 5. Equal Opportunity for Employment; No disabled person shall be denied access to opportunities for suitable employment. A
qualified disabled employee shall be subject to the same terms and conditions of employment and the same compensation, privileges,
benefits, fringe benefits, incentives or allowances as a qualified able bodied person.

The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the ambit of Article 80.

Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article 280 of the LC., which
provides:

Art. 280. Regular and Casual Employment; The provisions of writtenagreement to the contrary notwithstanding and regardless
of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered as regular employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.
119
The test of whether an employee is regular was laid down in De Leon v. NLRC, in which this Court held:

“The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the
nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also if the employee
has been performing the job for at least one year, even if the performance is not continuous and merely intermittent, the law
deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensibility of that
activity to the business. Hence, the employment is considered regular, but only with respect to such activity, and while such
activity exist. Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of respondent
bank. With the exception of sixteen of them, petitioners performed these tasks for more than six months. Thus, the following
twenty-seven petitioners should be deemed regular employees. As held by the Court, "Articles 280 and 281 of the Labor Code
put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending
to them probationary appointments, ad infinitum."

The contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees' fitness for the
job. When the bank renewed the contract after the lapse of the six-month probationary period, the employees thereby became regular
employees.

No employer is allowed to determine indefinitely the fitness of its employees. As regular employees, the 27 petitioners are entitled to
security of tenure; that is, their services may be terminated only for a just or authorized cause. Because respondent failed to show such
cause, these 27 petitioners are deemed illegally dismissed and therefore entitled to back wages and reinstatement without loss of seniority
rights and other privileges. Considering the allegation of respondent that the job of money sorting is no longer available because it has
been assigned back to the tellers to whom it originally belonged, petitioners are hereby awarded separation pay in lieu of reinstatement.
Because the other 16 worked only for six months, they are not deemed regular employees and hence not entitled to the same benefits.
The award referred to respondents’ backwages and not to withheld salaries to which the Court affirmed. Petition was dismissed.

B. EMPLOYMENT OF WOMEN

Philippine Telegraph and Telephone Company vs. National Labor Relations Commission G.R. No. 118978 May 23, 1997

FACTS: Grace de Guzman was initially hired by petitioner as a reliever, for a fixed period to substitute one C.F. Tenorio who went on
maternity leave. Her services as reliever were again engaged by petitioner, this time in replacement of another person. After August 8,
1991, and pursuant to their Reliever Agreement, her services were terminated.

She was once more asked to join the company as a probationary employee, the probationary period to cover 150 days. In the job
application form that was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she was
single although she had contracted marriage a few months earlier.

When petitioner supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Official, sent to private respondent
a memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she was reminded about the
company's policy of not accepting married women for employment. She stated that she was not aware of PT&T's policy regarding married
women at the time, and that all along she had not deliberately hidden her true civil status.

Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed from the company. She filed a
complaint for illegal dismissal, coupled with a claim for non-payment of cost of living allowances.

ISSUE: Whether or not the company policy tantamount to unjust and unlawful discrimination against married women.

HELD: Petitioner's policy of not accepting or considering as disqualified from work any woman worker who contracts marriage runs afoul
of the test of, and the right against, discrimination, afforded all women workers by our labor laws and by no less than the Constitution.
Contrary to petitioner's assertion that it dismissed private respondent from employment on account of her dishonesty, the record discloses
clearly that her ties with the company were dissolved principally because of the company's policy that married women are not qualified
for employment in the said company, and not merely because of her supposed acts of dishonesty.

Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any
kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as
it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible
and inalienable right. Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they
may deem convenient, the same should not be contrary to law, morals, good customs, public order, or public policy. Carried to its logical
consequences, it may even be said that petitioner's policy against legitimate marital bonds would encourage illicit or common-law relations
and subvert the sacrament of marriage.

120
Del Monte Philippines, Inc. vs. Lolita Velasco G.R. No. 153477 March 6, 2007

FACTS: Lolita M. Velasco started working with Del Monte Philippines on October 21, 1976 as a seasonal employee and was regularized
on May 1, 1977. Her latest assignment was as Field Laborer. On June 16, 1987, respondent was warned in writing due to her absences.
On May 4, 1991, respondent, thru a letter, was again warned in writing by petitioner about her absences without permission and a
forfeiture of her vacation leave entitlement for the year 1990-1991 was imposed against her. On September 14, 1992, another warning
letter was sent to respondent regarding her absences without permission during the year 1991-1992. Her vacation entitlement for the
said employment year affected was consequently forfeited.

In view of the said alleged absences without permission, on September 17, 1994, a notice of hearing was sent to respondent notifying
her of the charges filed against her for violating the Absence Without Official Leave rule: that is for excessive absence without permission
on August 15-18, 29-31 and September 1-10, 1994.

The hearing was set on September 23, 1994. Respondent having failed to appear on September 23, 1994 hearing, another notice of
hearing was sent to her resetting the investigation on September 30, 1994. It was again reset to October 5, 1994.

On January 10, 1995, after hearing, the petitioner terminated the services of respondent effective January 16, 1994 due to excessive
absences without permission. Feeling aggrieved, respondent filed a case for illegal dismissal against petitioner asserting that her
dismissal was illegal because she was on the family way suffering from urinary tract infection, a pregnancy-borne, at the time she
committed the alleged absences. She explained that for her absence from work on August 15, 16, 17 & 18, 1994 she had sent an
application for leave to her supervisor, Prima Ybañez.

Thereafter, she went to the company hospital for check-up and was advised accordingly to rest in quarters for four (4) days or on August
27 to 30, 1994. Still not feeling well, she failed to work on September 1, 1994 and was again advised two days of rest in quarters on
September 2-3, 1994. Unable to recover, she went to see an outside doctor, Dr. Marilyn Casino, and the latter ordered her to rest for
another five (5) consecutive days, or from September 5 to 9, 1994. She declared she did not file the adequate leave of absence because
a medical certificate was already sufficient per company policy. On September 10, 1994 she failed to report to work but sent an application
for leave of absence to her supervisor, Prima Ybañez, which was not anymore accepted.

ISSUE: Whether the employment of respondent had been validly terminated on the ground of excessive absences without permission.
Corollary to this is the question of whether the petitioner discharged the respondent on account of pregnancy, a prohibited act.

HELD: Court upholds and adopts the finding of the NLRC, thus: In this jurisdiction tardiness and absenteeism, like abandonment, are
recognized forms of neglect of duties, the existence of which justify the dismissal of the erring employee. Respondent’s rule penalizing
with discharge any employee who has incurred six (6) or more absences without permission or subsequent justification is admittedly
within the purview of the foregoing standard.

However, while it is not disputed that complainant incurred absences exceeding six (6) days as she actually failed to report for work from
August 15-18, 23-26, 29-31, September 1-3, 5-10, 12-17, 21-24, 26-30, and October 1-3, 1994, her being pregnant at the time these
absences were incurred is not questioned and is even admitted by respondent. It thus puzzles us why respondent asserts complainant
failed to explain satisfactorily her absences on August 15-18, 29-31, September 1-3 and 5-10, 1994, yet reconsidered the rest of her
absences for being covered with “rest-in-quarters” (RIQ) advice from its hospital personnel when this advice was unquestionably issued
in consideration of the physiological and emotional changes complainant, a conceiving mother, naturally developed. Medical and health
reports abundantly disclose that during the first trimester of pregnancy, expectant mothers are plagued with morning sickness, frequent
urination, vomiting and fatigue all of which complainant was similarly plagued with.

Union official IBB Lesna’s observation on complainant being apparently not feeling well during the investigation conducted by respondent
on October 5, 1994 even remains in the records of said proceedings. For respondent to isolate the absences of complainant in August
and mid-September, 1994 from the absences she incurred later in said month without submitting any evidence that these were due to
causes not in manner associated with her condition renders its justification of complainant’s dismissal clearly not convincing under the
circumstances.

Despite contrary declaration, the records bear the admission of respondent’s P/A North Supervisor, PB Ybanez, of her receipt of the
hospital record showing complainant’s RIQ advice for August 19-20, 1994 which could already serve as respondent’s reference in
resolving the latter’s absences on August 15 to 18, 1994. Respondent further admitted complainant was under RIQ advice on September
2-3, 1994, yet, insisted in including these dates among her 16 purported unexplained absences justifying termination of her employment.
The Court agrees with the CA in concluding that respondent’s sickness was pregnancy-related and, therefore, the petitioner cannot
terminate respondent’s services because in doing so, petitioner will, in effect, be violating the Labor Code which prohibits an employer to
discharge an employee on account of the latter’s pregnancy. Art. 137. Prohibited acts. – It shall be unlawful for any employer: (2) To
discharge such woman on account of her pregnancy, while on leave or in confinement due to her pregnancy;

Second. The petitioner stresses that many women go through pregnancy and yet manage to submit prior notices to their employer,
especially if “there is no evidence on record indicating a condition of such gravity as to preclude efforts at notifying petitioner of her
absence from work in series.” But it must be emphasized that under petitioner’s company rules, absences may be subsequently justified.

121
The Court finds no cogent reason to disturb the findings of the NLRC and the CA that the respondent was able to subsequently justify
her absences in accordance with company rules and policy; that the respondent was pregnant at the time she incurred the absences;
that this fact of pregnancy and its related illnesses had been duly proven through substantial evidence; that the respondent attempted to
file leaves of absence but the petitioner’s supervisor refused to receive them; that she could not have filed prior leaves due to her
continuing condition; and that the petitioner, in the last analysis, dismissed the respondent on account of her pregnancy, a prohibited act.
The Court is convinced that the petitioner terminated the services of respondent on account of her pregnancy which justified her absences
and, thus, committed a prohibited act rendering the dismissal illegal.

Fernando Co v. Vargas

Facts:

Respondent files a case for underpayment or non-payment of wages and holiday pay. (later amended to include illegal dismissal)

Respondent alleges that she used to work for petitioner in his bakery and that she would sometimes do his house chores like that of a
maid. She was never given a pay-slip nor asked to sign a payroll.

On April 6, 2003 Petitioners wife asked respondent to cook them lunch. Respondent however forgot to do so since she was busy
attending to customer orders. Petitioner’s wife thus cussed at Respondent and told the latter to leave and never return since she is not
needed anymore. Respondent thus left and filed the case.

Petitioner denies Respondent contentions, countering that (1) respondent was merely employed as a baker in his business; (2) his wife
merely reprimanded the respondent; (3) that respondent demanded her salary, walked out and never returned; and (4) respondent
allegedly badmouthed petitioners daughter and displayed defiance, disrespect and insubordination.

The LA ruled in favor of Respondent Vargas and ordered Petitioner Co to reinstate the former to her previous position without loss of
seniority rights. LA further found out that the place of business of petitioner is the same as his place of residence and that respondent
works for petitioner as well as for his business, which is based in his home. Thus, the LA concluded that while Respondent Vargas may
have started her employ doing chores for the petitioners family, she also fulfilled tasks connected with the petitioner’s business such as
cooking, filling orders, baking orders, and other clerical work, all of which are usually necessary and desirable in the usual trade or
business of the petitioner. Inescapably, respondent is a regular employee and thus, entitled to security of tenure.

On appeal, the NLRC reversed the LA decision concluding that respondent was not employed as a baker at petitioner’s bakeshop but
was merely petitioners housemaid who left her employ voluntarily.

Respondent Vargas filed a petition for certiorari with the CA. It ruled in favor of Respondent and reinstated the LA decision. It further ruled
that respondent Vargas is not a househelper or domestic servant of petitioner Co. The evidence shows that respondent Vargas is working
within the premises of the business of petitioner Co and in relation to or in connection with such business. In the Memorandum of Appeal
filed by petitioner before the NLRC, his place of business and his residence is located in the same place, Brgy. Juliana, San
Fernando, Pampanga. Thus, petitioner Co exercised control and supervision over respondent Vargas’ functions. Hence the petition.

Issue: Whether or not at the time Respondent was working with the Co Family, the business was being conducted at the residence.

Held: Petition DENIED;

The issue raised by petitioner is clearly a question of fact, which requires a review of the evidence presented. The Supreme Court is not
a trier of facts. It is not the function of this Court to examine, review or evaluate the evidence all over again, specially on evidence raised
for the first time on appeal.

As a rule, the findings of fact of the Court of Appeals are final and conclusive and this Court will not review them on appeal, subject to
exceptions such as those enumerated by this Court in Development Bank of the Philippines v. Traders Royal Bank.

Petitioner failed to show that this case falls under any of the exceptions. The finding of the Labor Arbiter that petitioner’s bakery and his
residence are located at the same place was not reversed by the NLRC. Furthermore, the Court of Appeals upheld this finding of the
Labor Arbiter.

122
 C. EMPLOYMENT OF HOMEWORKERS/HOUSEHELPER

ULTRA VILLA FOOD HAUS vs. GENISTON GR. No. 120473, June 23, 1999

FACTS: Renato Geniston, private respondent herein filed a complaint for illegal dismissal againts the Ultra Vires Food Haus restaurant
and/or its alleged owner Rosie Tio. Private respondent alleged that he was employed as a "do it all guy," acting as waiter, driver, and
maintenance man, in said restaurant. His employment therein spanned from March 1, 1989 until he was dismissed on May 13, 1992. For
his services, private respondent was paid P60.00 in 1989, P70.00 in 1990, P80.00 in 1991 and P90.00 when he was dismissed in 1992.

Petitioner Rosie Tio, on the other hand, maintained that private respondent was her personal driver, not an employee of the Ultra Villa
Food Haus. As petitioner's personal driver, private respondent was required to report for work at 7:00 a.m. to drive petitioner to Mandaue
City where petitioner worked as the Manager of the CFC Corporation. Private respondent was likewise given free meals as well as 13th
month pay at the end of the year. Petitioner denied dismissing private respondent whom she claimed abandoned his job. During the
elections of May 11, 1992, private respondent acted as a Poll Watcher for the National Union of Christian Democrats.

Though well aware that May 12, 1992 was a holiday, petitioner called up private respondent that day to ask him to report for work as she
had some important matters to attend to. Private respondent's wife, however, coldly told petitioner that private respondent was helping in
the counting of ballots. Petitioner was thus forced to hire another driver to replace private respondent. Private respondent came back a
week after but only to collect his salary.

The Labor Arbiter concluded that private respondent, being a personal driver, was not entitled to overtime pay, premium pay, service
incentive leave pay and 13th month pay. The Labor Arbiter noted Private respondent's admission that he was petitioner's driver contained
in the mandatory conference order issued by the Labor Arbiter on January 10, 1994. The NLRC ruled that private respondent was an
employee of the Ultra Villa Food Haus.

ISSUES:
(1) Whether private respondent was an employee of the Ultra Villa Food Haus or the personal driver of petitioner
(2) Whether private respondent was illegally dismissed from employment.

HELD: (1) The Supreme Court find that private respondent was indeed the personal driver of petitioner, and not an employee of the Ultra
Villa Food Haus. There is substantial evidence to support such conclusion, such as Private respondent's admission during the mandatory
conference that he was petitioner's personal driver, Copies of the Ultra Villa Food Haus payroll which do not contain private respondent's
name and other pertinent documents.

Thus, Article 141 of the Labor Code applies, which provides:

Art. 141. Coverage. - This Chapter shall apply to all persons rendering services in households for compensation.

"Domestic or household service" shall mean services in the employers home which is usually necessary or desirable for the
maintenance and enjoyment thereof and includes ministering to the personal comfort and convenience of the members of the
employers household, including services of family drivers.

The Labor Code is silent on the grant of overtime pay, holiday pay, premium pay and service incentive leave to those engaged in the
domestic or household service.

Moreover, the specific provisions of LC and Article 82, which defines the scope of the application of these provisions, expressly
excludes domestic helpers from its coverage:

Art. 82. Coverage. - The provision of this title shall apply to employees in all establishments and undertakings whether for profit
or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who
are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by
results as determined by Secretary of Labor in appropriate regulations.

Clearly then, petitioner is not obliged by law to grant private respondent any of these benefits. Employing the same line of analysis, it
would seem that private respondent is not entitled to 13 month pay. Nevertheless, we deem it just to award private respondent 13th month
pay in view of petitioner's practice of according private respondent such benefit. Indeed, petitioner admitted that she gave private
respondent 13th month pay every December.

(2) No. The Supreme Court disagrees with Petitioner which submits that private respondent abandoned his job, preferring to work as an
election watcher instead. To constitute abandonment, two requisites must concur:

(1) the failure to report to work or absence without valid or justifiable reason; and

(2) a clear intention to sever the employer-employee relationship as manifested by some overt acts, with the second requisite
as the more determinative factor. The burden of proving abandonment as a just cause for dismissal is on the employer.
123
Petitioner failed to discharge this burden. It is quite unbelievable that private respondent would leave a stable and relatively well paying
job as petitioner's family driver to work as an election watcher. Consequently, we do not find private respondent to have abandoned his
job. His dismissal from petitioner's employ being unjust, petitioner is entitled to an indemnity under Article 149 of the Labor Code:

Art. 149. Indemnity for unjust termination of service.—

If the period of household service is fixed, neither the employer nor the househelper may terminate the contract
before the expiration of the term, except for a just cause.

If the househelper is unjustly dismissed, he or she shall be paid the compensation already earned plus that for fifteen
(15) days by way of indemnity.

If the househelper leaves without justifiable reason he or she shall forfeit any unpaid salary due him or her not
exceeding fifteen (15) days.

Remington Industrial Sales Corporation vs. Erlinda Castaneda GR Nos. 169295-96 November 20, 2006

FACTS: Erlinda alleged that she started working in August 1983 as company cook with a salary of Php 4,000.00 for Remington,
a corporation engaged in the trading business; She averred that she reported for work at the new site in Caloocan City on
January 15, 1998, only to be informed that Remington no longer needed her services. Erlinda believed that her dismissal was
illegal because she was not given the notices required by law; hence, she filed her complaint for reinstatement without loss of
seniority rights, salary differentials, service incentive leave pay, 13 th month pay and 10% attorney’s fees.
Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a domestic helper, not a regular employee; Erlinda
worked as a cook and this job had nothing to do with Remington’s business of trading in construction or hardware materials,
steel plates and wire rope products.

ISSUE:
Whether or not respondent is considered to be a regular employee or a mere domestic helper.
Whether or not burden of proof rests upon the employer to show that the dismissal is for a just cause.

HELD: In this case, there was no allegation by respondent that complainant had ever worked in the residence of Mr. Tan. What
is clear from the facts narrated by the parties is that complainant continuously did her job as a cook in the office of respondent
serving the needed food for lunch and merienda of the employees. Thus, her work as cook inured not for the benefit of the family
members of Mr. Tan but solely for the individual employees of respondent.

Complainant as an employee of respondent company is even bolstered by no less than the certification dated May 23, 1997
issued by the corporate secretary of the company certifying that complainant is their bonafide employee. This is a solid evidence
which the Labor Arbiter simply brushed aside. But, such error would not be committed here as it would be at the height of
injustice if we are to declare that complainant is a domestic helper.

The petitioner itself admits in its position paper that respondent worked at the company premises and her duty was to cook and
prepare its employees’ lunch and merienda. Clearly, the nature of respondent’s work as a cook, who caters not only to the needs
of Mr. Tan and his family but also to that of the petitioner’s employees, makes her fall squarely within the definition of a regular
employee.

In termination cases, the burden of proof rests upon the employer to show that the dismissal is for a just and valid cause; failure
to do so would necessarily mean that the dismissal was illegal. If doubt exists between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter. The petition is DENIED for lack of merit

CO vs VARGAS GR No. 195167 November 26, 2011

This petition for review 1 assails the 29 June 2010 Decision 2 and the 5 January 2011 Resolution 3 of the Court of Appeals in CA-G.R.
SP No. 110728. The Court of Appeals set aside the 11 June 2008 Decision 4 of the National Labor Relations Commission (NLRC) and
reinstated the 30 October 2004 Decision 5 of the Labor Arbiter.

The Facts

On 22 April 2003, respondent Lina B. Vargas (respondent) filed against Nathaniel Bakeshop and its owner Fernando Co a complaint for
underpayment or non-payment of wages and holiday pay. 6 The complaint was later amended to include illegal dismissal as a cause of
action and the non-payment of service incentive leave. 7

Respondent alleged that she started working at the bakeshop in October 1994 as a baker and worked from 8:00 a.m. until 8:30 p.m.,
Monday to Saturday. Aside from baking, respondent also served the customers and supervised the other workers in the absence of the
124
owner. Furthermore, respondent claimed that she sometimes cooked and did the chores of a housemaid whenever the latter was not
available. Respondent had a salary of P220 per day, which she received every Saturday afternoon. During the period of her employment,
respondent was not given a payslip and she was never asked to sign a payroll.

On 6 April 2003, petitioner Co's wife, Nely Co, told respondent to cook their lunch because the housemaid was ironing clothes. Since
respondent was busy preparing customers' orders, she lost track of time and was unable to cook lunch as instructed. Irate at respondent's
failure to cook, Nely Co cussed respondent and told her to leave and never to return because she was not needed anymore. Respondent
was so humiliated and could no longer bear the treatment she received from her employers that she decided to take her salary and leave
that same day. Respondent later filed the complaint against Nathaniel Bakeshop and its owner Fernando Co. HEDSCc

Petitioner denies respondent's claim that she was employed as a baker in their business. Petitioner alleges that they hired respondent to
work as a housemaid. Petitioner refutes respondent's version of the events which allegedly happened on 6 April 2003. Petitioner alleges
that in April 2003, his wife, Nely Co, reprimanded respondent for her failure to cook lunch on time. Angered at being reprimanded,
respondent then demanded her salary and walked out of petitioner's residence and has never reported for work again. Petitioner further
avers that respondent badmouthed petitioner's daughter and displayed defiance, disrespect and insubordination toward them.

On 30 October 2004, the Labor Arbiter rendered a Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered finding illegal complainant's dismissal.
Consequently, respondents are hereby held liable and ordered to reinstate complainant to her former position without
loss of seniority rights and other privileges with full backwages initially computed at this time at P110,436.04.

IN CASE REINSTATEMENT BECOMES IMPOSSIBLE DUE TO SOME SUPERVENING EVENT, RESPONDENTS

ARE ALSO ORDERED TO PAY COMPLAINANT'S SEPARATION PAY COMPUTED at one month's pay for every
year of service.

Respondents are likewise ordered to pay complainant's service incentive leave of P3,332.50, 13th month pay (pro-
rata) of P1,551.66 and salary differential of P1,723.41.

All other claims are hereby dismissed for lack of merit. SO ORDERED. 8

The Labor Arbiter found that the place of business of petitioner is the same as his place of residence and that respondent works
for petitioner as well as for his business which is based in his home. Thus, the Labor Arbiter concluded that "while complainant may
have started her employ doing chores for the [petitioner's] family, she also fulfilled tasks connected with the [petitioner's] business such
as cooking, filling orders, baking orders, and other clerical work, all of which are usually necessary and desirable in the usual trade or
business of the respondent. Inescapably, complainant is a regular employee and thus, entitled to security of tenure." 9

On appeal, the NLRC reversed and set aside the Labor Arbiter's Decision. The NLRC concluded that respondent was not employed as
a baker at petitioner's bakeshop but was merely petitioner's housemaid who left her employ voluntarily. The NLRC found petitioner not
guilty of illegal dismissal.

Respondent filed a petition for certiorari with the Court of Appeals.

The Ruling of the Court of Appeals

On 29 June 2010, the Court of Appeals promulgated its Decision in favor of respondent. The Court of Appeals annulled the NLRC Decision
and reinstated the 30 October 2004 Decision of the Labor Arbiter. The Court of Appeals ruled:

[I]t is clear that petitioner [Lina B. Vargas] is not a househelper or domestic servant of private respondents
[Nathaniel Bakeshop and Fernando Co]. The evidence shows that petitioner is working within the premises
of the business of private respondent Co and in relation to or in connection with such business. In the
Memorandum of Appeal filed by private respondents before the NLRC, the place of business of respondent
Co and his residence is located in the same place, Brgy. Juliana, San Fernando, Pampanga. Thus,
respondent Co exercised control and supervision over petitioner's functions. Respondent Co's averment that
petitioner had the simple task of cleaning the house and cooking at times and was not involved in the business was
negated by the fact that petitioner likewise takes the orders of private respondents' customers. Even if petitioner was
actually working as domestic servant in private respondent's residence, her act of taking orders, which was
ratiocinated by the NLRC as not leading to the conclusion that petitioner in fact took the orders, would warrant the
conclusion that petitioner should be considered as a regular employee and not as a mere family househelper or
domestic servant of respondent Co. IAEcaH

Private respondents relied heavily on the recantation (through an Affidavit of Recantation) by Joseph Baybayon of
his Affidavit stating that petitioner was an employee, to boast [sic] their theory that petitioner is a mere domestic
125
 helper. Nonetheless, this Court is convinced that the allegations in the first affidavit are sufficient to establish that
petitioner is an employee of private respondent and not a housemaid. Granting arguendo, that the second affidavit
validly repudiated the first one, courts generally do not look with favor on any retraction or recanted testimony, for it
could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and
place the investigation of the truth at the mercy of unscrupulous witnesses. A recantation does not necessarily cancel
an earlier declaration, but like any other testimony, the same is subject to the test of credibility and should be received
with caution.

Having resolved the issue that petitioner was an employee of private respondents and not a housemaid, was
petitioner illegally dismissed? The answer is in the affirmative. Since petitioner is an employee of private respondents,
she is entitled to security of tenure. The NLRC observed that it was petitioner who left private respondents on April
6, 2003 when petitioner was allegedly driven away from work by Nely Co. Private respondents' witnesses, Jay dela
Cruz and Maria Fe Reniva, averred that it was petitioner who abandoned her job by not reporting for work. But their
affidavits did state that the two were employees of private respondent. The other two documents considered by the
NLRC were the affidavits of Felisa Borason San Andres (who allegedly helped petitioner to be employed as
housemaid of Nely Co) and Alma P. Agorita (an alleged co-housemaid of petitioner in the Co residence). Surprisingly,
the affidavit of Felisa Borason San Andres was written in English, considering the statement that she was employed
as househelper of Nely Co. The question is whether the said househelper understood what was written in her affidavit
or if the same was explained to her in her native language, for she was a resident of San Felipe, Naga City, where
she allegedly executed her affidavit. All told, the said affidavits cannot be given credence to refute the fact that
petitioner was an employee of private respondent Co doing work in relation to private respondent's business, which
is that of a bakeshop.

Assuming further that petitioner abandoned her job, the Supreme Court held in Ultra Villa Food Haus and/or Rosie
Tio vs. NLRC that to constitute abandonment, two requisites must concur:

(1) the failure to report to work or absence without valid or justifiable reason, and

(2) a clear intention to sever the employer-employee relationship as manifested by some overt acts, with the
second requisite as the more determinative factor.

The burden of proving abandonment as a just cause for dismissal is on the employer. Private respondents failed to
discharge this burden. The only evidence adduced by private respondents to prove abandonment were the affidavits
of their househelpers and employees.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the National Labor Relations
Commission, Second Division dated June 11, 2008 is hereby ANNULLED and SET ASIDE and the Decision of the
Labor Arbiter dated October 30, 2004 is REINSTATED.

SO ORDERED. 10 (Boldfacing supplied)

Petitioner filed a Motion for Reconsideration, which the Court of Appeals denied in its Resolution dated 5 January 2011. Hence, this
petition.

The Issue

Petitioner raises the sole issue of whether the "Court of Appeals erred in ruling that at the time Respondent was working with the Co
family, the business was being conducted at the residence." 11

The Ruling of the Court

We find the petition without merit.

In this case, it was only in petitioner's Supplement to the Motion for Reconsideration of the Court of Appeals' Decision that petitioner
raised the issue that contrary to the findings of the Labor Arbiter, NLRC, and the Court of Appeals, the bakery was not located at his
residence at the time respondent was in their employ. Furthermore, petitioner would even have this Court evaluate additional documentary
evidence which were not offered during the proceedings in the Labor Arbiter, NLRC, and the Court of Appeals. The additional evidence
were only submitted after the Court of Appeals promulgated its Decision, when petitioner attached the additional evidence in his
Supplement to the Motion for Reconsideration. 12 ICDSca

The issue raised by petitioner is clearly a question of fact which requires a review of the evidence presented. The Supreme Court is not
a trier of facts. 13 It is not the function of this Court to examine, review or evaluate the evidence all over again, 14 specially on evidence
raised for the first time on appeal. 15

A petition for review under Rule 45 of the Rules of Court should cover only questions of law, thus:

126
 Section 1.Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final
order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall
raise only questions of law which must be distinctly set forth.(Emphasis supplied)

As a rule, the findings of fact of the Court of Appeals are final and conclusive and this Court will not review them on appeal, 16 subject
to exceptions such as those enumerated by this Court in Development Bank of the Philippines v. Traders Royal Bank: 17

The jurisdiction of the Court in cases brought before it from the appellate court is limited to reviewing errors of law,
and findings of fact of the Court of Appeals are conclusive upon the Court since it is not the Court's function to analyze
and weigh the evidence all over again. Nevertheless, in several cases, the Court enumerated the exceptions to the
rule that factual findings of the Court of Appeals are binding on the Court: (1) when the findings are grounded entirely
on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible;
(3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when
the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the
case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are
contrary to that of the trial court; (8) when the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; or (11) when the Court of Appeals manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify a different conclusion. 18

Petitioner failed to show that this case falls under any of the exceptions. The finding of the Labor Arbiter that petitioner's bakery and his
residence are located at the same place was not reversed by the NLRC. 19 Furthermore, the Court of Appeals upheld this finding of the
Labor Arbiter. We find no justifiable reason to deviate from the findings and ruling of the Court of Appeals.

WHEREFORE, we DENY the petition. We AFFIRM the 29 June 2010 Decision and the 5 January 2011 Resolution of the Court of Appeals
in CA-G.R. SP No. 110728.

SO ORDERED.

D.EMPLOYMENT OF ACADEMIC/NON-ACADEMIC PERSONNEL IN PRIVATE EDUCATIONAL INSTITUTION

UNIVERSITY OF THE EAST VS. ANALIZA PEPANIO AND MARITI BUENO

FACTS:

This case is about the employment status of college teachers with no postgraduate degrees who have been repeatedly extended
semester-to-semester appointments as such.

In 1992 DECS issued Revised Manual of Regulations for Private Schools requiring tertiary teachers to have a post-graduate degree as
a minimum educational requirement for them to attain a regular status. UE and the UE Faculty Association adopted such rule in their
1994 CBA. The CBA provided that UE shall extend only semester-to-semester appointments to college faculty staffs who did not possess
the minimum qualifications. Those with such qualifications shall be given probationary appointments and their performance on a full-time
or full-load basis shall be reviewed for four semesters.

Defendants are employees of UE who were hired after the DECS regulation was adopted by the school. In short, they are covered by the
CBA executed the UE and the UE Faculty Association. Since the defendants failed to prove that they completed a post-graduate course,
they remained as probationary employees until 2001 when another CBA was executed by the university and its faculty association. The
defendants were given chances and notices by the University and the Dean of Arts and Sciences (college where they belong) to secure
the minimum educational requirement. In any event, Dean Javier subsequently issued a memorandum, stating that she would recommend
the extension of the probationary appointees for two more semesters for those who want it based on the wishes of the University
President. At any rate, the school eventually wrote respondents, extending their probationary period but neither Pepanio nor Bueno
reported for work.

The respondents demanded regularization. When UE failed to heed their demand, they filed a case of Illegal Dismissal against the
school in the Labor Arbiter’s office. The LA ruled in favor of the defendants ordering their regularization. UE appealed to the NLRC.
NLRC reversed the LA decision and ruled in favor of the petitioners. In the CA, the appellate court ruled in favor of defendants on technical
grounds.

Among other issues, the defendants contended that the timeliness of the appeal to the NLRC. They pointed to the postmaster’s
certification that its office received the mail containing the LA’s Decision on March 17, 2005 and “informed the Office of Atty. Mison
[counsel of the petitioners] right away but they only got the letter on April 4, 2005.” Bueno and Pepanio (defendants) claim that the 10-
127
day period for appeal should be counted from March 22, 2005, five days after the postmaster’s first notice to Atty. Mison to claim his mail.

ISSUE: Whether or not UE illegally dismissed Bueno and Pepanio.

HELD: Respondents argue that UE hired them in 1997 and 2000, when what was in force was the 1994 CBA between UE and the faculty
union. Since that CBA did not yet require a master’s degree for acquiring a regular status and since respondents had already complied
with the threerequirements of the CBA, namely, (a) that they served full-time; (b) that they rendered three consecutive years of service;
and (c) that their services were satisfactory,they should be regarded as having attained permanent or regular status.

But the policy requiring postgraduate degrees of college teachers was provided in the Manual of Regulations as early as 1992. Indeed,
recognizing this, the 1994 CBA provided even then that UE was to extend only semesterto-semester appointments to college faculty
staffs, like respondents, who did not possess the minimum qualifications for their positions.

Besides, as the Court held in Escorpizo v. University of Baguio, a school CBA must be read in conjunction with statutory and administrative
regulations governing faculty qualifications. Such regulations form part of a valid CBA without need for the parties to make express
reference to it. While the contracting parties may establish such stipulations, clauses, terms and conditions, as they may see fit, the right
to contract is still subject to the limitation that the agreement must not be contrary to law or public policy.

The State through Batas Pambansa Bilang 232 (The Education Act of 1982) delegated the administration of the education system and
the supervision and regulation of educational institutions to the Ministry of Education, Culture and Sports (now Department of Education).
Accordingly, in promulgating the Manual of Regulations, DECS was exercising its power of regulation over educational institutions, which
includes prescribing the minimum academic qualifications for teaching personnel.

In 1994 the legislature transferred the power to prescribe such qualifications to the Commission on Higher Education (CHED). CHED’s
charter authorized it to set minimum standards for programs and institutions of higher learning.The Manual of Regulations continued to
apply to colleges and universities and suppletorily the Joint Order until 2010 when CHED issued a Revised Manual of Regulations which
specifically applies only to institutions involved in tertiary education.

The requirement of a masteral degree for tertiary education teachers is not unreasonable. The operation of educational institutions
involves public interest. The government has a right to ensure that only qualified persons, in possession of sufficient academic knowledge
and teaching skills, are allowed to teach in such institutions. Government regulation in this field of human activity is desirable for protecting,
not only the students, but the public as well from ill-prepared teachers, who are lacking in the required scientific or technical knowledge.
They may be required to take an examinationor to possess postgraduate degrees as prerequisite to employment.

Respondents were each given only semester-to-semester appointments from the beginning of their employment with UE precisely
because they lacked the required master's degree. It was only when UE and the faculty union signed their 2001 CBA that the school
extended petitioners a conditional probationary status subject to their obtaining a master's degree within their probationary period. It is
clear, therefore, that the parties intended to subject respondents' permanent status appointments to the standards set by the law and the
university.

Here, UE gave respondents Bueno and Pepanio more than ample opportunities to acquire the postgraduate degree required of them.
But they did not take advantage of such opportunities. Justice, fairness, and due process demand that an employer should not be
penalized for situations where it had little or no participation or control.

Colegio Del Santisimo Rosario et al., vs. Rojo, G.R. No. 170388, Sept. 4, 2013 citing Mercado et al., vs. AMA Computer
College-Paranaque City, GR No. 183572, April 13, 2010

Facts:

Colegio del Santisimo Rosario (CSR) hired Rojo as a high school teacher on probationary basis for the school years 1992-1993, 1993-
19947 and 1994-1995.

On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP (Mofada), decided not to renew respondent’s services.

Thus, on July 13, 1995, respondent filed a Complaint for illegal dismissal. He alleged that since he had served three consecutive school
years which is the maximum number of terms allowed for probationary employment, he should be extended permanent employment.
Citing paragraph 75 of the 1970 Manual of Regulations for Private Schools (1970 Manual), respondent asserted that "full- time teachers
who have rendered three (3) consecutive years of satisfactory services shall be considered permanent

128
On the other hand, petitioners argued that respondent knew that his Teacher’s Contract for school year 1994-1995 with CSR would
expire on March 31, 1995.12 Accordingly, respondent was not dismissed but his probationary contract merely expired and was not
renewed. Petitioners also claimed that the "three years" mentioned in paragraph 75 of the 1970 Manual refer to "36 months," not three
school years. And since respondent served for only three school years of 10 months each or 30 months, then he had not yet served the
"three years" or 36 months mentioned in paragraph 75 of the 1970 Manual.

The LA ruled that "three school years" means three years of 10 months, not 12 months. Considering that respondent had already
served for three consecutive school years, then he has already attained regular employment status. Thus, the non-renewal of his
contract for school year 1995-1996 constitutes illegal dismissal.

On appeal, the NLRC affirmed the LA’s Decision with modification. It held that after serving three school years, respondent had attained
the status of regular employment especially because CSR did not make known to respondent the reasonable standards he should meet

The NLRC also agreed with the LA that respondent’s termination was done in bad faith. It held that respondent is entitled to
reinstatement, if viable; or separation pay, if reinstatement was no longer feasible, and back wages.

According to the CA, respondent has attained the status of a regular employee after he was employed for three consecutive school
years as a full-time teacher and had served CSR satisfactorily. Aside from being a high school teacher, he was also the Prefect of
Discipline, a task entailing much responsibility. The only reason given by Mofada for not renewing respondent’s contract was the
alleged expiration of the contract, not any unsatisfactory service. Also, there was no showing that CSR set performance standards for
the employment of respondent, which could be the basis of his satisfactory or unsatisfactory performance. Hence, there being no
reasonable standards made known to him at the time of his engagement, respondent was deemed a regular employee and was, thus,
declared illegally dismissed when his contract was not renewed.

ISSUE:

WHETHER THE COURT OF APPEALS [AS WELL AS THE NATIONAL LABOR RELATIONS COMMISSION] COMMITTED
GRIEVOUS AND REVERSIBLE ERROR WHEN IT RULED THAT A BASIC EDUCATION (ELEMENTARY) TEACHER HIRED FOR
THREE (3) CONSECUTIVE SCHOOL YEARS AS A PROBATIONARY EMPLOYEE AUTOMATICALLY AND/OR BY LAW
BECOMES A PERMANENT EMPLOYEE UPON COMPLETION OF HIS THIRD YEAR OF PROBATION NOTWITHSTANDING [A]
THE PRONOUNCEMENT OF THIS HONORABLE COURT IN COLEGIO SAN AGUSTIN V. NLRC, 201 SCRA 398 1991 THAT A
PROBATIONARY TEACHER ACQUIRES PERMANENT STATUS "ONLY WHEN HE IS ALLOWED TO WORK AFTER THE
PROBATIONARY PERIOD" AND [B] DOLE-DECS-CHED-TESDA ORDER NO. 01, S. 1996 WHICH PROVIDE THAT TEACHERS
WHO HAVE SERVED THE PROBATIONARY PERIOD "SHALL BE MADE REGULAR OR PERMANENT IF ALLOWED TO WORK
AFTER SUCH PROBATIONARY PERIOD.

In other words, the main issue revolves if there is automatic permanency after the teacher served for certain period as
probationary period with satisfactory performance.

HELD:

In Mercado v. AMA Computer College-Parañaque City, Inc., dealing with employment on probationary status of teaching
personnel are not governed solely by the Labor Code as the law is supplemented, with respect to the period of probation, by special
rules found in the Manual of Regulations for Private Schools (the Manual). With regard to the probationary period, Section 92 of the
1992 Manual33 provides:

Section 92. Probationary Period. – Subject in all instances to compliance with the Department and school requirements, the
probationary period for academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the
elementary and secondary levels, six (6) consecutive regular semesters of satisfactory service for those in the tertiary level, and nine
(9) consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses are offered on a trimester basis

In this case, school’s teacher who were on probationary employment were made to enter into a contract effective for one
school year. Thereafter, it may be renewed for another school year, and the probationary employment continues. At the end of the
second fixed period of probationary employment, the contract may again be renewed for the last time.

Such employment for fixed terms during the teachers’ probationary period is an accepted practice in the teaching profession as
established in Magis Young Achievers’ Learning Center v. Manalo,

129
However, this scheme "of fixed-term contract is a system that operates during the probationary period and for this reason is subject to
Article 281 of the Labor Code,"35 which provides:

x x x The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails
to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of
his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.

That teachers on probationary employment also enjoy the protection afforded by Article 281 of the Labor Code is supported by Section
93 of the 1992 Manual which provides:

Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be made regular or permanent. Full-time
teachers who have satisfactorily completed their probationary period shall be considered regular or permanent.

The above provision clearly provides that full-time teachers become regular or permanent employees once they have
satisfactorily completed the probationary period of three school years. The use of the term satisfactorily necessarily connotes
the requirement for schools to set reasonable standards to be followed by teachers on probationary employment. For how
else can one determine if probationary teachers have satisfactorily completed the probationary period if standards therefor
are not provided?

As such, "no vested right to a permanent appointment shall accrue until the employee has completed the prerequisite three-year
period necessary for the acquisition of a permanent status. [However, it must be emphasized that] mere rendition of service for three
consecutive years does not automatically ripen into a permanent appointment. It is also necessary that the employee be a full-time
teacher, and that the services he rendered are satisfactory."

The SC has definitively pronounced that "in a situation where the probationary status overlaps with a fixed-term contract not specifically
used for the fixed term it offers, Article 281 should assume primacy and the fixed-period character of the contract must give way."

An example given of a fixed-term contract specifically used for the fixed term it offers is a replacement teacher or a reliever contracted
for a period of one year to temporarily take the place of a permanent teacher who is on leave. The expiration of the reliever’s fixed-term
contract does not have probationary status implications as he or she was never employed on probationary basis. This is because his or
her employment is for a specific purpose with particular focus on the term. There exists an intent to end his or her employment with the
school upon expiration of this term.41

However, for teachers on probationary employment, in which case a fixed term contract is not specifically used for the fixed term it
offers, it is incumbent upon the school to have not only set reasonable standards to be followed by said teachers in determining
qualification for regular employment, the same must have also been communicated to the teachers at the start of the probationary
period, or at the very least, at the start of the period when they were to be applied. These terms, in addition to those expressly provided
by the Labor Code, would serve as the just cause for the termination of the probationary contract.1âwphi1 The specific details of this
finding of just cause must be communicated to the affected teachers as a matter of due process. Corollarily, should the teachers not
have been apprised of such reasonable standards at the time specified above, they shall be deemed regular employees.

In Tamson’s Enterprises, Inc. v. Court of Appeals,43 we held that "[t]he law is clear that in all cases of probationary
employment, the employer shall [convey] to the employee the standards under which he will qualify as a regular employee
at the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a
regular employee.

In this case, glaringly absent from petitioners’ evidence are the reasonable standards that respondent was expected to meet that could
have served as proper guidelines for purposes of evaluating his performance. Nowhere in the Teacher’s Contract could such standards
be found. Neither was it mentioned that the same were ever conveyed to respondent.

Jocelyn Herrera-Manaois v. St. Scholastica's College, G.R No. 188914, December 11, 2013.

Sereno, CJ. First Division

Facts:

Manaois, a graduate of SSC (A.B. English), was a part-time English teacher for four years. She was later, then, recommended
by the Department Chairperson to become a full-time faculty member of the English department. Hence, she applied for as full-time
instructor for the school year 2000-2001.She noted that she was taking up Master of Arts in English Studies, Major in Creative Writing
from the UP, Diliman. The SSC approved her application and gave her the designation as probationary full-time faculty member with a
rank of instructor. She performed well as manifested by ratings given by her superior.
130
 Because of the completion of her 3rd year of her probationary employment, Manaois wrote to the Dean for an extension of
her teaching load since her Masteral degree was in near completion.

SSC declined her application for extension contending that she did not completed her masters within the 3 years period and
that her performance would not suffice for the school to grant her permanent employment.

She filed a complaint for illegal dismissal, payment of 13th month pay, damages, and attorney's fee against SSC.

The Labor Arbiter decided in favor of Manaois on the grounds that she was able to comply the condition of good performance
and passage of relevant papers pertaining with her Masters. The former was evidenced by the good ratings given by her superior; the
latter was evidenced by the certification from the UP that she is in near completion of her Masters. Hence, according to the SSC
manual, Manaois could have complied the requirement for assistant professorship because such rank just requires a bachelor degree
plus 25 percent of the units for masters. It was not ground for just cause for dismissal. The NLRC affirmed the decision.

The CA reversed the decision contending that both the labor arbiter and the NLRC committed grave abuse of discretion in
ruling that Manaois was not aware that her application for permanency was pegged on her completion of her Masters. Hence, because
Manaois never completed her masters on time, the SSC was within its right not to renew her employment contract. CA dismissed her
complaint.

Issue

The completion of a master's degree is required in order for a tertiary level educator to earn the status of permanency in a private
educational institution

Ruling:

Probationary employment refers to the trial stage or period during which the employer examines the competency and
qualifications of job applicants , and determines whether they are qualified to be extended permanent employment status. Such an
arrangement affords an employer the opportunity- before the full force of the guarantee of security of tenure comes into play- to fully
scrutinize and observe the fitness and worth of probationers while on the job and to determine whether they would become proper and
efficient employees.

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

E. MEDICAL, DENTAL AND OCCUPATIONAL SAFETY

Tolosa vs. NLRC GR No. 149578. April 10, 2003

FACTS: Evelyn Tolosa was the widow of Captain Virgilio Tolosa who was hired by Qwana-Kaiun, through its manning agent, Asia Bulk
Transport Phils. Inc., to be the master of the Vessel named M/V Lady Dona. The contract officially began when he assumed command
of the vessel in Yokohama, Japan. The vessel departed for Long Beach California, passing by Hawaii in the middle of the voyage. At the
time of embarkation, he was allegedly shown to be in good health. During ‘channeling activities’ upon the vessel’s departure from
Yokohama Capt. Tolosa was drenched with rainwater.

The following day, he had slight fever and in the succeeding twelve days, his health rapidly deteriorated resulting in his death on November
18, 1992. Because of his death, his wife filed a Complaint/Position Paper against Qwana-Kaiun, thru its resident-agent, Mr. Fumio
Nakagawa, Asia Bulk, Pedro Garate and Mario Asis, as respondents. Petitioner argues that her cause of action is based on the failure of
private respondents, as employers of her husband, to provide him timely, adequate and competent medical services under Art. 161 of
the Labor Code. Likewise, she contends that Article 217 (a) (4) of the Labor Code vests labor arbiters and the NLRC with jurisdiction to
award all kinds of damages in cases arising from employer-employee relations. She also insisted that the “reasonable causal connection”
rule should be applied in her favor.

ISSUES:
1.) Whether or not the labor arbiter and the NLRC had jurisdiction over petitioner’s action
2.) Whether or not claim can be anchored on Art. 161 of the Labor Code

HELD: (1) The NLRC and the LA had no jurisdiction over petitioner’s claim for damages. Time and time again, we have held that the
allegations in the complaint determine the nature of the action and, consequently, the jurisdiction of the courts. After carefully examining
131
petitioner’s complaint/position paper, we are convinced that the allegations therein are in the nature of an action based on a quasi delict
or tort. It is evident that she sued Pedro Garate and Mario Asis for gross negligence. Petitioner’s complaint/position paper refers to and
extensively discusses the negligent acts of shipmates Garate and Asis, who had no employer-employee relation with Captain Tolosa.
The LA himself classified petitioner’s case as “a complaint for damages, blacklisting and watchlisting for gross negligence resulting in the
death of complainant’s husband, Capt. Virgilio Tolosa.” The case does not involve the adjudication of a labor dispute, but the recovery of
damages based on a quasi delict. The jurisdiction of labor tribunals is limited to disputes arising from employer-employee relations, as
we ruled in Georg Grotjahn GMBH & Co. v. Isnani:

“Not every dispute between an employer and employee involves matters that only LAs and the NLRC can resolve in the exercise
of their adjudicatory or quasi-judicial powers. The jurisdiction of LAs 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.”

The pivotal question is whether the Labor Code has any relevance to the relief sought by petitioner.

From her paper, it is evident that the primary reliefs she seeks are as follows: (a) loss of earning capacity denominated therein as “actual
damages” or “lost income” and (b) blacklisting. The loss she claims does not refer to the actual earnings of the deceased, but to his
earning capacity based on a life expectancy of 65 years. This amount is recoverable if the action is based on a quasi delict as provided
for in Article 2206 of the Civil Code, but not in the Labor Code. While it is true that labor arbiters and the NLRC have jurisdiction to award
not only reliefs provided by labor laws, but also damages governed by the Civil Code, these reliefs must still be based on an action that
has a reasonable causal connection with the Labor Code, other labor statutes, or collective bargaining agreements.

The central issue is determined essentially from the relief sought in the complaint. Where such principal relief is to be granted under labor
legislation or a CBA, the case should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages might
be asserted as an incident to such claim.

It must be noted that a worker’s loss of earning capacity and blacklisting are not to be equated with wages, overtime compensation or
separation pay, and other labor benefits that are generally cognized in labor disputes. The loss of earning capacity is a relief or claim
resulting from a quasi delict or a similar cause within the realm of civil law. “Claims for damages under paragraph 4 of Article 217 must
have a reasonable causal connection with any of the claims provided for in the article in order to be cognizable by the labor arbiter. Only
if there is such a connection with the other claims can the claim for damages be considered as arising from employer-employee relations.”

In the present case, petitioner’s claim for damages is not related to any other claim under Article 217, other labor statutes, or collective
bargaining agreements.

(2) Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or specify a claim or relief.
This provision is only a safety and health standard the enforcement of which rests with the labor secretary. Thus, claims for an employer’s
violation thereof are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor standard provided for
in Article 161 by suing for damages before the labor arbiter.

It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the employer-employee relation is
merely incidental, and in which the cause of action proceeds from a different source of obligation such as a tort. Since petitioner’s claim
for damages is predicated on a quasi delict or tort that has no reasonable causal connection with any of the claims provided for in Article
217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies with the regular courts -- not with the NLRC
or the labor arbiters.

NOTES:
*Conditions for the application of “reasonable causal connection” rule (Claims for damages under paragraph 4 of Article 217 must have
a reasonable causal connection with any of the claims provided for in the article in order to be cognizable by the labor arbiter.):

1) the dispute arose from an employer-employee relation

2) the dispute can be resolved by reference to the Labor Code

*A worker’s loss of earning capacity and blacklisting are not to be equated with wages, overtime compensation or separation pay, and
other labor benefits that are generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting from a quasi
delict or a similar cause within the realm of civil law.

DOCTRINE: As a rule, labor arbiters and the National Labor Relations Commission have no power or authority to grant reliefs from claims
that do not arise from employer-employee relations. They have no jurisdiction over torts that have no reasonable causal connection to
any of the claims provided for in the Labor Code, other labor statutes, or collective bargaining agreements.

U-BIX CORP VS BANDIOLA 525 SCRA 566 (2007)

132
Facts: Sometime in April 1995, Bandiola was employed by U-BIX to install furniture for its customers. On 13 April 1997, Bandiola and
two other U-BIX employees were involved in a vehicular accident on their way to Baguio, where they were assigned by U-BIX to install
furniture for an exhibit. As a result of the accident, Bandiola sustained a fracture on his left leg.

Bandiola and his co-employees were initially brought to the Rosario District Hospital. The next day, 14 April 1997, they were transferred
to the Philippine Orthopedic Hospital (Orthopedic). After his broken leg was cemented, Bandiola was advised to go back for further
medical treatment. U-BIX paid for the medical expenses incurred in both hospitals.

Bandiola claims that he asked U-BIX for financial assistance but that the latter refused. He attached the receipts, issued by Medical
Center Parañaque (MCP) and Dr. Celestino Musngi, for medical expenses with a total amount of P7,742.50. He also attached a copy of
the Roentgenological Report by a Radiologist in MCP. Bandiola added that he paid for other medical expenses for which no receipts were
issued.

On September 1998, Bandiola filed a Complaint before the Labor Arbiter, where he alleged underpayment of salary; non-payment of
overtime pay; premium pay for work performed on holidays and rest days; separation pay; service incentive leave pay; 13th month pay;
and the payment of actual, moral and exemplary damages. The Labor Arbiter ordered in its Decision that respondent pay the complainant:
Salary Differential, Service incentive and 13th Month pay while dismissing all other claims.
Bandiola filed an appeal before the NLRC. The NLRC amended the Decision rendered by the Labor Arbiter. It ruled that U-BIX should
reimburse Bandiola the amount of P12,742.50 for the medical expenses he incurred in connection with his fractured leg. It further ruled
that U-BIX is liable to pay Bandiola P25,000.00 in moral damages and P25,000.00 in exemplary damages for refusing to reimburse
Bandiola for the medical expenses he incurred after it failed to report to the Social Security System (SSS) the injuries sustained by
Bandiola. Thereafter, U-BIX filed a Motion for Reconsideration, which was denied by the NLRC.

On appeal, the Court of Appeals modified the NLRC Resolution. It affirmed Bandiola's entitlement to reimbursement of his medical
expenses, but reduced the amount to P7,742.50, the amount of actual damages he was able to prove. It also affirmed without modification
the award of moral and exemplary damages, and the monetary award granted by the Labor Arbiter.

Issue: Whether or not the Honorable Court of Appeals erred in ordering petitioner U-Bix to reimburse respondent Bandiola for the alleged
medical expenses when there was no evidence submitted by respondent in support thereof.

SC Ruling: The petition is without merit. Contrary to the arguments put forward by U-BIX, it is liable to reimburse Bandiola the amount of
P7,742.50 for medical expenses because its failure to comply with its duty to record and report Bandiola's injury to the SSS precluded
Bandiola from making any claims. Moreover, U-BIX, by its own admission, reimbursed its other employees who were involved in the same
accident for their medical expenses.

Clearly, the reimbursement of medical expenses for injuries incurred in the course of employment is part of the benefits enjoyed by U-
BIX's employees. The only justification for its refusal to reimburse Bandiola was that he intended to defraud the company by presenting
spurious receipts amounting to P7,742.50 that were allegedly issued four months before their presentation.

ART. 205 RECORD OF DEATH OR DISABILITY—

(a) All employers shall keep a logbook to record chronologically the sickness, injury or death of their employees, setting forth
therein their names, dates and places of the contingency, nature of the contingency and absences. Entries in the logbook shall
be made within five days from notice or knowledge of the occurrence of contingency. Within five days after entry in the logbook,
the employer shall report to the System only those contingencies he deems to be work-connected.

(b) All entries in the employers logbook shall be made by the employer or any of his authorized official after verification of the
contingencies or the employees absences for a period of a day or more. Upon request by the System, the employer shall furnish
the necessary certificate regarding information about any contingency appearing in the logbook, citing the entry number, page
number and date. Such logbook shall be made available for inspection to the duly authorized representatives of the System.

ART 206. NOTICE OF SICKNESS, INJURY OR DEATH—

Notice of sickness, injury or death shall be given to the employer by the employee or by his dependents or anybody on his behalf
within five days from the occurrence of the contingency. No notice to the employer shall be required if the contingency is known
to the employer or his agents or representatives.

As a general rule, the injured employee must notify his employer, who is obligated to enter the notice in a logbook within five days after
notification. Within five days after making the entry, the employer of a private company reports the work-related sickness or injury to the
SSS. The claim is forwarded to the SSS, which decides on the validity of the claim. When the SSS denies the claim, the denial may be
appealed to the Employees' Compensation Commission (ECC) within 30 days.

133
However, the law provides an exception to the rule requiring an employee to notify his or her employer of his injuries. Under Section B of
ECC Board Resolution No. 2127, issued on 5 August 1982, notice of injury, sickness or death of the employee need not be given to the
employer in any of the following situations:

(1) When the employee suffers the contingency within the employer's premises;
(2) When the employee officially files an application for leave of absence by reason of the contingency from which he suffers;
(3) When the employer provides medical services and/or medical supplies to the employee who suffers from the contingency;
and
(4) When the employer can be reasonably presumed to have had knowledge of the employee's contingency, in view of the
following circumstances:

(4.1) The employee was performing an official function for the employer when the contingency occurred;
(4.2) The employee's contingency has been publicized through mass media outlets; or
(4.3) The specific circumstances of the occurrence of the contingency have been such that the employer can be
reasonably presumed to have readily known it soon thereafter; or
(4.4) Any other circumstances that may give rise to a reasonable presumption that the employer has been aware of
the contingency.

In the present case, there is no dispute that Bandiola's leg injury was sustained in the course of his employment with U-BIX. At the time
of the accident, Bandiola was on the way to Baguio, where he was ordered by U-BIX to install furniture for an exhibit. Moreover, U-BIX
was aware that Bandiola, as well as his other co-employees, were injured during the accident. U-BIX admitted to providing Bandiola and
his co-employees with medical assistance and it even sent its representative, Rey Reynes, to Rosario District Hospital, where they were
confined, and had them transferred to the Orthopedic. U-BIX was also aware that the Orthopedic instructed Bandiola to return for further
medical treatment. It is implicit that Bandiola needed further treatment for his broken leg and was, thus, incapacitated to work.

Given the foregoing circumstances, U-BIX had the legal obligation to record pertinent information in connection with the injuries sustained
by Bandiola in its logbook within five days after it had known about the injuries; and to report the same to the SSS within five days after it
was recorded in the logbook, in accordance with Articles 205 and 206 of the Labor Code. Had U-BIX performed its lawful duties, the SSS,
or the ECC on appeal, could have properly considered whether or not Bandiola was entitled to reimbursement for his medical expenses,
as well as disability benefits while he was unable to work. However, U-BIX did not present any evidence showing that it had complied with
these legal requirements. It had not even replied to Bandiola's allegations in his Position Paper, dated 13 April 1998, that its employees
were not even members of the SSS.

By failing to report Bandiola's injury to the SSS, U-BIX disregarded the law and its purpose; that is, to provide a proper and prompt
settlement of his claims. Instead, U-BIX arrogated upon itself the duty of determining which medical expenses are proper for
reimbursement. In doing so, it could unnecessarily delay and unjustifiably refuse to reimburse Bandiola for medical expenses even if they
were adequately supported by receipts, as was done in this instance. The expense and delay undergone by Bandiola since 1997 in
obtaining reimbursement for his medical expenses of P7,742.50 very clearly defeat the purpose of the law. The instant Petition is denied.

Ocean Builders Construction vs Sps. Cubacub GR. 150898, April 13, 2011

On April 13, 2011, the Supreme Court issued its ruling in the case of Ocean Builders Construction Corp. and/or Dennis Hao vs. Spouses
Antonio and Anicia Cubacub. Justice Conchita Carpio-Morales penned the majority decision. Although the decision was rendered by the
Supreme Court from the cool comforts of its Baguio City summer sanctuary, Justice Lucas Bersamin opted to turn up the heat as sole
dissenter.

Ocean Builders, of which petitioner Dennis Hao was general manager, employed Bladimir Cubacub as a maintenance man. On April 9,
1995, Bladimir fell ill to chicken pox as a result of which Hao advised him to rest for three days, which Bladimir promptly did at the
company’s barracks. Three days later, according to the ponente, Bladimir proceeded with his usual chores of manning the gate of the
company premises and even cleaned company vehicles.

Apparently still not feeling well, he asked a co-worker to accompany him to his house in the province of Tarlac. Upon being informed of
this request, Hao gave Bladimir P1,000.00 and instructed Bladimir’s co-worker to instead bring Bladimir to the nearest hospital. Thus, on
April 12, 1995, Bladimir was taken to the Caybiga Community Hospital, a primary-care hospital around one kilometer away from the office
of the company, and in which Bladimir was confined.

At the request and suggestion of the attending physician, Bladimir’s parents, respondent spouses Antonio and Anicia Cubacub, together
with a friend, Dr. Hermes Frias, arrived at the hospital the following day and transferred Bladimir to the Quezon City General Hospital
(QCGH) where he was placed in the intensive care unit. Bladimir died the following day, April 14, 1995.

The death certificate issued by the QCGH recorded Bladimir’s immediate cause of death as cardio-respiratory arrest and the antecedent
cause as pneumonia. On the other hand, the death certificate issued by Dr. Frias recorded the causes of death as cardiac arrest, multiple
organ system failure, septicaemia and chicken pox.

134
Around four months after Bladimir’s death, his parents filed a tort action for damages before the Regional Trial Court of Tarlac alleging
that Hao was guilty of negligence which resulted in the deterioration of Bladimir’s condition leading to eventual his death.

The Tarlac RTC dismissed the complaint, holding that Hao was not under any obligation to bring Bladimir to better tertiary hospitals and
assuming that Bladimir died of chicken pox aggravated by pneumonia or some other complications due to lack of adequate facilities at
the hospital, the same cannot be attributed to Hao.

On appeal, the Court of Appeals, reversed the trial court’s decision, holding that Hao violated Article 161 of the Labor Code by failing to
bring Bladimir to a better-equipped hospital. The Court of Appeals further ruled that Hao should have foreseen that Bladimir, an adult,
could suffer complications from chicken pox and, had he been brought to hospitals like St. Luke’s, Capitol Medical Center, Philippine
General Hospital and the like, Bladimir could have been saved.

Seeking relief from the Supreme Court, Ocean Builders and Hao asserted that Hao exercised the diligence more than the degree of
diligence the law requires and thus are not liable for damages.

Speaking for the majority, Justice Carpio-Morales noted that to successfully prosecute an action anchored on torts, the following elements
must be present:

(1) duty
(2) breach
(3) injury and proximate causation

While the Supreme Court noted that the Court of Appeals held that it was the duty of petitioners to provide adequate medical assistance
to the employees under Article 161 of the Labor Code:

ART. 161. Assistance of employer. – It shall be the duty of any employer to provide all the necessary assistance to ensure the
adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency.

The Implementing Rules of the Labor Code do not enlighten what the phrase “adequate and immediate” medical attendance means in
relation to an “emergency.” Accordingly, Justice Carpio-Morales stated that “it would thus appear that the determination of what it means
is left to the employer, except when a full-time registered nurse or physician are available on-site as required, also under Section 157 of
the Labor Code.”

In the view of the High Court, Hao’s advice for Bladimir to, as he did, take a three-day rest and to later have him brought to the nearest
hospital constituted “adequate and immediate medical” attendance that he is mandated, under Article 161, to provide to a sick employee
in an emergency.

Justice Carpio-Morales adds, “[c]hicken pox is self-limiting. Hao does not appear to have a medical background. He may not be thus
expected to have known that Bladimir needed to be brought to a hospital with better facilities than the Caybiga Hospital, contrary to
appellate court’s ruling.”

In any case, the majority held that Hao cannot be considered as the proximate cause of the death of Bladimir. “Proximate cause is that
which, in natural and continuous sequence, unbroken by an efficient intervening cause, produces injury, and without which, the result
would not have occurred. An injury or damage is proximately caused by an act or failure to act, whenever it appears from the evidence
in the case that the act or omission played a substantial part in bringing about or actually causing the injury or damage, and that the injury
or damage was either a direct result or a reasonably probable consequence of the act or omission.”

Therefore, based on the relevant facts, the Supreme Court found Ocean Builders and Hao not to have been negligent and thus reversed
the Court of Appeals.

In his dissenting opinion, Justice Lucas Bersamin takes the view that the petitioners should be held liable for damages, as the Court of
Appeals ruled, essentially because Bladimir “died from the complications of chicken pox after his employers forced him to continue on
the job despite his affliction that, in the first place, he had contracted in the workplace from a co-employee. To [Justice Bersamin], his
death was wrongful by reason of the employers’ failure: (a) to isolate the co-worker to prevent the spread of chicken pox; (b) to provide
to him the legally mandated first aid treatment; and (c) to extend adequate medical and other assistance for his affliction with chicken pox
and the expected complications of the affliction (like letting him off from work in order to have complete rest).”

The dissenter cites the factual records of the case as convincingly establishing that Hao had failed to exercise the degree of care and
vigilance required under the circumstances.

For one thing, Justice Bersamin notes that the petitioners had violated Article 157 of the Labor Code for not having the required medical
personnel or facilities. [On this point, the majority opinion stated that there is no allegation on the number of employees or state of the
company’s premises on which to reach a determination as to that applicability of Article 157 to the petitioners.]

As such, Bladimir received no first aid treatment from the time he contracted chicken pox until the day he was rushed to the community
hospital. Moreover, Bladimir was not allowed to have bed rest, considering that Hao instead required him to continue on the job despite

135
his affliction. The dissent also points out that Bladimir was not allowed to rest in his parents’ home in Tarlac because Hao was due to
leave for Hongkong for the Holy Week break. In addition, the employee barracks were unsuitable for employees with illnesses.

Concluded Justice Bersamin, “Hao’s utter lack of concern and solicitude for the welfare of Bladimir not only contravened the letter and
spirit of the Labor Code but also manifested a callous disregard of Bladimir’s weakened condition.”

E. MIGRANT WORKER’S ACT AND OVERSEAS FILIPINO ACT OF 1995 & RECRUITMENT AND PLACEMENT

JSS Indochina Corporation vs. Gerardo R. Ferrer, et al. G.R. No. 156381, October 14, 2005

Facts: Petitioner hired the respondents as construction workers for its Taiwan-based principal employer Sr Formosa Plastics Corp. (FPC).
Pursuant to the parties’ contracts of employment, each respondent would receive monthly salary of NT$15,360. Their employment
covered a period of 1 year of from May 1, 1997 to May 1, 1998.

As scheduled, respondents, along with other Filipino contract workers, were deployed to Taiwan. But upon their arrival, only 20 workers,
excluding respondents, were employed as construction workers at FPC. Aggrieved, they were assisted by the officials of Manila Economic
Cultural Office who directed them to sign affidavits alleging that they were assigned, not as construction workers for FPC, but as cable
tray I pipe tracts workers at Shin Kwan Enterprises Co., Ltd. They were then repatriated to the Philippines.

Thus, respondents filed a complaint for illegal dismissed, payment of salaries, refund of placement fee, damages and attorney’s fees with
the Office of the Labor Arbiter against JSS Indochina Corp.

SC Ruling: The decision to resign from their employment were made by force of circumstances not attributable to their own fault, and it
was not their fault that they were left out from among those workers who were considered for employment by the foreign employer.
Evidently, petitioner is guilty for breach of contract because upon arrival of respondents at the jobsite, there was no employer on hand,
which then made respondents to decide to go home to the Philippines. Therefore, the termination of respondent’s services is, undoubtedly,
without just or valid cause. Consequently, the respondents are entitled to an amount representing their 3 months salaries considering
that their employment contract has a term of exactly 1 year, plus a full refused of their placement fee with interest at 12% per annum.

Such award is in accordance to Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act, which
provides:

“SECTION 10. Money claims.—

xxxxxx
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 12% interest per annum, plus his salaries
for the unexpired portion of his employment contract or for 3 months for every year of the unexpired term, whichever is
less.

People of the Philippines vs. Capt. Florencio O. Gasacao [G.R. No. 168445 November 11, 2005]

Facts: Appellant was the Crewing Manager of Great Eastern Shipping Agency Inc., a licensed local manning agency, while his nephew
and co-accused, Jose Gasacao, was the President. As the crewing manager, Capt. Gasacao's duties included receiving job applications,
interviewing the applicants and informing them of the agency's requirement of payment of performance or cash bond prior to deployment.
On August 4, 2000, Capt. Gasacao and Jose Gasacao were charged with Large Scale Illegal Recruitment defined under Section 6,
paragraphs (a), (l) and (m) of Republic Act (RA) No. 8042 or the Migrant Workers and Overseas Filipinos Act of 1995, and penalized
under Section 7(b) of the same law, before the RTC of Quezon City. Only Capt. Gasacao was arrested while Jose Gasacao remained at
large. When arraigned, appellant pleaded not guilty to the offense charged. Thereafter, trial on the merits ensued. On March 5, 2001, the
RTC of Quezon City, rendered its Joint Decision convicting appellant of Large Scale Illegal Recruitment.

Issue: Whether or not Capt. Gasacao was guilty beyond reasonable doubt of the crime of large scale illegal recruitment

SC Ruling: RA No. 8042 defines illegal recruitment as follows:

II. ILLEGAL RECRUITMENT. Sec. 6. DEFINITIONS. – For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract services, promising or advertising
for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated under
Article 13(f) of Pd 442, as amended: Provided, that such non-licensee or non-holder who, in any manner, offers or promises for a fee
employment abroad to two or more persons shall be deemed so engaged. It shall likewise include the following acts, whether committed
by any persons, whether a non-licensee, non-holder, licensee or holder of authority.

(a) To charge or accept directly or indirectly any amount greater than the specified in the schedule of allowable fees
prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than that actually
received by him as a loan or advance;
xxx xxx xxx
136
 (l) Failure to actually deploy without valid reason as determined by the Department of Labor and Employment; and

(m) Failure to reimburse expenses incurred by the workers in connection with his documentation and processing for
purposes of deployment, in cases where the deployment does not actually take place without the worker's fault.

Illegal recruitment when committed by a syndicate or in large scale shall be considered as offense involving economic
sabotage. Illegal recruitment is deemed committed by a syndicate carried out by a group of 3 or more persons
conspiring or confederating with one another. It is deemed committed in large scale if committed against 3 or more
persons individually or as a group.

A license is a document issued by the DOLE authorizing a person or entity to operate a private employment agency, while an authority
is a document issued by the DOLE authorizing a person or association to engage in recruitment and placement activities as a private
recruitment entity. However, it appears that even licensees or holders of authority can be held liable for illegal recruitment should they
commit any of the above-enumerated acts.

Thus, it is inconsequential that appellant committed large scale illegal recruitment while Great Eastern Shipping Agency, Inc. was holding
a valid authority. We thus find that the court below committed no reversible error in not appreciating that the manning agency was a holder
of a valid authority when appellant recruited the private complainants. There is no merit in appellant's contention that he could not be held
liable for illegal recruitment since he was a mere employee of the manning agency, pursuant to Section 6 of RA No.
8042 which provides:

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.

Contrary to Capt. Gasacao's claim, he is not a mere employee of the manning agency but the crewing manager. As such, he receives
job applications, interviews applicants and informs them of the agency's requirement of payment of performance or cash bond prior to
the applicant's deployment. As the crewing manager, he was at the forefront of the company's recruitment activities. The foregoing
testimonies of the private complainantsclearly established that Gasacao is not a mere employee of Great Eastern Shipping Agency Inc.
As the crewing manager, it was appellant who made representations with the private complainants that he can secure overseas
employment for them upon payment of the cash bond. It is well settled that to prove illegal recruitment, it must be shown that appellant
gave complainants the distinct impression that he had the power or ability to send complainants abroad for work such that the latter were
convinced to part with their money in order to be employed. Appellant's act of promising the private complainants that they will be deployed
abroad within three months after they have paid the cash bond clearly shows that he is engaged in illegal recruitment.

Even assuming that Capt. Gasacao was a mere employee, such fact is not a shield against his conviction for large scale illegal recruitment.
Clearly, the acts of Capt. Gasacao vis-à-vis the private complainants, either as the crewing manager of Great Eastern Shipping Agency
Inc. or as a mere employee of the same, constitute acts of large scale illegal recruitment which should not be countenanced.

Although he informed them that it is optional, he collected cash bonds and promised their deployment notwithstanding the proscription
against its collection under Section 60 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 which state that:

SEC. 60. Prohibition on Bonds and Deposits. – In no case shall an
employment agency require any bond or cash deposit from
the worker to guarantee performance under the contract or his/her repatriation. Illegal recruitment is deemed committed in large
scale if committed against three or more persons individually or as a group.

In this case, five complainants testified against appellant's acts of illegalrecruitment, thereby rendering his acts tantamount to economic
sabotage.

Mercedita Acuña, et al. vs. CA and Join International Corp. and/or Elizabeth Alañon [G.R. No. 159832 May 05, 2006]

Facts: 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 Alañon is the president of Join International Corporation. After
their papers were processed, petitioners claimed they signed a uniformly-worded employment contract 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 of two
years.

On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the job site, a factory owned by 3D, they were
made to sign another contract which stated that their salary was only NT$11,840.00. They were likewise informed that the dormitory which
would serve as their living quarters was still under construction. They were requested to temporarily bear with the inconvenience but were
assured that their dormitory would be completed in a short time The petitioners averred that on December 16, 1999, due to unbearable
working conditions, they were constrained to inform management that they were leaving. They booked a flight home, at their own expense.
Before they left, they were made to sign a written waiver. In addition, petitioners were not paid any salary for work rendered on December
11-15, 1999.

Issue: Whether petitioners were illegally dismissed under Rep. Act No. 8042, thus entitling them to benefits plus damages.
137
SC Ruling: 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.

In this case, the appellate court found that petitioners did not deny that the accommodations were not as homely as expected. In the
petitioners’ 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.

To our mind these cited circumstances do not reflect malice by private respondents nor do they show the principal’s intention to subject
petitioners to unhealthy accommodations. Under these facts, we cannot rule that there was constructive dismissal.

Asian International Manpower Services, Inc. (AIMS) vs. CA and Aniceta Lacerna [ G.R. No. 169652 October 09, 2006]

Facts: Private respondent Lacerna alleges the facts of the case being: That she was hired by Proxy Maid Services Centre (hereinafter
referred to as Proxy) thru petitioner AIMS, a recruitment entity in the Philippines; That on February 10, 2000, she signed an employment
contract as a domestic helper of Low See Ting, who later on cancelled the same sometime in March 2000; That subsequent to the
cancellation of the contract, Lacerna, with the assurance of a new employer from AIMS, proceeded to Hongkong, and that upon her
arrival, she was fetched by Tan Kmin Shwe Lin Charmain, her new employer; That on May 2, 2000, she was dismissed by Charmain on
the ground of “difficulty in communication”; That on May 20, 2000, she was transferred by Proxy to Tam Ching-yee, Donna, who later on
dismissed her without stating the reason(s) thereof; Proxy neither gave her an explanation regarding this; That on July 1, 2000, she
agreed to take a three-day trial period with another employer, Daisy Lee; that before she could sign her contract with Daisy Lee, she was
denied of her request for change of employer by the Hongkong government and was advised instead to submit a fresh application with
her country of domicile. That upon her return to the Philippines, she was informed by AIMS that Daisy Lee was no longer interested in
hiring her; and, That upon knowing this, she demanded the return of her placement fee but was denied; Hence, this instant case of illegal
dismissal.

Petitioner AIMS on the other hand, alleges the facts to be: That Lacerna resigned after working for 5 days as a domestic worker for Low
See Ting, as evidenced by her resignation letter; That Proxy paid her wages and return ticket to the Philippines, but respondent refused
to be repatriated; That thereafter, Proxy assisted her to be employed by Charmain, who subsequently dismissed her for difficulty in
communication; and, That the Hongkong government permitted her an extension of her stay in Hongkong, but that this was her last
chance.

Respondent argued that her first employer was Chairman, and not Low See Ting, as she never got the chance to work for the latter. She
also contend that the signature on the resignation and on the receipt of payment was not hers, nor was the handwriting. On June 28,
2001, the Labor Arbiter ruled in favor of petitioner AIMS, stating that Lacerna was not illegally dismissed as shown by her resignation
letter. However, this decision was later on reversed by the Court of Appeals due to the lack of just or authorized cause to justify Lacerna’s
dismissal. The court also ruled that AIMS is solidarily liable with Proxy, as provided by Sec. 10 of RA 8042, stating that the liability of the
principal employer and the recruitment agency shall not be affected by any substitution, amendment or modification of the contract of
employment.

Issue: Was Lacerna illegally dismissed? If yes, may AIMS be held liable for the monetary claims of Lacerna?

SC Ruling: The High Court rules in the affirmative for both questions.

(1) There is no dispute that the last employer of Lacerna was Donna and not Daisy Lee because the Hong Kong government directed her
repatriation before she could sign her contract with the latter. In dismissing her, Donna gave no reason for her termination. Neither did
Proxy explain the ground for her dismissal. And where there is no showing of a clear, valid, and legal cause for the termination, the law
considers the matter, a case of illegal dismissal. In termination cases involving Filipino workers recruited for overseas employment, the
burden of proving just or authorized cause for termination rests with the foreign based employer/principal and the local based entity which
recruited the worker both being solidarily liable for liabilities arising from the illegal dismissal of the worker. In this case, the Court of
Appeals correctly declared Lacerna’s termination illegal since no reason was given to justify her termination

The employment contract signed by Lacerna, as approved by the POEA, reveals that Proxy was her designated principal employer. Since
AIMS was the local agency responsible for the recruitment of domestic helpers, such as Lacerna, for Proxy, it is solidarily liable with the
latter for liabilities arising from her illegal dismissal. To absolve AIMS from liability would run in contravention to the avowed policy of the
state to protect the labor sector. The Court says that “the joint and solidary liability imposed by law against recruitment agencies and
foreign employers is meant to assure the aggrieved worker of immediate and sufficient payment of what is due him.”

(2) As for the monetary claims, the Supreme Court cited Section 10 of R.A. No. 8042, which provides that: 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 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
138
directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation or partners hip for the
aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be affected by any substitution,
amendment or modification made locally or in a foreign country of the said contract.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the worker shall be
entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per annum, plus his salaries for the unexpired
portion of the employment contract or for three (3) months for every year of the unexpired term, whichever is less.

As such, Lacerna is entitled to the full reimbursement of her placement fee with interest ate 12% per annum, plus salaries for the unexpired
portion of her employment contract, or for 3 months for every year of the unexpired term, whichever is less. But the award for moral and
exemplary damages cannot be credited in as much as Lacerna failed to prove that AIMS and Proxy are guilty of bad faith.

Corazon C. Sim vs. NLRC and Equitable PCI-Bank [ G.R. NO. 157376 October 02, 2007]

Facts: Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor Arbiter, alleging that she was initially employed by Equitable
PCI-Bank (respondent) in 1990 as Italian Remittance Marketing Consultant to the Frankfurt Representative Office. Eventually, she was
promoted to Manager position, until September 1999, when she received a letter from Remegio David -- the Senior Officer, European
Head of PCIBank, and Managing Director of PCIB- Europe -- informing her that she was being dismissed due to loss of trust and
confidence based on alleged mismanagement and misappropriation of funds.

Issue: Whether or not the Labor Arbiter has jurisdiction over the case.

SC Ruling: The rule is that the Court is bound by the findings of facts of the Labor Arbiter or the NLRC, unless it is shown that grave
abuse of discretion or lack or excess of jurisdiction has been committed by said quasi-judicial bodies. The Court will not deviate from said
doctrine without any clear showing that the findings of the Labor Arbiter, as affirmed by the NLRC, are bereft of sufficient substantiation.

The Court notes palpable error in the Labor Arbiter's disposition of the case, which was affirmed by the NLRC, with regard to the issue
on jurisdiction. It was wrong for the Labor Arbiter to rule that “labor relations system in the Philippines has no extra-territorial jurisdiction.

Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter and the National Labor Relations Commission, viz.:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. –

(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 any 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 relations, including those of persons in domestic or household
service, involving an amount of 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.

Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipinos Act of 1995, provides:

SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of
damages.

Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 provides that the Labor Arbiters of the NLRC shall
139
have the original and exclusive jurisdiction to hear and decide all claims arising out of 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, subject to the rules and procedures of the NLRC.

Under these provisions, it is clear that labor arbiters have original and exclusive jurisdiction over claims arising from employer-employee
relations, including termination disputes involving all workers, among whom are overseas Filipino workers. In Philippine National Bank v.
Cabansag, the Court pronounced: x x x Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine
labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public
policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed,
and regulate the relations between workers and employers. For the State assures the basic rights of all workers to self-organization,
collective bargaining, security of tenure, and just and humane conditions of work [Article 3 of the Labor Code of the Philippines; See also
Section 18, Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil
Code which states that laws “which have for their object public order, public policy and good customs shall not be rendered ineffective by
laws or judgments promulgated, or by determination or conventions agreed upon in a foreign country.”

Bahia Shipping Services, Inc. vs. Reynaldo Chua [G.R. No. 162195, April 08, 2008]

Facts: Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia Shipping Services, Inc., as a restaurant
waiter on board a luxury cruise ship liner M/S Black Watch pursuant to a Philippine Overseas Employment Administration (POEA)
approved employment contract dated October 9, 1996 for a period of nine (9) months from October 18, 1996 to July 17, 1997. On October
18, 1996, the private respondent left Manila for Heathrow, England to board the said sea vessel where he will be assigned to work.

On February 15, 1997, the private respondent reported for his working station one and one-half hours late. On February 17, 1997, the
master of the vessel served to the private respondent an official warning-termination form pertaining to the said incident. On March 8,
1997, the vessel's master, ship captain Thor Fleten conducted an inquisitorial hearing to investigate the said incident. Thereafter, on
March 9, 1997, private respondent was dismissed from the service on the strength of an unsigned and undated notice of dismissal. An
alleged record or minutes of the said investigation was attached to the said dismissal notice.

On March 24, 1997, the private respondent filed a complaint for illegal dismissal and other monetary claims, which case was assigned to
Labor Arbiter Manuel M. Manansala.

Issues:
1. Whether or not respondent is entitled to overtime pay which was incorporated in his award for the unexpired portion of the contract
despite the fact that he did not render overtime work; and

2. Whether or not it is proper for the NLRC to award money claims despite the fact that the NLRC decision, and affirmed by the Court of
Appeals, did not state clearly the facts and the evidence upon which such conclusions are based.

SC Ruling: It being settled that the dismissal of respondent was illegal, it follows that the latter is entitled to payment of his salary for the
unexpired portion of his contract, as provided under Republic Act (R.A.) No. 8042, considering that his employment was pre-terminated
on March 9, 1997 or four months prior to the expiration of his employment contract on July 17, 1997.

However, the LA limited the award to an amount equivalent to respondent's salary for three months. The NLRC affirmed said award but
deducted therefrom his salary for one day as penalty for the tardiness incurred. The CA affirmed the one-day salary deduction imposed
by the NLRC but removed the three months - salary cap imposed by the LA. In effect, as this particular monetary award now stands, it is
to be computed based on the salary of respondent covering the period March 9, 1997 to July 17, 1997, less his salary for one day.

Petitioner questions the CA for lifting the three-month salary cap, pointing out that the LA and NLRC decisions which imposed the cap
can no longer be altered as said decisions were not questioned by respondent.

Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it and can no longer obtain from the appellate
court any affirmative relief other that what was already granted under said judgment. However, when strict adherence to such technical
rule will impair a substantive right, such as that of an illegally dismissed employee to monetary compensation as provided by law, then
equity dictates that the Court set aside the rule to pave the way for a full and just adjudication of the case.

The Court has consistently applied the foregoing exception to the general rule. It does so yet again in the present case.

Section 10 of R.A. No. 8042, entitles an overseas worker who has been illegally dismissed to "his salaries for the unexpired portion of the
employment contract or for three (3) months for every year of the unexpired term, whichever is less."

The CA correctly applied the interpretation of the Court in Marsaman Manning Agency, Inc. v. National Labor Relations Commission that
the second option which imposes a three months-salary cap applies only when the term of the overseas contract is fixed at one year or
longer; otherwise, the first option applies in that the overseas worker shall be entitled payment of all his salaries for the entire unexpired
period of his contract.
140
In Skippers Pacific, Inc. v. Mira, wherein the overseas contract involved was only for six months, the Court held that it is the first option
provided under Section 10 of R.A. No. 8042 which is applicable in that the overseas worker who was illegally dismissed is entitled to
payment of all his salaries covering the entire unexpired period of his contract. The CA committed no error in adhering to the prevailing
interpretation of Section 10 of R.A. No. 8042.

Finally, the Court comes to the last issue on whether in the computation of the foregoing award, respondent's "guaranteed overtime" pay
amounting to US$197.00 per month should be included as part of his salary. Petitioner contends that there is no factual or legal basis for
the inclusion of said amount because, after respondent's repatriation, he could not have rendered any overtime work.

This time, petitioner's contention is well taken.

The Court had occasion to rule on a similar issue in Stolt-Nielsen Marine Services (Phils.), Inc. v. National Labor Relations Commission,
where the NLRC was questioned for awarding to an illegally dismissed overseas worker fixed overtime pay equivalent to the unexpired
portion of the latter's contract. In resolving the question, the Court, citing Cagampan v. National Labor Relations Commission, held that
although an overseas employment contract may guarantee the right to overtime pay, entitlement to such benefit must first be established,
otherwise the same cannot be allowed.

Hence, it being improbable that respondent rendered overtime work during the unexpired term of his contract, the inclusion of his
"guaranteed overtime" pay into his monthly salary as basis in the computation of his salaries for the entire unexpired period of his contract
has no factual or legal basis and the same should have been disallowed.

Marciano L. Masangcay vs. Trans-Global Maritime Agency, Inc. and Ventnor Navigation, Inc.
[G. R. No. 172800, October 17, 2008]

Facts: On September 2, 2002, Marciano Masangcay was hired by Ventnor (a foreign company based in Liberia and engaged in maritime
commerce), through its manning agent, Trans-Global (a corporation organized and existing under Philippine laws), as an oiler on M/T
Eastern Jewel, an oil tanker. His employment was to run for a period of seven (7) months. He was to receive, inter alia, a basic monthly
salary of US$445.00. While on board M/T Eastern Jewel, Marciano Masangcay noticed a “reddish discoloration of his urine upon
micturation (urination). Masangcay was brought to the Fujairah Hospital, Fujairah, United Arab Emirates, because of lower abdominal
pain and left loin pain of ten (10) days duration with difficulty in urinating. He was advised surgery but opted to be repatriated back to the
Philippines. On repatriation, he was confined at Makati Medical Center on October 8, 2002 where he underwent ESWL, left. On December
17-23, 2003, he was confined at National Kidney Institute and he underwent right ureterolithotomy.

Dr. dela Cruz pronounced Masangcay fit to resume work as all his laboratory examinations showed normal results. Accordingly, on 30
January 2003, Trans-Global’s designated physician, Dr. Barrientos of the Associated Medical & Clinical Services, Inc., declared
Masangcay fit to go back to work after a regular medical examination and pegged the disability period of the latter to be from 3 October
2002 until 3 February 2003.

Trans-Global, in behalf of Ventnor, paid Masangcay his full 120 days Sick Leave pay of Ninety Five Thousand Five Hundred Sixty Four
and 52/100 (P95,564.52) Pesos representing One Thousand Seven Hundred Seventy Nine Dollars and 60/100 (US$1,779.60) U.S.
Dollars, as well as all his medical and hospital expenses, professional fees of his attending physicians, the total amount of which reached
One Hundred Seventy Four Thousand Seventy Five and 10/100 (P174,075.10) Pesos.

Masangcay was asked to report back to the office of Trans-Global for deployment line-up. He was also asked to undergo medical
examination in view of his impending deployment. He was informed by the Port Captain that he can no longer be deployed due to negative
reports about him coming from its principal, Ventnor.

More than six months later, armed with a Medical Certificate issued by one Dr. Efren R. Vicaldo (Dr. Vicaldo), a cardiologist, Masangcay
instituted a complaint against Trans-Global and Ventnor, including Trans-Global’s President, Michael Estaniel, before the National Labor
Relations Commission (NLRC) for the payment of disability benefit, damages and attorney’s fees.

Dr. Vicaldo justified the finding of Impediment Grade III (78.36%) in this wise:

Masangcay is now unfit to resume work as seaman in any capacity. His illness is considered work aggravated. He needs regular
monitoring of his renal function for deterioration and possible recurrence of kidney stones. His right kidney is non-functioning
and his left kidney has impaired function. There’s a likelihood that he would need dialysis in the future. He cannot land a gainful
employment given his medical background.

Masangcay is claiming that his disability was contracted during the term of his Contract of Employment, therefore claiming benefit under
Section 20(b), paragraph 5 of the Philippine Overseas Employment Administration (POEA) Revised Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels, as amended by Memorandum Circular No. 55, Series
of 1996, which is deemed integrated in every contract of employment of Filipino seafarers on ocean-going vessels.

Trans-Global, Ventnor, and Estaniel, countered that Masangcay had fully recovered and was pronounced fit for employment, his claim
for disability benefits has no basis. The right to compensation for disability arises only when it is shown that the seafarer is disabled on
141
account of an illness or injury suffered while in the employ of his employer.

15 April 2004, Labor Arbiter Daisy G. Cauton-Barcelona found Masangcay’s complaint meritorious and ordered Trans-Global, Ventnor,
and Estaniel to pay Masangcay the amount of Thirty Nine Thousand One Hundred Eighty U.S. Dollars (US$39,180.00) representing the
latter’s disability benefit at Impediment Grade III (78.36%). Labor arbiter opined that the compensability of an ailment does not depend
on whether or not the injury or disease was pre-existing at the time of employment, but rather, if the injury or disease was related to or
was aggravated by Masangcay’s work. The labor arbiter gave great weight to the medical opinion of Dr. Vicaldo rather than that of Trans-
Global’s designated physicians considering that “respondents’ accredited doctors’ opinion has (sic) more than meets the eye and should
not be taken at face value. For most often than not, they are palpably self-serving and bias (sic) in favor of the employer and certainly
cannot be considered independent.”

Trans-Global and Ventnor filed an original action for certiorari before the Court of Appeals imputing grave abuse of discretion amounting
to lack or excess of jurisdiction on the NLRC for affirming the decision of the labor arbiter.

On 10 February 2006, the appellate court granted the petition for certiorari of Trans-Global and Ventnor. It nullified and set aside the
challenged Resolutions of the NLRC for having been issued in grave abuse of discretion amounting to lack or excess of jurisdiction,
considering that the claimant was already full (sic) paid the benefits to which he was lawfully entitled.

The Court of Appeals reasoned in its decision that, the Labor Arbiter, the NLRC arbitrarily set aside the fact that Masangcay was precluded
from any entitlement to disability benefits after he was already fully recovered and declared to be fit for employment by the company-
designated physician. The right to compensation for disability arises only when the seafarer has been disabled on account of his illness
or injury that he suffered while in the employ of his employer; otherwise, gross injustice would result to the petitioners.

The NLRC could not simply sweep away the opinions of Dr. Barrientos and Dr. Agustin, as well s that of Dr. dela Cruz, by generalizing
that company-designated or company-referred physicians were often biased in favor of the company and that their opinions were self-
serving without specifically indicating how their specific findings were biased and why such opinions were self-serving. The generalization
was, at the very least, most unfair to Dr. Agustin and Dr. dela Cruz, specialists in urology that covered the ailment of Masangcay. The
arbitrariness and capriciousness became even more blatant in the face of the fact that such company-designated or company-referred
physicians had themselves personally attended to, examined and treated Masangcay in a professional capacity. Thereby, their findings
and conclusions were far from speculation and conjecture.

Issue: Whether or not Marciano Masangcay can legally demand and claim disability benefits from Trans-Global and Ventnor for an illness
that became apparent during his contract of employment with the shipping company.

SC Ruling: As set forth in Sec. 20(b) of the POEA Standard Employment Contract, the employer-vessel owner/principal shall be liable
for disability benefits to the seafarer only in case the latter was declared disabled by the company designated physician in view of a work-
related illness or injury that he suffered onboard the vessel. Since petitioner-seafarer was declared FIT TO WORK by the company
designated physician, clearly then he is not entitled to disability benefits under the POEA Standard Employment Contract.” As with all
other kinds of worker, the terms and conditions of a seafarer’s employment is governed by the provisions of the contract he signs at the
time he is hired.

Considering that Masangcay was employed on 3 September 2002, it is the 2000 POEA Amended Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels that is considered appended in his contract of
employment and is controlling for purposes of resolving the issue at hand and not the 1996 POEA Revised Amended Standard Terms
and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels as alluded to by Masangcay.

Under Sec. 20(b), paragraph 6, of the 2000 POEA Amended Standard Terms and Conditions Governing the Employment of Filipino
Seafarers on Board Ocean-Going Vessels, viz:

SECTION 20. COMPENSATION AND BENEFITS—

Seafarer, to be entitled to compensation and benefits under said provision, it is not sufficient to establish that the
seafarer’s illness or injury has rendered him permanently or partially disabled, but it must also be shown that there is a
causal connection between the seafarer’s illness or injury and the work for which he had been contracted for.

Masangcay must prove that he is suffering from permanent total or partial disability due to a work-related illness occurring during the term
of his contract. Proof that he not only acquired or contracted his illness during the term of his employment contract is clearly not enough;
must also present evidence that such infirmity was work-related, or at the very least aggravated by the conditions of the work for which
he was contracted for. There is no substantiation that the progression of his ailment was brought about largely by the conditions of his
job as an oiler. His medical history and/or records prior to his deployment as an oiler in M/T Eastern Jewel were neither presented nor
alluded to in order to demonstrate that the working conditions on board said vessel increased the risk of contracting renal failure, chronic
or otherwise. It is, therefore, highly improbable that Masangcay’s chronic renal failure developed in just a month’s time, the length of time
he was on board M/T Eastern Jewel before the symptoms became

Moreover, chronic renal failure, is neither listed as a disability under Sec. 32 of the 2000 POEA Amended Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels; nor an occupational disease under Sec. 32-A thereof,
which provides for the schedule of disability or impediment for injuries suffered and diseases including occupational diseases or illness.
142
The only similarity between the two cases, Crystal Shipping and the present petition, is the fact that the seafarers in both have the same
personal physician, Dr. Efren R. Vicaldo, a cardiologist, who declared them permanently disabled to return to work. The factual
circumstances of the Crystal Shipping case are poles apart from that attendant to the case at bar. The seafarer in said case had been
employed as a Chief Mate of an ocean-going vessel when he complained of coughing and hoarseness and was later diagnosed with
thyroid cancer.

The company-designated physician and seafarer’s physician were both in agreement that the seafarer had been rendered disabled by
his illness; they only differed in their assessments of the degree and the impediment grade of such disability in accordance with the
schedule of disability or impediment for injuries suffered and diseases including occupational diseases or illness contracted under Sec.
32 of the 1996 POEA Revised Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going
Vessels.

In contrast, Trans-Global and Ventnor are contesting the right of Masangcay to claim disability benefits as the company-designated
physicians have certified the latter fit to return to work, not to mention the fact that he was not suffering from a work-related and/or work-
aggravated illness.

All told, except for the bare assertion that he is no longer fit to work due to the illness that became manifest during his contract of
employment with Trans-Global and Ventnor, Masangcay makes no allegation, much less presents no proof, that the illness was caused
or aggravated by his employment.

The evidence on record is totally bare of essential facts on how he contracted or developed such disease and on how and why his working
conditions increased the risk of contracting the same. Consequently, the labor arbiter and the NLRC had no basis at all to rule that
Masangcay is deserving of other disability benefits espoused by Sec. 20(b), paragraph 6 of the 2000 POEA Amended Standard Terms
and Conditions other than that already extended to him by Trans-Global and Ventnor.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The assailed Decision dated 10 February 2006 and
Resolution dated 30 May 2006 both of the Court of Appeals in CA-G.R. SP No. 91393 are hereby AFFIRMED.

Costs against petitioner Marciano L. Masangcay.

Magsaysay Maritime Corp., et al. vs. Jaime M. Velasquez [ G.R. No. 179802 November 14, 2008]

FACTS: Jaime M. Velasquez (respondent) was hired by Magsaysay Maritime Corporation(petitioner) as second cook for its foreign
principal, co-petitioner ODF Jell ASA. The parties had a considerably long employment history covered by about ten (10) employment
contracts wherein Velasquez engaged respondent’s services on board vessels owned by ODF Jell ASA.

On July 28, 2003, on board the vessel M/T Bow Favour, Jaime M. Velasquez suffered high fever and was unable to work. By the f ourth
day, his body temperature reached 40.9°C. His extremities were swollen and he could not walk. He also had edema in the abdominal
area. Respondent was brought to a hospital in Singapore where he was confined from August 12 to October 13, 2003. Thereafter, he
was repatriated to the Philippines.

It is from this point onwards that the allegations of the parties differ. Jaime M. Velasquez alleged that upon his repatriation, he was not
confined to St. Luke’s Medical Center as he expected. He claimed that he was compelled to seek medical treatment from an independent
doctor. On November 13, 2003, he consulted a certain Dr. Efren Vicaldo (Dr. Vicaldo) who diagnosed him to be suffering from
staphylococcal bacteremia, multiple metastatic abcesses, pleural effusion and hypertension and declared his disability as Impediment
Grade 1 (120%). Dr. Vicaldo further concluded that respondent was “unfit to resume work as seaman in any capacity.”

Respondent filed a claim for disability benefits, illness allowance/reimbursement of medical expenses, damages and attorney’s fees but
petitioners refused to pay.

Petitioners, on the other hand, maintained that upon respondent’s repatriation on October 13, 2003, he was immediately referred to a
company designated physician for further medical care and treatment; that the initial impression was Systemic Staphylococcal Infections;
Resolving; that he was under the care of said physician for three (3) months during which he underwent extensive medications and
treatment; that he was admitted and confined at St. Luke’s Medical Center from October 13, 2003 to November 11, 2003; that progress
reports on his recovery have been issued; that by January 5, 2004, respondent was declared as “cleared to work resumption as seafarer”;
and that petitioners were the ones who shouldered respondent’s hospitalization expenses.

On March 29, 2005, the Labor Arbiter rendered a decision in favor of Jaime M. Velasquez, ordering Magsaysay Maritime Corporation
and/or Conrado N. Dela Cruz and ODF Jell ASA to pay complainant Jaime M. Velasquez the amount of SIXTY TWO THOUSAND TWO
HUNDRED SIXTY US DOLLARS (US$62,260.00) or its equivalent in Philippine Peso at the prevailing rate of exchange at the time of
actual payment representing his disability benefits and sickness allowance and 10% of the total monetary award by way of attorney’s
fees. Magsaysay Maritime Corporation and/or Conrado N. Dela Cruz and ODF Jell ASA filed an appeal with the NLRC, alleging serious
errors in the factual findings of the Labor Arbiter.

NLRC made the following findings:

143
 By way of a contrary medical finding, assail the diagnosis arrived at by the company designated physician, Dr. Natalio G. Alegre
II. As noted, the findings of Dr. Efren Vicaldo, complainant’s private physician, and those of Dr. Alegre, bear consistency with
each other save for his hypertensive condition. Above all these, complainant’s credibility suffered a serious setback when he
declared that he was seen by Dr. Alegre only twice and that there was no treatment given to him since repatriation (Records,
pp. 88-89). Records belie such assertion. Copies of the medical reports accomplished by the company accredited physician
would show that he was examined and treated by the latter for no less than eight (8) times (Records, pp. 128-135).

ISSUE: Whether or not it is the company designated physician or a private physician who should determine the disability grading or
fitness of a seafarer.

SC RULING: As gleaned therefrom, complainant was placed under the care and supervision of Dr. Alegre for about ninety (90) days, his
admission at St. Luke’s Medical Center being on 13 October 2003 and with his discharge being had only on 11 November 2003.

NLRC rendered a decision reversing that of the Labor Arbiter and dismissed respondent’s complaint for lack of merit. Under the POEA
Standard Employment Contract (Article 1159, Civil Code of the Philippines).

Court of Appeals rendered the herein challenged Decision setting aside the decision of the NLRC and reinstating that of the labor arbiter.
That the company-designated physician did declare that petitioner is fit to sea duty should not prejudice petitioner’s claim for disability
benefits. In the first instance, it is well to note that there is doubt and question as to the accuracy of the declaration of the Dr. Alegre’s
“cleared to work resumption as seafarer.” Such certification should not be taken as the only primary consideration, especially when there
is contra finding by another doctor giving doubt to the findings of the company-designated physician.

As held in the case of Wallem Maritime Services, Inc. vs. NLRC, “opinions of petitioner’s doctor to this effect should not be given
evidentiary weight as they are palpably self-serving and biased in favor of petitioners, and certainly could not be considered independent.”

Petitioner having substantially established that he could not able to perform the same work as he used to before his repatriation, and was
found both by his independent physician and Gleneagles Hospital in Singapore suffering from severe hypertension as well as other
diagnosed illnesses which were contracted as a result of his exposure to the risks involved in the performance of his job, we find the
NLRC to have acted in grave abuse of discretion in reversing and setting aside the decision of the Labor Arbiter awarding disability claims
to petitioner.

The POEA Contract is clear in its provisions when it provided who should determine the disability grading or fitness to work of seafarers.
The POEA contract recognizes only the disability grading provided by the company-designated physicians. Section 20 B.3 of the POEA
contract provides:

Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to his basic wage
until he is declared fit to work or the degree of permanent disability has been assessed by the company-designated physician
but in no case shall exceed one hundred twenty (120) days.

For this purpose the seafarer shall 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 of the seafarer to comply with the mandatory
reporting requirement shall resort in his forfeiture of the right to claim the above benefits.

Moreover, Section 20 (B), no. 2, paragraph 2 of the POEA Contract provides:

However, if after the 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.

These provisions clearly illustrate that respondent’s disability can only be assessed by the company-designated physician. If the company-
designated physician declares him fit to work, then the seaman is bound by such declaration. Further, it should be noted that the claim
for sickness and permanent disability benefits arose from the stipulations in the standard format contract of employment pursuant to a
circular of the POEA. Such circular was intended for all parties involved in the employment of Filipino seamen on board any ocean-going
vessel. The POEA Contract, of which the parties are both signatories, is the law between them and as such, its provisions bind both of
them. Thus, the parties are both bound by the provisions of the POEA Contract which declares that the degree of disability or fitness to
work of a seafarer should be assessed by the company-designated physician.

In German Marine Agencies v. NLRC, [8] the Court explicitly laid that it is the company-designated physician who should determine the
degree of disability of the seaman or his fitness to work, thus: 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. 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.
144
Again, in Benjamin L. Sarocam v. Interorient Maritime Ent., Inc., and Demaco United Ltd, [9] the Court ruled that the opinion of the
company-designated physician should be upheld over that of the doctors appointed by the seafarer considering that the basis of the
findings of the seafarer’s doctor are the medical findings of the company physician.

Undoubtedly, jurisprudence is replete with pronouncements that it is the company-designated physician’s findings which should form the
basis of any disability claim of the seafarer. In this particular case, respondent refused to accept the assessment made by the company-
designated physician that he is fit to work.

Under the Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessel or the POEA
Contract issued pursuant to DOLE Department Order No. 4 and POEA Memorandum Circular No. 9, both Series of 2000, respondent
could not disregard the findings of the company-designated physician. Section 20-B, paragraph 3 of the POEA Contract provides: “It is
beyond cavil that it is the company-designated physician who is entrusted with the task of assessing the seaman’s disability.”

But under the aforecited provision, when the seaman’s private physician disagrees with the assessment of the company-designated
physician, as here, a third doctor’s opinion may be availed of in determining his disability. This however was not resorted to by the parties.
As such, the credibility of the findings of their respective doctors was properly evaluated by the NLRC.

The Court has applied the Labor Code concept of permanent total disability to the case of seafarers. In a catena of cases, the Court
declared that disability should not be understood more on its medical significance but on the loss of earning capacity. Permanent total
disability means disablement of an employee to earn wages in the same kind of work, or work of similar nature that he was trained for or
accustomed to perform, or any kind of work which a person of his mentality and attainment could do. In addition, the Court in GSIS v.
Cadiz and Ijares v. CA held that permanent disability is the inability of a worker to perform his job for more than 120 days, regardless of
whether or not he loses the use of any part of his body.

The company-designated physician cleared respondent for work resumption upon finding that his infection has subsided after successful
medication. We agree with the NLRC that the doctor more qualified to assess the disability grade of the respondent seaman is the doctor
who regularly monitored and treated him. The company-designated physician possessed personal knowledge of the actual condition of
respondent. Since the company-designated physician in this case deemed the respondent as fit to work, then such declaration should be
given credence, considering the amount of time and effort the company doctor gave to monitoring and treating respondent’s condition. It
is undisputed that the recommendation of Dr. Vicaldo was based on a single medical report which outlined the alleged findings and
medical history of respondent despite the fact that Dr. Vicaldo treated or examined respondent only once.

On the other hand, the company-designated physician outlined the progress of respondent’s successful treatment over a period of several
months in several reports, as can be gleaned from the record. As between the findings of the company-designated physician (Dr. Alegre)
and the physician appointed by respondent (Dr. Vicaldo), the former deserves to be given greater evidentiary weight.

All told, the Court finds and so rules that the CA committed reversible error in ignoring the medical assessment of the company-designated
physician that respondent was cleared for work resumption as a seafarer and granting respondent’s claim for disability on the basis of a
single medical examination report of respondent’s appointed physician contrary to the clear, unambiguous provisions regarding disability
benefit claims contained in the POEA Contract between the parties.

WHEREFORE, the instant petition is GRANTED. The assailed decision of the Court of Appeals in CA-G.R. SP No. 97098 is REVERSED
and SET ASIDE. The decision of the NLRC, 2nd Division, is hereby REINSTATED. SO ORDERED.

Antonio M. Serrano vs. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.
[GR No. 167614 March 24, 2009]

Facts: Sailor Antonio Serrano entered into a 12-month overseas employment contract with respondents Gallant Maritime Services, Inc.
and Marlow Navigation Co., Ltd., initially signing up for the position of Chief Officer. Sailor Serrano, however, was persuaded to submit to
a “downgraded” contract as Second Officer, on the assurance of eventual promotion to Chief Officer by the end of the following month.
Having wandered around respondents’ ship for more than two months without being granted any promotion whatsoever, “he refused to
stay on as Second Officer and was repatriated back to the Philippines,” with still nine (9) months and twenty- three (23) days left unserved.
Sailor Serrano afterwards filed a complaint with the Labor Arbiter, charging respondents with constructive dismissal and demanding that
he be paid the salary as corresponds to the remaining term of his contract. The Arbiter ruled for him, concluding that there was illegal
dismissal; however, Sailor Serrano was only awarded with salary equivalent to 3 months. The Arbiter relied on Section 10, parag. 5 of
R.A. 8042 (the Migrant Workers and Overseas Filipino Act of 1995), which puts forth that—

“In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers
shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is
less”.

Gritty, our man now condemns the provision as unconstitutional, wailing how it “impairs the terms of their contract, deprives them of
equal protection and denies them due process.”

145
SC Ruling: Though it scoffed at the argument that the law unduly impairs their contract—enacted in 1995, the law is thus deemed read
into the agreement forged between the parties in 1998— the Court, with straitlaced hesitation, declared the assailed clause “for three
(3) months for every year of the unexpired term, whichever is less” unconstitutional, in that it did deny workers in similar
situations (particularly OFWs) the right to equal protection and due process.

“…the subject clause creates a sub-layer of discrimination among OFWs** …those who are illegally dismissed with less than one year
left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with
one year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries
for three months only.”

Further magnifying the clause’s incompatibility with the right to equal protection of laws is the fact that it deprives overseas workers of a
benefit granted without exception to domestic workers (the right to recover in cases of illegal dismissal the salary for the entire unexpired
portion of the contract), with the government not being able to prove any compelling state interest warranting such damaging
discrimination. As a matter of fact, before the law’s enactment, both domestic and overseas workers enjoyed the same right.

“...the subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who
are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts,
but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one classification of
OFWs and burdens it with a peculiar disadvantage.”

Bravo, sailor.

Becmen Service Exporter and Promotion Inc., vs Spouses Cuaresma, GR Nos. 182978-79 & 184298-99, april 7, 2009

FACTS: On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and Promotion, Inc. (Becmen) to
serve as assistant nurse in Al-Birk Hospital in the Kingdom of Saudi Arabia (KSA), for a contract duration of three years, with a
corresponding salary of US$247.00 per month. Over a year later, she died allegedly of poisoning. Jessie Fajardo, a co-worker of Jasmin,
narrated that on June 21, 1998, Jasmin was found dead by a female cleaner lying on the floor inside her dormitory room with her mouth
foaming and smelling of poison.

Based on the police report and the medical report of the examining physician of the Al-Birk Hospital, who conducted an autopsy of
Jasmin’s body, the likely cause of her death was poisoning.

Jasmin’s body was repatriated to Manila on September 3, 1998. The following day, the City Health Officer of Cabanatuan City conducted
an autopsy and the resulting medical report indicated that Jasmin died under violent circumstances, and not poisoning as originally found
by the KSA examining physician. The toxicology report of the NBI, however, tested negative for non-volatile, metallic poison and
insecticides.

Simplicio and Mila Cuaresma (the Cuaresmas), Jasmin’s parents and her surviving heirs, received from the Overseas Workers Welfare
Administration (OWWA) the following amounts: P50,000.00 for death benefits; P50,000.00 for loss of life; P20,000.00 for funeral
expenses; and P10,000.00 for medical reimbursement.

On November 22, 1999, the Cuaresmas filed a complaint against Becmen and its principal in the KSA, Rajab & Silsilah Company (Rajab),
claiming death and insurance benefits, as well as moral and exemplary damages for Jasmin’s death, Jasmin’s death was work-related,
having occurred at the employer’s premises; that under Jasmin’s contract with Becmen, she is entitled to “iqama insurance” coverage;
that Jasmin is entitled to compensatory damages in the amount of US$103,740.00, which is the sum total of her monthly salary of
US$247.00 per month under her employment contract, multiplied by 35 years (or the remaining years of her productive life had death not
supervened at age 25, assuming that she lived and would have retired at age 60).

In their position paper, Becmen and Rajab insist that Jasmin committed suicide, citing a prior unsuccessful suicide attempt sometime in
March or April 1998 and relying on the medical report of the examining physician of the Al-Birk Hospital. They likewise deny liability
because the Cuaresmas already recovered death and other benefits totaling P130,000.00 from the OWWA. They insist that the
Cuaresmas are not entitled to “iqama insurance” because this refers to the “issuance” – not insurance – of iqama, or residency/work
permit required in the KSA. On the issue of moral and exemplary damages, they claim that the Cuaresmas are not entitled to the same
because they have not acted with fraud, nor have they been in bad faith in handling Jasmin’s case.

While the case was pending, Becmen filed a manifestation and motion for substitution alleging that Rajab terminated their agency
relationship and had appointed White Falcon Services, Inc. (White Falcon) as its new recruitment agent in the Philippines. Thus, White
Falcon was impleaded as respondent as well, and it adopted and reiterated Becmen’s arguments in the position paper it subsequently
filed.

ISSUES:
(1) whether the Cuaresmas are entitled to monetary claims, by way of benefits and damages, for the death of their daughter Jasmin.
(2) whether or not Jasmin’s death be considered as work-connected and thus compensable even while she was not on duty;

HELD: Article 19 of the Civil Code provides that every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith. Article 21 of the Code states that any person who wilfully
146
causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the
damage. And, lastly, Article 24 requires that in all contractual, property or other relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for
his protection.

Clearly, Rajab, Becmen and White Falcon’s acts and omissions are against public policy because they undermine and subvert the interest
and general welfare of our OFWs abroad, who are entitled to full protection under the law. They set an awful example of how foreign
employers and recruitment agencies should treat and act with respect to their distressed employees and workers abroad. Their shabby
and callous treatment of Jasmin’s case; their uncaring attitude; their unjustified failure and refusal to assist in the determination of the
true circumstances surrounding her mysterious death, and instead finding satisfaction in the unreasonable insistence that she committed
suicide just so they can conveniently avoid pecuniary liability; placing their own corporate interests above of the welfare of their employee’s
– all these are contrary to morals, good customs and public policy, and constitute taking advantage of the poor employee and her family’s
ignorance, helplessness, indigence and lack of power and resources to seek the truth and obtain justice for the death of a loved one.

Giving in handily to the idea that Jasmin committed suicide, and adamantly insisting on it just to protect Rajab and Becmen’s material
interest – despite evidence to the contrary – is against the moral law and runs contrary to the good custom of not denouncing one’s
fellowmen for alleged grave wrongdoings that undermine their good name and honor.

Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract
stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection
to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between
workers and employers. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that laws which have for
their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by
determinations or conventions agreed upon in a foreign country.

The relations between capital and labor are so impressed with public interest,and neither shall act oppressively against the other, or
impair the interest or convenience of the public. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of
the safety and decent living for the laborer.

The grant of moral damages to the employee by reason of misconduct on the part of the employer is sanctioned by Article 2219 (10) of
the Civil Code, which allows recovery of such damages in actions referred to in Article 21.

Thus, in view of the foregoing, the Court holds that the Cuaresmas are entitled to moral damages, which Becmen and White Falcon are
jointly and solidarily liable to pay, together with exemplary damages for wanton and oppressive behavior, and by way of example for the
public good.

On the second issue:

While the “employer’s premises” may be defined very broadly not only to include premises owned by it, but also premises it leases, hires,
supplies or uses, we are not prepared to rule that the dormitory wherein Jasmin stayed should constitute employer’s premises as would
allow a finding that death or injury therein is considered to have been incurred or sustained in the course of or arose out of her employment.
There are certainly exceptions, but they do not appear to apply here. Moreover, a complete determination would have to depend on the
unique circumstances obtaining and the overall factual environment of the case, which are here lacking.

WHEREFORE, Rajab & Silsilah Company, White Falcon Services, Inc., Becmen Service Exporter and Promotion, Inc., and their corporate
directors and officers are found jointly and solidarily liable and ORDERED to indemnify the heirs of Jasmin Cuaresma, spouses Simplicio
and Mila Cuaresma, the following amounts:

(1) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as moral damages;

(2) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as exemplary damages;

(3) Attorney’s fees equivalent to ten percent (10%) of the total monetary award.

People of the Philippines vs. Larry “Lauro” Domingo GR No. 181475 April 07, 2009

FACTS: Larry "Lauro" Domingo was accused of the crime of illegal recruitment for recruiting and/or placing several workers under local
or overseas employment despite being a non-licensee or non-holder of authority from the Department of Labor and Employment. This
offense involved economic sabotage, as it was committed in large scale.

Informations for 23 counts of Estafa were also filed. All of which were similarly worded but varying with respect to the name of each
complainant and the amount which each purportedly gave to appellant.

Of the 23 complainants, only five testified. One complainant later recanted his testimony. The substance of their respective testimonies
state that Domingo deceived the complainants by assuring them of employment abroad provided that they submit certain documents
147
and pay the required placement fee and that complainants paid appellant the amount he asked on account of appellant’s representations
which turned out to be false.

By Joint Decision dated October 19, 2004, the trial court found appellant guilty beyond reasonable doubt of Illegal Recruitment (Large
Scale) and of 2 counts of Estafa.

The appellate court affirmed the trial court’s decision holding that the straightforward and consistent testimonies of the complaining
witnesses sufficiently supported the trial court’s conclusion that appellant undertook recruitment activities beginning September up to
December 1999 in Malolos, Bulacan without the license therefor, and failed to deploy those he recruited. As for the estafa cases, the
appellate court held that the elements constituting the crime were sufficiently established.

Hence, the present appeal.

SC RULING: The appeal is bereft of merit. The term "recruitment and placement" is defined under Article 13(b) of the Labor Code of the
Philippines as follows:

(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring
workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit
or not. Provided, That any person or entity which, in any manner, offers or promises for a fee employment to two or more persons
shall be deemed engaged in recruitment and placement. (Emphasis supplied)

On the other hand, Article 38, paragraph (a) of the Labor Code, as amended, under which the accused stands charged, provides:

Art. 38. Illegal Recruitment—

(a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of this Code, to be
undertaken by non-licensees or non-holders of authority shall be deemed illegal and punishable under Article 39 of this
Code. The Ministry of Labor and Employment or any law enforcement officer may initiate complaints under this Article.

(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving
economic sabotage and shall be penalized in accordance with Article 39 hereof.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or
confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first
paragraph hereof. Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons
individually or as a group. (Emphasis supplied)

From the foregoing provisions, it is clear that any recruitment activities to be undertaken by non-licensee or non-holder of authority shall
be deemed illegal and punishable under Article 39 of the Labor Code of the Philippines. Illegal recruitment is deemed committed in large
scale if committed against three (3) or more persons individually or as a group.

To prove illegal recruitment in large scale, the prosecution must prove three essential elements, to wit: (1) the person charged undertook
a recruitment activity under Article 13(b) or any prohibited practice under Article 34 of the Labor Code; (2) he/she did not have the license
or the authority to lawfully engage in the recruitment and placement of workers; and (3) he/she committed the prohibited practice against
three or more persons individually or as a group.

The Court finds that the prosecution ably discharged its onus of proving the guilt beyond reasonable doubt of appellant of the crimes
charged.
That no receipt or document in which appellant acknowledged receipt of money for the promised jobs was adduced in evidence does not
free him of liability. For even if at the time appellant was promising employment no cash was given to him, he is still considered as having
been engaged in recruitment activities, since Article 13(b) of the Labor Code states that the act of recruitment may be for profit or not. It
suffices that appellant promised or offered employment for a fee to the complaining witnesses to warrant his conviction for illegal
recruitment.

That one of the original complaining witnesses, Cabigao, later recanted, via an affidavit and his testimony in open court, does not
necessarily cancel an earlier declaration. Like any other testimony, the same is subject to the test of credibility and should be received
with caution. For a testimony solemnly given in court should not be set aside lightly, least of all by a mere affidavit executed after the
lapse of considerable time. In the case at bar, the Affidavit of Recantation was executed three years after the complaint was filed. It is
thus not unreasonable to consider his retraction an afterthought to deny its probative value.

AT ALL EVENTS, the Court finds that the prosecution evidence consisting of the testimonies of the four complainants, whose credibility
has not been impaired, has not been overcome.

WHEREFORE, the petition is DENIED.

148
ATCI Overseas Corp. et. al., vs Echin GR No. 178551, Oct. 11, 2010

Foreign law; burden of proof; processual presumption. As to petitioners’ contentions that Philippine labor laws on probationary
employment are not applicable since it was expressly provided in respondent’s employment contract, which she voluntarily entered into,
that the terms of her engagement shall be governed by prevailing Kuwaiti Civil Service Laws and Regulations as in fact POEA Rules
accord respect to such rules, customs and practices of the host country, the same was not substantiated. Indeed, a contract freely entered
into is considered the law between the parties who can establish stipulations, clauses, terms and conditions as they may deem convenient,
including the laws which they wish to govern their respective obligations, as long as they are not contrary to law, morals, good customs,
public order or public policy. It is hornbook principle, however, that the party invoking the application of a foreign law has the burden of
proving the law, under the doctrine of processual presumption which, in this case, petitioners failed to discharge. The Court’s ruling in
EDI-Staffbuilders Int’l., v. NLRC illuminates:

In the present case, the employment contract signed by Gran specifically states that Saudi Labor Laws will govern matters not
provided for in the contract (e.g. specific causes for termination, termination procedures, etc.). Being the law intended by the
parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should govern all matters relating to the termination of
the employment of Gran.

In international law, the party who wants to have a foreign law applied to a dispute or case has the burden of proving the foreign
law. The foreign law is treated as a question of fact to be properly pleaded and proved as the judge or labor arbiter cannot take
judicial notice of a foreign law. He is presumed to know only domestic or forum law.

Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the International Law doctrine of
presumed-identity approach or processual presumption comes into play. Where a foreign law is not pleaded or, even if pleaded,
is not proved, the presumption is that foreign law is the same as ours. Thus, we apply Philippine labor laws in determining the
issues presented before us. (emphasis and underscoring supplied)

Foreign law; no judicial notice of foreign law. The Philippines does not take judicial notice of foreign laws, hence, they must not only
be alleged; they must be proven. To prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24
and 25 of Rule 132 of the Revised Rules of Court which reads:

SEC. 24. Proof of official record. — The record of public documents referred to in paragraph (a) of Section 19, when admissible
for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody
of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer
has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of the
embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. (emphasis
supplied)

SEC. 25. What attestation of copy must state. — Whenever a copy of a document or record is attested for the purpose of the
evidence, the attestation must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as
the case may be. The attestation must be under the official seal of the attesting officer, if there be any, or if he be the clerk of a
court having a seal, under the seal of such court.

To prove the Kuwaiti law, petitioners submitted the following:

(1) MOA between respondent and the Ministry, as represented by ATCI, which provides that the employee is subject to a
probationary period of one (1) year and that the host country’s Civil Service Laws and Regulations apply;

(2) a translated copy (Arabic to English) of the termination letter to respondent stating that she did not pass the probation terms,
without specifying the grounds therefor, and a translated copy of the certificate of termination, both of which documents were
certified by Mr. Mustapha Alawi, Head of the Department of Foreign Affairs-Office of Consular Affairs Inslamic Certification and
Translation Unit; and

(3) respondent’s letter of reconsideration to the Ministry, wherein she noted that in her first eight (8) months of employment,
she was given a rating of “Excellent” albeit it changed due to changes in her shift of work schedule.

These documents, whether taken singly or as a whole, do not sufficiently prove that respondent was validly terminated as a probationary
employee under Kuwaiti civil service laws. Instead of submitting a copy of the pertinent Kuwaiti labor laws duly authenticated and
translated by Embassy officials thereat, as required under the Rules, what petitioners submitted were mere certifications attesting only to
the correctness of the translations of the MOA and the termination letter which does not prove at all that Kuwaiti civil service laws differ
from Philippine laws and that under such Kuwaiti laws, respondent was validly terminated. Thus the subject certifications read:

This is to certify that the herein attached translation/s from Arabic to English/Tagalog and or vice versa was/were presented to
this Office for review and certification and the same was/were found to be in order. This Office, however, assumes no
responsibility as to the contents of the document/s.

149
 This certification is being issued upon request of the interested party for whatever legal purpose it may serve. (emphasis
supplied)

Skippers United Pacific vs Doza GR No. 175558, February 8, 2012

FACTS: Skippers United Pacific, Inc. deployed, in behalf of Skippers, De Gracia, Lata, and Aprosta to work on board the vessel MV
Wisdom Star, under the following terms and conditions:

Name: Napoleon O. De Gracia

Position: 3rd Engineer
Contract Duration: 10 months
Basic Monthly Salary: US$800.00
Contract Date: 17 July 1998 14

Name: Isidro L. Lata

Position: 4th Engineer
Contract Duration: 12 months
Basic Monthly Salary: US$600.00
Contract Date: 17 April 1998 15

Name: Charlie A. Aprosta

Position: Third Officer
Contract Duration: 12 months
Basic Monthly Salary: US$600.00
Contract Date: 17 April 1998 16

Paragraph 2 of all the employment contracts stated that: "The terms and conditions of the Revised Employment Contract Governing the
Employment of All Seafarers approved per Department Order No. 33 and Memorandum Circular No. 55, both series of 1996 shall be
strictly and faithfully observed." 17 No employment contract was submitted for Nathaniel Doza.

De Gracia, et al., claimed that Skippers failed to remit their respective allotments for almost five months, compelling them to air their
grievances with the Romanian Seafarers Free Union. 18 On 16 December 1998, ITF Inspector Adrian Mihalcioiu of the Romanian
Seafarers Union sent Captain Savvas of Cosmos Shipping a fax letter, relaying the complaints of his crew, namely: home allotment delay,
unpaid salaries (only advances), late provisions, lack of laundry services (only one washing machine), and lack of maintenance of the
vessel (perforated and unrepaired deck). 19 To date, however, Skippers only failed to remit the home allotment for the month of December
1998. 20 On 28 January 1999, De Gracia, et al. were unceremoniously discharged from MV Wisdom Stars and immediately repatriated.
21 Upon arrival in the Philippines, De Gracia, et al. filed a complaint for illegal dismissal with the Labor Arbiter on 4 April 1999 and prayed
for payment of their home allotment for the month of December 1998, salaries for the unexpired portion of their contracts, moral damages,
exemplary damages, and attorney's fees. 22

Skippers, on the other hand, claims that at around 2:00 a.m. on 3 December 1998, De Gracia, smelling strongly of alcohol, went to the
cabin of Gabriel Oleszek, Master of MV Wisdom Stars, and was rude, shouting noisily to the master.23 De Gracia left the master's cabin
after a few minutes and was heard shouting very loudly somewhere down the corridors. 24 This incident was evidenced by the Captain's
Report sent via telex to Skippers on said date. 25

Skippers also claims that at 12:00 noon on 22 January 1999, four Filipino seafarers, namely Aprosta, De Gracia, Lata and Doza, arrived
in the master's cabin and demanded immediate repatriation because they were not satisfied with the ship.26 De Gracia, et al. threatened
that they may become crazy any moment and demanded for all outstanding payments due to them. 27 This is evidenced by a telex of
Cosmoship MV Wisdom to Skippers, which however bears conflicting dates of 22 January 1998 and 22 January 1999. 28

Skippers also claims that, due to the disembarkation of De Gracia, et al., 17 other seafarers disembarked under abnormal circumstances.
29 For this reason, it was suggested that Polish seafarers be utilized instead of Filipino seamen. 30 This is again evidenced by a fax of
Cosmoship MV Wisdom to Skippers, which bears conflicting dates of 24 January 1998 and 24 January 1999. 31

Skippers, in its Position Paper, admitted non-payment of home allotment for the month of December 1998, but prayed for the offsetting
of such amount with the repatriation expenses in the following manner:

Seafarer Repatriation Expense / Home Allotment = Balance

De Gracia: US$1,340.00 / US$900.00 = US$440.00
Aprosta: US$1,340.00 / US$600.00 = US$740.00
Lata: US$1,340.00 / US$600.00 = US$740.00

Since De Gracia, et al., pre-terminated their contracts, Skippers claims they are liable for their repatriation expenses 33in accordance
with Section 19 (G) of Philippine Overseas Employment Administration (POEA) Memorandum Circular No. 55, series of 1996 which
states:

150
 G. A seaman who requests for early termination of his contract shall be liable for his repatriation cost as well as the
transportation cost of his replacement. The employer may, in case of compassionate grounds, assume the
transportation cost of the seafarer's replacement.

Skippers also prayed for payment of moral damages and attorney's fees. 34

The Decision of the Labor Arbiter

The Labor Arbiter rendered his Decision on 18 February 2002, with its dispositive portion declaring:

WHEREFORE, judgment is hereby rendered dismissing herein action for lack of merit. Respondents' claim for
reimbursement of the expenses they incurred in the repatriation of complainant Nathaniel Doza is likewise dismissed.

SO ORDERED. 35

The Labor Arbiter dismissed De Gracia, et al.'s complaint for illegal dismissal because the seafarers voluntarily pre-terminated their
employment contracts by demanding for immediate repatriation due to dissatisfaction with the ship. 36The Labor Arbiter held that such
voluntary pre-termination of employment contract is akin to resignation, 37 a form of termination by employee of his employment contract
under Article 285 of the Labor Code. The Labor Arbiter gave weight and credibility to the telex of the master of the vessel to Skippers,
claiming that De Gracia, et al. demanded for immediate repatriation. 38 Due to the absence of illegal dismissal, De Gracia, et al.'s claim
for salaries representing the unexpired portion of their employment contracts was dismissed. 39

The Labor Arbiter also dismissed De Gracia et al.'s claim for home allotment for December 1998. 40 The Labor Arbiter explained that
payment for home allotment is "in the nature of extraordinary money where the burden of proof is shifted to the worker who must prove
he is entitled to such monetary benefit." 41 Since De Gracia, et al., were not able to prove their entitlement to home allotment, such claim
was dismissed. 42

Lastly, Skippers' claim for reimbursement of repatriation expenses was likewise denied, since Article 19 (G) of POEA Memorandum
Circular No. 55, Series of 1996 allows the employer, in case the seafarer voluntarily pre-terminates his contract, to assume the repatriation
cost of the seafarer on compassionate grounds. 43

The Decision of the NLRC

The NLRC, on 28 October 2002, dismissed De Gracia, et al.'s appeal for lack of merit and affirmed the Labor Arbiter's decision. 44 The
NLRC considered De Gracia, et al.'s claim for home allotment for December 1998 unsubstantiated, since home allotment is a benefit
which De Gracia, et al., must prove their entitlement to. 45 The NLRC also denied the claim for illegal dismissal because De Gracia, et
al., were not able to refute the telex received by Skippers from the vessel's master that De Gracia, et al., voluntarily pre-terminated their
contracts and demanded immediate repatriation due to their dissatisfaction with the ship's operations. 46

The Decision of the Court of Appeals

The CA, on 5 July 2006, granted De Gracia, et al.'s petition and reversed the decisions of the Labor Arbiter and NLRC, its dispositive
portion reading as follows:

WHEREFORE, the instant petition for certiorari is GRANTED. The Resolution dated October 28, 2002 and the Order
dated August 31, 2004 rendered by the public respondent NLRC are ANNULLED and SET ASIDE. Let another
judgment be entered holding private respondents jointly and severally liable to petitioners for the payment of:

1.Unremitted home allotment pay for the month of December, 1998 or the equivalent thereof in Philippine
pesos:
a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00

2.Salary for the unexpired portion of the employment contract or for 3 months for every year of the unexpired
term, whichever is less, or the equivalent thereof in Philippine pesos:
a. De Gracia = US$2,400.00
b. Lata = US$1,800.00
c. Aprosta = US$1,800.00

3.Attorney's fees and litigation expenses equivalent to 10% of the total claims.

SO ORDERED. 47

151
The CA declared the Labor Arbiter and NLRC to have committed grave abuse of discretion when they relied upon the telex messag e of
the captain of the vessel stating that De Gracia, et al., voluntarily pre-terminated their contracts and demanded immediate repatriation.
48 The telex message was "a self-serving document that does not satisfy the requirement of substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as adequate to justify the conclusion that petitioners indeed voluntarily
demanded their immediate repatriation." 49 For this reason, the repatriation of De Gracia, et al., prior to the expiration of their contracts
showed they were illegally dismissed from employment. 50 DaIACS

In addition, the failure to remit home allotment pay was effectively admitted by Skippers, and prayed to be offset from the repatriation
expenses. 51 Since there is no proof that De Gracia, et al., voluntarily pre-terminated their contracts, the repatriation expenses are for
the account of Skippers, and cannot be offset with the home allotment pay for December 1998. 52

No relief was granted to Doza due to lack of factual basis to support his petition. 53 Attorney's fees equivalent to 10% of the total claims
was granted since it involved an action for recovery of wages or where the employee was forced to litigate and incur expenses to protect
his rights and interest. 54

The Issues

Skippers, in its Petition for Review on Certiorari, assigned the following errors in the CA Decision:

a) The Court of Appeals seriously erred in not giving due credence to the master's telex message showing that the
respondents voluntarily requested to be repatriated.

b) The Court of Appeals seriously erred in finding petitioners liable to pay backwages and the alleged unremitted
home allotment pay despite the finding of the Labor Arbiter and the NLRC that the claims are baseless.

c) The Court of Appeals seriously erred in awarding attorney's fees in favor of respondents despite its findings that
the facts attending in this case do not support the claim for moral and exemplary damages. 55

The Ruling of this Court

We deny the petition and affirm the CA Decision, but modify the award.

For a worker's dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality of the
manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive due process. 56

Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish the
employee with two written notices before the termination of employment can be effected: (1) the first notice apprises the employee of the
particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the employee of the employer's decision
to dismiss him. Before the issuance of the second notice, the requirement of a hearing must be complied with by giving the worker an
opportunity to be heard. It is not necessary that an actual hearing be conducted. 57

Substantive due process, on the other hand, requires that dismissal by the employer be made under a just or authorized cause under
Articles 282 to 284 of the Labor Code.

In this case, there was no written notice furnished to De Gracia, et al., regarding the cause of their dismissal. Cosmoship furnished a
written notice (telex) to Skippers, the local manning agency, claiming that De Gracia, et al., were repatriated because the latter voluntarily
pre-terminated their contracts. This telex was given credibility and weight by the Labor Arbiter and NLRC in deciding that there was pre-
termination of the employment contract "akin to resignation" and no illegal dismissal. However, as correctly ruled by the CA, the telex
message is "a biased and self-serving document that does not satisfy the requirement of substantial evidence." If, indeed, De Gracia, et
al., voluntarily pre-terminated their contracts, then De Gracia, et al., should have submitted their written resignations.

Article 285 of the Labor Code recognizes termination by the employee of the employment contract by "serving written notice on the
employer at least one (1) month in advance." Given that provision, the law contemplates the requirement of a written notice of resignation.
In the absence of a written resignation, it is safe to presume that the employer terminated the seafarers. In addition, the telex message
relied upon by the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and 22 January 1999, giving doubt to the veracity
and authenticity of the document. In 22 January 1998, De Gracia, et al., were not even employed yet by the foreign principal. For these
reasons, the dismissal of De Gracia, et al., was illegal.

On the issue of home allotment pay, Skippers effectively admitted non-remittance of home allotment pay for the month of December 1998
in its Position Paper. Skippers sought the repatriation expenses to be offset with the home allotment pay. However, since De Gracia, et
al.'s dismissal was illegal, their repatriation expenses were for the account of Skippers and could not be offset with the home allotment
pay.

Contrary to the claim of the Labor Arbiter and NLRC that the home allotment pay is in "the nature of extraordinary money where the
burden of proof is shifted to the worker who must prove he is entitled to such monetary benefit," Section 8 of POEA Memorandum Circular
No. 55, series of 1996, states that the allotment actually constitutes at least eighty percent (80%) of the seafarer's salary:
152
 The seafarer is required to make an allotment which is payable once a month to his designated allottee in the
Philippines through any authorized Philippine bank. The master/employer/agency shall provide the seafarer with
facilities to do so at no expense to the seafarer. The allotment shall be at least eighty percent (80%)of the seafarer's
monthly basic salary including backwages, if any. (Emphasis supplied)

Paragraph 2 of the employment contracts of De Gracia, Lata and Aprosta incorporated the provisions of above Memorandum Circular
No. 55, series of 1996, in the employment contracts. Since said memorandum states that home allotment of seafarers actually constitutes
at least eighty percent (80%) of their salary, home allotment pay is not in the nature of an extraordinary money or benefit, but should
actually be considered as salary which should be paid for services rendered. For this reason, such non-remittance of home allotment pay
should be considered as unpaid salaries, and Skippers shall be liable to pay the home allotment pay of De Gracia, et al., for the month
of December 1998.

Damages

As admitted by Skippers in its Position Paper, the home allotment pay for December 1998 due to De Gracia, Lata and Aprosta is:

Seafarer Home Allotment Pay

De Gracia: US$900.00
Aprosta: US$600.00
Lata: US$600.00

The monthly salary of De Gracia, according to his employment contract, is only US$800.00. However, since Skippers admitted in its
Position Paper a higher home allotment pay for De Gracia, we award the higher amount of home allotment pay for De Gracia in the
amount of US$900.00. Since the home allotment pay can be considered as unpaid salaries, the peso equivalent of the dollar amount
should be computed using the prevailing rate at the time of termination since it was due and demandable to De Gracia, et al., on 28
January 1999.

Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims in cases of unjust termination of employment
contracts:

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.

The Migrant Workers Act provides that salaries for the unexpired portion of the employment contract or three (3) months for every year
of the unexpired term, whichever is less, shall be awarded to the overseas Filipino worker, in cases of illegal dismissal. However, in 24
March 2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co., Inc., 58 the Court, in an En Banc Decision, declared
unconstitutional the clause "or for three months for every year of the unexpired term, whichever is less" and awarded the entire unexpired
portion of the employment contract to the overseas Filipino worker.

On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended Section 10 of the Migrant Workers Act, and once
again reiterated the provision of awarding the unexpired portion of the employment contract or three (3) months for every year of the
unexpired term, whichever is less.

Nevertheless, since the termination occurred on January 1999 before the passage of the amendatory RA 10022, we shall apply RA 8042,
as unamended, without touching on the constitutionality of Section 7 of RA 10022.

The declaration in March 2009 of the unconstitutionality of the clause "or for three months for every year of the unexpired term, whichever
is less" in RA 8042 shall be given retroactive effect to the termination that occurred in January 1999 because an unconstitutional clause
in the law confers no rights, imposes no duties and affords no protection. The unconstitutional provision is inoperative, as if it was not
passed into law at all. 59

As such, we compute the claims as follows:

Seafarer Contract Contract Repatriation Unexpired Monthly

Total Term Date Date Term Salary Claims

De Gracia: 10 months 17 Jul. 1998 - 28 Jan. 1999 3 months & US$800 US$2933.34
20 days
Lata: 12 months 17 Apr. 1998 - 28 Jan. 1999 2 months & US$600
US$1600 20 days
Aprosta: 12 months 17 Apr. 1998 - 28 Jan. 1999 2 months & US$600 US$1600
20 days

153
Given the above computation, we modify the CA's imposition of award, and grant to De Gracia, et al., salaries representing the
unexpired portion of their contracts, instead of salaries for three (3) months.

Article 2219 of the Civil Code of the Philippines provides for recovery of moral damages in certain cases:

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1)A criminal offense resulting in physical injuries;

(2)Quasi-delicts causing physical injuries;
(3)Seduction, abduction, rape, or other lascivious acts;
(4)Adultery or concubinage;
(5)Illegal or arbitrary detention or arrest;
(6)Illegal search;
(7)Libel, slander or any other form of defamation;
(8)Malicious prosecution;
(9)Acts mentioned in Article 309;
(10)Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover
moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this
article, in the order named.

Article 2229 of the Civil Code, on the other hand, provides for recovery of exemplary damages:

Art. 2229.Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory damages.

In this case, we agree with the CA in not awarding moral and exemplary damages for lack of factual basis.

Lastly, Article 2208 of the Civil Code provides for recovery of attorney's fees and expenses of litigation:

Art. 2208.In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1)When exemplary damages are awarded;
(2)When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;
(3)In criminal cases of malicious prosecution against the plaintiff;
(4)In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5)Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim;
(6)In actions for legal support;
(7)In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8)In actions for indemnity under workmen's compensation and employer's liability laws;
(9)In a separate civil action to recover civil liability arising from a crime;
(10)When at least double judicial costs are awarded;
(11)In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

Article 111 of the Labor Code provides for a maximum award of attorney's fees in cases of recovery of wages:
Art. 111. Attorney's fees. —
a. In cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent
to ten percent of the amount of wages recovered.

b. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for
the recovery of wages, attorney's fees which exceed ten percent of the amount of wages recovered.

Since De Gracia, et al., had to secure the services of the lawyer to recover their unpaid salaries and protect their interest, we agree with
the CA's imposition of attorney's fees in the amount of ten percent (10%) of the total claims.

WHEREFORE, we AFFIRM the Decision of the Court of Appeals dated 5 July 2006 with MODIFICATION. Petitioners Skippers United
Pacific, Inc. and Skippers Maritime Services, Inc., Ltd. are jointly and severally liable for payment of the following:

154
 1) Unremitted home allotment pay for the month of December 1998 in its equivalent rate in Philippine Pesos at the time of
termination on 28 January 1999:
a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00

2) Salary for the unexpired portion of the employment contract or its current equivalent in Philippine Pesos:
a. De Gracia = US$2,933.34
b. Lata = US$1,600.00
c. Aprosta = US$1,600.00

3) Attorney's fees and litigation expenses equivalent to 10% of the total claims.

SO ORDERED.

International Management Services vs Logarta GR No. 163657, April 12, 2012

FACTS: This is a petition for review on certiorari assailing the Decision 1 dated January 8, 2004 of the Court of Appeals (CA) in CA-G.R.
SP No. 58739, and the Resolution 2 dated May 12, 2004 denying petitioner's motion for reconsideration.

The factual and procedural antecedents are as follows:

Sometime in 1997, the petitioner recruitment agency, International Management Services (IMS), a single proprietorship owned and
operated by Marilyn C. Pascual, deployed respondent Roel P. Logarta to work for Petrocon Arabia Limited (Petrocon) in Alkhobar,
Kingdom of Saudi Arabia, in connection with general engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi Aramco).
Respondent was employed for a period of two (2) years, commencing on October 2, 1997, with a monthly salary of eight hundred US
Dollars (US$800.00). In October 1997, respondent started to work for Petrocon as Piping Designer for works on the projects of Saudi
Aramco.

Thereafter, in a letter 3 dated December 21, 1997, Saudi Aramco informed Petrocon that for the year 1998, the former is allotting to the
latter a total work load level of 170,850 man-hours, of which 100,000 man-hours will be allotted for cross-country pipeline projects.

However, in a letter 4 dated April 29, 1998, Saudi Aramco notified Petrocon that due to changes in the general engineering services work
forecast for 1998, the man-hours that were formerly allotted to Petrocon is going to be reduced by 40%. DTAcIa

Consequently, due to the considerable decrease in the work requirements of Saudi Aramco, Petrocon was constrained to reduce its
personnel that were employed as piping designers, instrument engineers, inside plant engineers, etc., which totaled to some 73 personnel,
one of whom was respondent.

Thus, on June 1, 1998, Petrocon gave respondent a written notice 5 informing the latter that due to the lack of project works related to
his expertise, he is given a 30-day notice of termination, and that his last day of work with Petrocon will be on July 1, 1998. Petrocon also
informed respondent that all due benefits in accordance with the terms and conditions of his employment contract will be paid to
respondent, including his ticket back to the Philippines.

On June 23, 1998, respondent, together with his co-employees, requested Petrocon to issue them a letter of Intent stating that the latter
will issue them a No Objection Certificate once they find another employer before they leave Saudi Arabia. 6 On June 27, 1998, Petrocon
granted the request and issued a letter of intent to respondent. 7

Before his departure from Saudi Arabia, respondent received his final paycheck 8 from Petrocon amounting SR7,488.57.

Upon his return, respondent filed a complaint with the Regional Arbitration Branch VII, National Labor Relations Commission (NLRC),
Cebu City, against petitioner as the recruitment agency which employed him for employment abroad. In filing the complaint, respondent
sought to recover his unearned salaries covering the unexpired portion of his employment contract with Petrocon on the ground that he
was illegally dismissed.

After the parties filed their respective position papers, the Labor Arbiter rendered a Decision 9 in favor of the respondent, the dispositive
portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Marilyn C. Pascual,
doing business under the name and style International Management Services, to pay the complainant Roel Logarta
the peso equivalent of US$5,600.00 based on the rate at the time of actual payment, as payment of his wages for
the unexpired portion of his contract of employment.

The other claims are dismissed for lack of merit.

So Ordered. 10

155
Aggrieved, petitioner filed an Appeal 11 before the NLRC. On October 29, 1999, the NLRC, Fourth Division, Cebu City rendered a
Decision 12 affirming the decision of the Labor Arbiter, but reduced the amount to be paid by the petitioner, to wit:

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby AFFIRMED with MODIFICATION
reducing the award to only US$4,800.00 or its peso equivalent at the time of payment.

SO ORDERED. 13

Petitioner filed a motion for reconsideration, but it was denied in the Resolution 14 dated April 17, 2000.

Not satisfied, petitioner sought recourse before the CA, 15 arguing that the NLRC gravely abused its discretion:

(a) in holding that while Petrocon's retrenchment was justified, Petrocon failed to observe the legal procedure for a
valid retrenchment when, in fact, Petrocon did observe the legal procedural requirements for a valid
implementation of its retrenchment scheme; and

(b) in making an award under Section 10 of R.A. No. 8042 which is premised on a termination of employment
without just, valid or authorized cause as defined by law or contract, notwithstanding that NLRC itself
found Petrocon's retrenchment to be justified. 16

On January 8, 2004, the CA rendered the assailed Decision dismissing the petition, the decretal portion of which reads:

WHEREFORE, premises considered, the petition is DISMISSED and the impugned Decision dated October 29,
1999 and Resolution dated April 17, 2000 are AFFIRMED. Costs against the petitioner.

SO ORDERED.

In ruling in favor of the respondent, the CA agreed with the findings of the NLRC that retrenchment could be a valid cause to terminate
respondent's employment with Petrocon. Considering that there was a considerable reduction in Petrocon's work allocation from Saudi
Aramco, the reduction of its work personnel was a valid exercise of management prerogative to reduce the number of its personnel,
particularly in those fields affected by the reduced work allocation from Saudi Aramco. However, although there was a valid ground for
retrenchment, the same was implemented without complying with the requisites of a valid retrenchment. Also, the CA concluded that
although the respondent was given a 30-day notice of his termination, there was no showing that the Department of Labor and
Employment (DOLE) was also sent a copy of the said notice as required by law. Moreover, the CA found that a perusal of the check
payroll details would readily show that respondent was not paid his separation pay.

Petitioner filed a motion for reconsideration, but it was denied in the Resolution 18 dated May 12, 2004.

Hence, the petition assigning the following errors:

I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT THE 30-DAY NOTICE TO
DOLE PRIOR TO RETRENCHMENT IS NOT APPLICABLE IN THIS CASE.

II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT RESPONDENT
EMPLOYEE DID NOT CONSENT TO HIS SEPARATION FROM THE PRINCIPAL COMPANY.

III. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT JARIOL VS. IMS IS NOT
APPLICABLE TO THE INSTANT CASE.

IV. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT RESPONDENT DID NOT
RECEIVE THE SEPARATION PAY REQUIRED BY LAW. 19 HAIaEc

Petitioner argues that the 30-day notice of termination, as required in Serrano v. NLRC, 20 is not applicable in the case at bar, considering
that respondent was in fact given the 30-day notice. More importantly, Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas
Filipino Act of 1995 nor its Implementing Rules do not require the sending of notice to the DOLE, 30 days before the effectivity of a
retrenchment of an Overseas Filipino Worker (OFW) based on grounds under Article 283 of the Labor Code.

Petitioner maintains that respondent has consented to his termination, since he raised no objection to his retrenchment and actually
sought another employer during his 30-day notice of termination. Respondent even requested from Petrocon a No Objection Certificate,
which the latter granted to facilitate respondent's application to other Saudi Arabian employers.

Petitioner also posits that the CA should have applied the case of Jariol v. IMS 21 even if the said case was only decided by the NLRC,
a quasi-judicial agency. The said case involved similar facts, wherein the NLRC categorically ruled that employers of OFWs are not
required to furnish the DOLE in the Philippines a notice if they intend to terminate a Filipino employee.

Lastly, petitioner insists that respondent received his separation pay. Moreover, petitioner contends that Section 10 of R.A. No. 8042
does not apply in the present case, since the termination of respondent was due to a just, valid or authorized cause. At best,
156
respondent is only entitled to separation pay in accordance with Article 283 of the Labor Code, i.e., one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher.

On his part, respondent maintains that the CA committed no reversible error in rendering the assailed decision.

The petition is partly meritorious.

Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to cut down costs for operation particularly
on salaries and wages. 22 It is one of the economic grounds to dismiss employees and is resorted by an employer primarily to avoid or
minimize business losses. 23 ISTHED

Retrenchment programs are purely business decisions within the purview of a valid and reasonable exercise of management prerogative.
It is one way of downsizing an employer's workforce and is often resorted to by the employer during periods of business recession,
industrial depression, or seasonal fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program, or introduction of new methods or more efficient machinery or automation. It is a
valid management prerogative, provided it is done in good faith and the employer faithfully complies with the substantive and procedural
requirements laid down by law and jurisprudence. 24

In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW in Saudi Arabia, still both he and his employer
are subject to the provisions of the Labor Code when applicable. The basic policy in this jurisdiction is that all Filipino workers, whether
employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations. 25 In the case of Royal Crown
Internationale v. NLRC, 26 this Court has made the policy pronouncement, thus: SEHaDI

. . . . Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and
social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the
basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers. . . . 27

Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or overseas Filipino worker under Article 283 of
the Labor Code, which provides:

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 operations 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 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 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 closure or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to at least 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 as one (1) whole year.

Thus, retrenchment is a valid exercise of management prerogative subject to the strict requirements set by jurisprudence, to wit:

(1)That the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred,
are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer;

(2)That the employer served written notice both to the employees and to the Department of Labor and Employment
at least one month prior to the intended date of retrenchment;

(3)That the employer pays the retrenched employees separation pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is higher;

(4)That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest
and not to defeat or circumvent the employees' right to security of tenure; and

(5)That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be
retained among the employees, such as status, . . . efficiency, seniority, physical fitness, age, and financial hardship
for certain workers. 28

Applying the above-stated requisites for a valid retrenchment in the case at bar, it is apparent that the first, fourth and fifth requirements
were complied with by respondent's employer. However, the second and third requisites were absent when Petrocon terminated the
services of respondent.

157
As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to retrench its employees in go od faith
and the considerable reduction of work allotments of Petrocon by Saudi Aramco was sufficient basis for Petrocon to reduce the number
of its personnel, thus:

Moreover, from the standard form of employment contract relied upon by the Labor Arbiter, it is clear that unilateral
cancellation (sic) may be effected for "legal, just and valid cause or causes." Clearly, contrary to the Labor Arbiter's
perception, the enumerated causes for employment termination by the employer in the standard form of employment
contract is not exclusive in the same manner that the listed grounds for termination by the employer is not exclusive.
As pointed out above, under Sec. 10 of RA 8042, it is clear that termination of employment may be for just, valid or
authorized cause as defined by law or contract. Retrenchment being indubitably a legal and authorized cause may
be availed of by the respondent. THESAD

From the records, it is clearly shown that there was a drastic reduction in Petrocon's 1998 work allocation from
250,000 man-hours to only 80,000 man-hours. Under these circumstances over which respondent's principal,
Petrocon had no control, it was clearly a valid exercise of management prerogative to reduce personnel particularly
those without projects to work on. To force Petrocon to continue maintaining all its workers even those without
projects is tantamount to oppression. "The determination to cease operation is a prerogative of management which
the state does not usually interfere with as no business or undertaking must be required to continue at a loss simply
because it has to maintain its employees in employment. Such an act would be tantamount to a taking of property
without due process of law. (Industrial Timber Corp. vs. NLRC, 273 SCRA 200) 29

As to complying with the fifth requirement, the CA was correct when it ruled that:

As to the fifth requirement, the NLRC considered the following criteria fair and reasonable in ascertaining who would
be dismissed and who would be retained among the employees:

(i) less preferred status;

(ii) efficiency rating;
(iii) seniority; and
(iv) proof of claimed financial losses.

The primary reason for respondent's termination is lack of work project specifically related to his expertise as piping
designer. Due to the highly specialized nature of Logarta's job, we find that the availability of work and number of
allocated man-hours for pipeline projects are sufficient and reasonable criteria in determining who would be
dismissed and who would be retained among the employees. Consequently, we find the criterion of less preferred
status and efficiency rating not applicable.

The list of terminated employees submitted by Petrocon, shows that other employees, with the same designation as
Logarta's (Piping Designer II), were also dismissed. Terminated, too, were employees designated as Piping Designer
I and Piping Designer. Hence, employees whose job designation involves pipeline works were without bias
terminated.

As to seniority, at the time the notice of termination was given to him, Logarta's employment was eight (8) months,
clearly, he has not accumulated sufficient years to claim seniority. THIcCA

As to proof of claimed financial losses, the NLRC itself has recognized the drastic reduction of Petrocon's work
allocation, thereby necessitating the retrenchment of some of its employees. 30

As for the notice requirement, however, contrary to petitioner's contention, proper notice to the DOLE within 30 days prior to the intended
date of retrenchment is necessary and must be complied with despite the fact that respondent is an overseas Filipino worker. In the
present case, although respondent was duly notified of his termination by Petrocon 30 days before its effectivity, no allegation or proof
was advanced by petitioner to establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent was terminated.
Thus, this requirement of the law was not complied with.

Also, petitioner's contention that respondent freely consented to his dismissal is unsupported by substantial evidence. Respondent's
recourse of finding a new employer during the 30-day period prior to the effectivity of his dismissal and eventual return to the Philippines
is but logical and reasonable under the circumstances. Faced with the eventuality of his termination from employment, it is understandable
for respondent to seize the opportunity to seek for other employment and continue working in Saudi Arabia.

Moreover, petitioner's insistence that the case of Jariol v. IMS should be applied in the present case is untenable. Being a mere decision
of the NLRC, it could not be considered as a precedent warranting its application in the case at bar. Suffice it to state that although Article
8 of the Civil Code 31 recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country, such level
of recognition is not afforded to administrative decisions.32

Anent the proper amount of separation pay to be paid to respondent, petitioner maintains that respondent was paid the appropriate
amount as separation pay. However, a perusal of his Payroll Check Details, 33 clearly reveals that what he received was his compensation
for the month prior to his departure, and hence, was justly due to him as his salary. Furthermore, the amounts which he
158
received as his "End of Contract Benefit" and "Other Earning/Allowances: for July 1998" 34 form part of his wages/salary, as such, cannot
be considered as constituting his separation pay. aSECAD

Verily, respondent is entitled to the payment of his separation pay. However, this Court disagrees with the conclusion of the Labor Arbiter,
the NLRC and the CA, that respondent should be paid his separation pay in accordance with the provision of Section 10 of R.A. No. 8042.
A plain reading of the said provision clearly reveals that it applies only to an illegally dismissed overseas contract worker or a worker
dismissed from overseas employment without just, valid or authorized cause, the pertinent portion of which provides:

Sec. 10.Money Claims. — . . . In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, . . .

In the case at bar, notwithstanding the fact that respondent's termination from his employment was procedurally infirm, having not
complied with the notice requirement, nevertheless the same remains to be for a just, valid and authorized cause, i.e., retrenchment as
a valid exercise of management prerogative. To stress, despite the employer's failure to comply with the one-month notice to the DOLE
prior to respondent's termination, it is only a procedural infirmity which does not render the retrenchment illegal. In Agabon v. NLRC, 35
this Court ruled that when the dismissal is for a just cause, the absence of proper notice should not nullify the dismissal or render it illegal
or ineffectual. Instead, the employer should indemnify the employee for violation of his statutory rights. 36

Consequently, it is Article 283 of the Labor Code and not Section 10 of R.A. No. 8042 that is controlling. Thus, respondent is entitled to
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. Considering that respondent was employed by Petrocon for a period of eight (8) months, he is entitled to receive one (1) month
pay as separation pay. In addition, pursuant to current jurisprudence, 37 for failure to fully comply with the statutory due process of
sufficient notice, respondent is entitled to nominal damages in the amount P50,000.00. AcICTS

WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 8, 2004 and the Resolution dated May 12,
2004 of the Court of Appeals are AFFIRMED with MODIFICATIONS. Petitioner is ORDERED to pay Roel P. Logarta one (1) month salary
as separation pay and P50,000.00 as nominal damages.

SO ORDERED.

Pert/Cpm Manpower Exponent Co., Inc. vs Vinuya et. al. GR No. 197528, September 8, 2012

FACTS: On March 5, 2008, respondents Armando A. Vinuya, Louie M. Ordovez, Arsenio S. Lumanta, Jr., Robelito S. Anipan, Virgilio R.
Alcantara, Marino M. Era, Sandy O. Enjambre and Noel T. Ladea (respondents) filed a complaint for illegal dismissal against the petitioner
Pert/CPM Manpower Exponent Co., Inc. (agency), and its President Romeo P. Nacino.

The respondents alleged that the agency deployed them between March 29, 2007 and May 12, 2007 to work as aluminum
fabricator/installer for the agency's principal, Modern Metal Solution LLC/MMS Modern Metal Solution LLC (Modern Metal) in Dubai,
United Arab Emirates.

The respondents' employment contracts, 4 which were approved by the Philippine Overseas Employment Administration(POEA),
provided for a two-year employment, nine hours a day, salary of 1,350 AED with overtime pay, food allowance, free and suitable housing
(four to a room), free transportation, free laundry, and free medical and dental services. They each paid a P15,000.00 processing fee. 5

On April 2, 2007, Modern Metal gave the respondents, except Era, appointment letters 6 with terms different from those in the employment
contracts which they signed at the agency's office in the Philippines. Under the letters of appointment, their employment was increased
to three years at 1,000 to 1,200 AED and food allowance of 200 AED. CHDAEc

The respondents claimed that they were shocked to find out what their working and living conditions were in Dubai. They were required
to work from 6:30 a.m. to 6:30 p.m., with a break of only one hour to one and a half hours. When they rendered overtime work, they were
most of the time either underpaid or not paid at all. Their housing accommodations were cramped and were shared with 27 other
occupants. The lodging house was in Sharjah, which was far from their jobsite in Dubai, leaving them only three to four hours of sleep a
day because of the long hours of travel to and from their place of work; there was no potable water and the air was polluted.

When the respondents received their first salaries (at the rates provided in their appointment letters and with deductions for placement
fees) and because of their difficult living and working conditions, they called up the agency and complained about their predicament. The
agency assured them that their concerns would be promptly addressed, but nothing happened.

On May 5, 2007, Modern Metal required the respondents to sign new employment contracts, 7 except for Era who was made to sign
later. The contracts reflected the terms of their appointment letters. Burdened by all the expenses and financial obligations they incurred
for their deployment, they were left with no choice but to sign the contracts. They raised the matter with the agency, which again took no
action.

On August 5, 2007, despondent over their unbearable living and working conditions and by the agency's inaction, the respondents
expressed to Modern Metal their desire to resign. Out of fear, as they put it, that Modern Metal would not give them their salaries and
159
release papers, the respondents, except Era, cited personal/family problems for their resignation. 8 Era mentioned the real reason —
"because I dont (sic) want the company policy" 9 — for his resignation.cHCaIE

It took the agency several weeks to repatriate the respondents to the Philippines. They all returned to Manila in September 2007.
Except for Ordovez and Enjambre, all the respondents shouldered their own airfare.

For its part, the agency countered that the respondents were not illegally dismissed; they voluntarily resigned from their employment to
seek a better paying job. It claimed that the respondents, while still working for Modern Metal, applied with another company which offered
them a higher pay. Unfortunately, their supposed employment failed to materialize and they had to go home because they had already
resigned from Modern Metal.

The agency further alleged that the respondents even voluntarily signed affidavits of quitclaim and release after they resigned. It thus
argued that their claim for benefits, under Section 10 of Republic Act No. (R.A.) 8042, damages and attorney's fees is unfounded.

The Compulsory Arbitration Rulings

On April 30, 2008, Labor Arbiter Ligerio V. Ancheta rendered a decision 10 dismissing the complaint, finding that the respondents
voluntarily resigned from their jobs. He also found that four of them — Alcantara, Era, Anipan and Lumanta — even executed a
compromise agreement (with quitclaim and release) before the POEA. He considered the POEA recourse a case of forum shopping.

The respondents appealed to the National Labor Relations Commission (NLRC). They argued that the labor arbiter committed serious
errors in (1) admitting in evidence the quitclaims and releases they executed in Dubai, which were mere photocopies of the originals and
which failed to explain the circumstances behind their execution; (2) failing to consider that the compromise agreements they signed
before the POEA covered only the refund of their airfare and not all their money claims; and (3) ruling that they violated the rule on non-
forum shopping. SHIETa

On May 12, 2009, the NLRC granted the appeal. 11 It ruled that the respondents had been illegally dismissed. It anchored its ruling on
the new employment contracts they were made to sign in Dubai. It stressed that it is illegal for an employer to require its employees to
execute new employment papers, especially those which provide benefits that are inferior to the POEA-approved contracts.

The NLRC rejected the quitclaim and release executed by the respondents in Dubai. It believed that the respondents executed the
quitclaim documents under duress as they were afraid that they would not be allowed to return to the Philippines if they did not sign the
documents. Further, the labor tribunal disagreed with the labor arbiter's opinion that the compromise agreement they executed before the
POEA had effectively foreclosed the illegal dismissal complaint before the NLRC and that the respondents had been guilty of forum
shopping. It pointed out that the POEA case involved pre-deployment issues; whereas, the complaint before the NLRC is one for illegal
dismissal and money claims arising from employment.

Consequently, the NLRC ordered the agency, Nacino and Modern Metal to pay, jointly and severally, the respondents, as follows:

WHEREFORE, the Decision dated 30 April 2008 is hereby REVERSED and SET ASIDE, a new Decision is hereby
issued ordering the respondents PERT/CPM MANPOWER EXPONENTS CO., INC., ROMEO NACINO, and
MODERN METAL SOLUTIONS, INC. to jointly and severally, pay the complainants the following:

Employee Underpaid Salary Placement fee Exemplary Damages Salary for the unexpired portion
Vinuya, 150 x 6 = USD400 8100AED P20,000.00 900AED
ARMANDO

Alcantara, 150 X 4 = USD400 8100AED P20,000.00 600AED

VIRGILIO

Era, 350 x 4 = USD400 8100AED P20,000.00 1400AED

MARINO

Ladea, 150 x 5 = USD400 8100AED P20,000.00 750AED

NOEL

Ordovez, 250 X 3 = USD400 8100AED P20,000.00 750AED

LOUIE

Anipan, 150 x 4 = USD400 8100AED P20,000.00 600AED

ROBELITO

Enjambre, 150 x 4 = USD400 8100AED P20,000.00 600 AED

SANDY

Lumanta, 250 x 5 = USD400 8100AED P20,000.00 1250 AED

ARSENIO

160
 TOTAL: US$3,200 64,800AED P400,000.00 6,850AED
or their peso equivalent at the time of actual payment plus attorney’s fees equivalent to 10% of the judgment award.

The agency moved for reconsideration, contending that the appeal was never perfected and that the NLRC gravely abused its discretion
in reversing the labor arbiter's decision. IECAaD

The respondents, on the other hand, moved for partial reconsideration, maintaining that their salaries should have covered the unexpired
portion of their employment contracts, pursuant to the Court's ruling in Serrano v. Gallant Maritime Services, Inc. 13

The NLRC denied the agency's motion for reconsideration, but granted the respondents' motion. 14 It sustained the respondents'
argument that the award needed to be adjusted, particularly in relation to the payment of their salaries, consistent with the Court's ruling
in Serrano. The ruling declared unconstitutional the clause, "or for three (3) months for every year of the unexpired term, whichever is
less," in Section 10, paragraph 5, of R.A. 8042, limiting the entitlement of illegally dismissed overseas Filipino workers to their salaries for
the unexpired term of their contract or three months, whichever is less. Accordingly, it modified its earlier decision and adjusted the
respondents' salary entitlement based on the following matrix:

Unexpired
Duration of
Employee Departure date Date dismissed portion of
Contract
contract
Vinuya, 19 months
2 years 29 March 2007 8 August 2007
ARMANDO and 21 days
Alcantara, 20 months
2 years 3 April 2007 8 August 2007
VIRGILIO and 5 days
Era, 21 months
2 years 12 May 2007 8 August 2007
MARINO and 4 days
Ladea, 19 months
2 years 29 March 2007 8 August 2007
NOEL and 21 days
Ordovez, 21 months
2 years 3 April 2007 26 July 2007
LOUIE and 23 days
Anipan, 20 months
2 years 3 April 2007 8 August 2007
ROBELITO and 5 days
Enjambre, 20 months
2 years 29 March 2007 26 July 2007
SANDY and 3 days
Lumanta, 19 months
2 years 29 March 2007 8 August 2007
ARSENIO and 21 days

Again, the agency moved for reconsideration, reiterating its earlier arguments and, additionally, questioning the application of the Serrano
ruling in the case because it was not yet final and executory. The NLRC denied the motion, prompting the agency to seek recourse from
the CA through a petition for certiorari.

The CA Decision
The CA dismissed the petition for lack of merit. 16 It upheld the NLRC ruling that the respondents were illegally dismissed. It found no
grave abuse of discretion in the NLRC's rejection of the respondents' resignation letters, and the accompanying quitclaim and release
affidavits, as proof of their voluntary termination of employment.

The CA stressed that the filing of a complaint for illegal dismissal is inconsistent with resignation. Moreover, it found nothing in the records
to substantiate the agency's contention that the respondents' resignation was of their own accord; on the contrary, it considered the
resignation letters "dubious for having been lopsidedly-worded to ensure that the petitioners (employer[s]) are free from any liability." 17

The appellate court likewise refused to give credit to the compromise agreements that the respondents executed before the POEA. It
agreed with the NLRC's conclusion that the agreements pertain to the respondents' charge of recruitment violations against the agency
distinct from their illegal dismissal complaint, thus negating forum shopping by the respondents. aHADTC

Lastly, the CA found nothing legally wrong in the NLRC correcting itself (upon being reminded by the respondents), by adjusting the
respondents' salary award on the basis of the unexpired portion of their contracts, as enunciated in theSerrano case.

The agency moved for, but failed to secure, a reconsideration of the CA decision. 18

The Petition

The agency is now before the Court seeking a reversal of the CA dispositions, contending that the CA erred in:
1. affirming the NLRC's finding that the respondents were illegally dismissed;
2. holding that the compromise agreements before the POEA pertain only to the respondents' charge of recruitment violations
against the agency; and
161
 3. affirming the NLRC's award to the respondents of their salaries for the unexpired portion of their employment contracts,
pursuant to the Serrano ruling.

The agency insists that it is not liable for illegal dismissal, actual or constructive. It submits that as correctly found by the labor arbiter, the
respondents voluntarily resigned from their jobs, and even executed affidavits of quitclaim and release; the respondents stated family
concerns for their resignation. The agency posits that the letters were duly proven as they were written unconditionally by the respondents.
It, therefore, assails the conclusion that the respondents resigned under duress or that the resignation letters were dubious. TAEcSC

The agency raises the same argument with respect to the compromise agreements, with quitclaim and release, it entered into with Vinuya,
Era, Ladea, Enjambre, Ordovez, Alcantara, Anipan and Lumanta before the POEA, although it submitted evidence only for six of them.
Anipan, Lumanta, Vinuya and Ladea signing one document; 19 Era 20 and Alcantara 21 signing a document each. It points out that the
agreement was prepared with the assistance of POEA Conciliator Judy Santillan, and was duly and freely signed by the respondents;
moreover, the agreement is not conditional as it pertains to all issues involved in the dispute between the parties.

On the third issue, the agency posits that the Serrano ruling has no application in the present case for three reasons.First, the respondents
were not illegally dismissed and, therefore, were not entitled to their money claims. Second, the respondents filed the complaint in 2007,
while the Serrano ruling came out on March 24, 2009. The ruling cannot be given retroactive application. Third, R.A. 10022, which was
enacted on March 8, 2010 and which amended R.A. 8042, restored the subject clause in Section 10 of R.A. 8042, declared
unconstitutional by the Court.

The Respondents' Position

In their Comment (to the Petition) dated September 28, 2011, 22 the respondents ask the Court to deny the petition for lack of merit. They
dispute the agency's insistence that they resigned voluntarily. They stand firm on their submission that because of their unbearable living
and working conditions in Dubai, they were left with no choice but to resign. Also, the agency never refuted their detailed narration of the
reasons for giving up their employment.

The respondents maintain that the quitclaim and release affidavits, 23 which the agency presented, betray its desperate attempt to escape
its liability to them. They point out that, as found by the NLRC, the affidavits are ready-made documents; for instance, in Lumanta's 24
and Era's 25 affidavits, they mentioned a certain G & A International Manpower as the agency which recruited them — a fact totally
inapplicable to all the respondents. They contend that they had no choice but to sign the documents; otherwise, their release papers and
remaining salaries would not be given to them, a submission which the agency never refuted. CSEHIa

On the agency's second line of defense, the compromise agreement (with quitclaim and release) between the respondents and the
agency before the POEA, the respondents argue that the agreements pertain only to their charge of recruitment violations against the
agency. They add that based on the agreements, read and considered entirely, the agency was discharged only with respect to the
recruitment and pre-deployment issues such as excessive placement fees, non-issuance of receipts and placement misrepresentation,
but not with respect to post-deployment issues such as illegal dismissal, breach of contract, underpayment of salaries and underpayment
and nonpayment of overtime pay. The respondents stress that the agency failed to controvert their contention that the agreements came
about only to settle their claim for refund of their airfare which they paid for when they were repatriated.

Lastly, the respondents maintain that since they were illegally dismissed, the CA was correct in upholding the NLRC's award of their
salaries for the unexpired portion of their employment contracts, as enunciated in Serrano. They point out that the Serrano ruling is
curative and remedial in nature and, as such, should be given retroactive application as the Court declared in Yap v. Thenamaris Ship's
Management. 26 Further, the respondents take exception to the agency's contention that the Serrano ruling cannot, in any event, be
applied in the present case in view of the enactment of R.A. 10022 on March 8, 2010, amending Section 10 of R.A. 8042. The amendment
restored the subject clause in paragraph 5, Section 10 of R.A. 8042 which was struck down as unconstitutional in Serrano.

The respondents maintain that the agency cannot raise the issue for the first time before this Court when it could have raised it before
the CA with its petition for certiorari which it filed on June 8, 2010; 27 otherwise, their right to due process will be violated. The agency,
on the other hand, would later claim that it is not barred by estoppel with respect to its reliance on R.A. 10022 as it raised it before the
CA in CA-G.R. SP No. 114353. 28 They further argue that RA 10022 cannot be applied in their case, as the law is an amendatory statute
which is, as a rule, prospective in application, unless the contrary is provided. 29 To put the issue to rest, the respondents ask the Court
to also declare unconstitutional Section 7 of R.A. 10022.

Finally, the respondents submit that the petition should be dismissed outright for raising only questions of fact, rather than of law.

The Court's Ruling

The procedural question

We deem it proper to examine the facts of the case on account of the divergence in the factual conclusions of the labor arbiter on the one
hand, and, of the NLRC and the CA, on the other. 30 The arbiter found no illegal dismissal in the respondents' loss of employment in
Dubai because they voluntarily resigned; whereas, the NLRC and the CA adjudged them to have been illegally dismissed because they
were virtually forced to resign. HCITcA

162
The merits of the case

We find no merit in the petition. The CA committed no reversible error and neither did it commit grave abuse of discretion in
affirming the NLRC's illegal dismissal ruling.

The agency and its principal, Modern Metal, committed flagrant violations of the law on overseas employment, as well as basic norms of
decency and fair play in an employment relationship, pushing the respondents to look for a better employment and, ultimately, to resign
from their jobs.

First. The agency and Modern Metal are guilty of contract substitution. The respondents entered into a POEA-approved two-year
employment contract, 31 with Modern Metal providing among others, as earlier discussed, for a monthly salary of 1350 AED. On April 2,
2007, Modern Metal issued to them appointment letters 32 whereby the respondents were hired for a longer three-year period and a
reduced salary, from 1,100 AED to 1,200 AED, among other provisions. Then, on May 5, 2007, they were required to sign new
employment contracts 33 reflecting the same terms contained in their appointment letters, except that this time, they were hired as
"ordinary laborer," no longer aluminum fabricator/installer. The respondents complained with the agency about the contract substitution,
but the agency refused or failed to act on the matter.

The fact that the respondents' contracts were altered or substituted at the workplace had never been denied by the agency. On the
contrary, it admitted that the contract substitution did happen when it argued, "[a]s to their claim for [underpayment] of salary, their original
contract mentioned 1350 AED monthly salary, which includes allowance while in their Appointment Letters, they were supposed to receive
1,300 AED. While there was [a] difference of 50 AED monthly, the same could no longer be claimed by virtue of their Affidavits of
Quitclaims and Desistance[.]" 34

Clearly, the agency and Modern Metal committed a prohibited practice and engaged in illegal recruitment under the law. Article 34 of the
Labor Code provides:

Art. 34.Prohibited Practices. — It shall be unlawful for any individual, entity, licensee, or holder of authority:
xxx
(i)To substitute or alter employment contracts approved and verified by the Department of Labor from the time
of actual signing thereof by the parties up to and including the periods of expiration of the same without the
approval of the Secretary of Labor[.]

Further, Article 38 of the Labor Code, as amended by R.A. 8042, defined "illegal recruitment" to include the following act:

(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[.]

Second. The agency and Modern Metal committed breach of contract. Aggravating the contract substitution imposed upon them by their
employer, the respondents were made to suffer substandard (shocking, as they put it) working and living arrangements. Both the original
contracts the respondents signed in the Philippines and the appointment letters issued to them by Modern Metal in Dubai provided for
free housing and transportation to and from the jobsite. The original contract mentioned free and suitable housing. 36 Although no
description of the housing was made in the letters of appointment except: "Accommodation: Provided by the company," it is but reasonable
to think that the housing or accommodation would be "suitable."

As earlier pointed out, the respondents were made to work from 6:30 a.m. to 6:30 p.m., with a meal break of one to one and a half hours,
and their overtime work was mostly not paid or underpaid. Their living quarters were cramped as they shared them with 27 other workers.
The lodging house was in Sharjah, far from the jobsite in Dubai, leaving them only three to four hours of sleep every workday because of
the long hours of travel to and from their place of work, not to mention that there was no potable water in the lodging house which was
located in an area where the air was polluted. The respondents complained with the agency about the hardships that they were suffering,
but the agency failed to act on their reports. Significantly, the agency failed to refute their claim, anchored on the ordeal that they went
through while in Modern Metal's employ.

Third. With their original contracts substituted and their oppressive working and living conditions unmitigated or unresolved, the
respondents' decision to resign is not surprising. They were compelled by the dismal state of their employment to give up their jobs;
effectively, they were constructively dismissed. A constructive dismissal or discharge is "a quitting because continued employment is
rendered impossible, unreasonable or unlikely, as, an offer involving a demotion in rank and a diminution in pay." 37

Without doubt, the respondents' continued employment with Modern Metal had become unreasonable. A reasonable mind would not
approve of a substituted contract that pays a diminished salary — from 1350 AED a month in the original contract to 1,000 AED to 1,200
AED in the appointment letters, a difference of 150 AED to 250 AED (not just 50 AED as the agency claimed) or an extended employment
(from 2 to 3 years) at such inferior terms, or a "free and suitable" housing which is hours away from the job site, cramped and crowded,
without potable water and exposed to air pollution. cSEaTH

We thus cannot accept the agency's insistence that the respondents voluntarily resigned since they personally prepared their resignation
letters 38 in their own handwriting, citing family problems as their common ground for resigning. As the CA did, we find the resignation
letters "dubious," 39 not only for having been lopsidedly worded to ensure that the employer is rendered free from any
163
liability, but also for the odd coincidence that all the respondents had, at the same time, been confronted with urgent family problems so
that they had to give up their employment and go home. The truth, as the respondents maintain, is that they cited family problems as
reason out of fear that Modern Metal would not give them their salaries and their release papers. Only Era was bold enough to say the
real reason for his resignation — to protest company policy.

We likewise find the affidavits 40 of quitclaim and release which the respondents executed suspect. Obviously, the affidavits were
prepared as a follow through of the respondents' supposed voluntary resignation. Unlike the resignation letters, the respondents had no
hand in the preparation of the affidavits. They must have been prepared by a representative of Modern Metal as they appear to come
from a standard form and were apparently introduced for only one purpose — to lend credence to the resignation letters. In Modern
Metal's haste, however, to secure the respondents' affidavits, they did not check on the model they used. Thus, Lumanta's affidavit 41
mentioned a G & A International Manpower as his recruiting agency, an entity totally unknown to the respondents; the same thing is true
for Era's affidavit. 42 This confusion is an indication of the employer's hurried attempt to avoid liability to the respondents.

The respondents' position is well-founded. The NLRC itself had the same impression, which we find in order and hereunder quote:

The acts of respondents of requiring the signing of new contracts upon reaching the place of work and requiring
employees to sign quitclaims before they are paid and repatriated to the Philippines are all too familiar stories of
despicable labor practices which our employees are subjected to abroad. While it is true that quitclaims are
generally given weight, however, given the facts of the case, We are of the opinion that the complainants-appellants
executed the same under duress and fear that they will not be allowed to return to the Philippines. 43

Fourth. The compromise agreements (with quitclaim and release) 44 between the respondents and the agency before the POEA did not
foreclose their employer-employee relationship claims before the NLRC. The respondents, except Ordovez and Enjambre, aver in this
respect that they all paid for their own airfare when they returned home 45 and that the compromise agreements settled only their claim
for refund of their airfare, but not their other claims. 46 Again, this submission has not been refuted or denied by the agency.

On the surface, the compromise agreements appear to confirm the agency's position, yet a closer examination of the documents would
reveal their true nature. Copy of the compromise agreement is a standard POEA document, prepared in advance and readily made
available to parties who are involved in disputes before the agency, such as what the respondents filed with the POEA ahead (filed in
2007) of the illegal dismissal complaint before the NLRC (filed on March 5, 2008). EHaCID

Under the heading "Post-Deployment," the agency agreed to pay Era 47 and Alcantara 48 P12,000.00 each, purportedly in satisfaction
of the respondents' claims arising from overseas employment, consisting of unpaid salaries, salary differentials and other benefits,
including money claims with the NLRC. The last document was signed by (1) Anipan, (2) Lumanta, (3) Ladea, (4) Vinuya, (5) Jonathan
Nangolinola, and (6) Zosimo Gatchalian (the last four signing on the left hand side of the document; the last two were not among those
who filed the illegal dismissal complaint). 49 The agency agreed to pay them a total of P72,000.00. Although there was no breakdown of
the entitlement for each of the six, but guided by the compromise agreement signed by Era and Alcantara, we believe that the agency
paid them P12,000.00 each, just like Era and Alcantara.

The uniform insubstantial amount for each of the signatories to the agreement lends credence to their contention that the settlement
pertained only to their claim for refund of the airfare which they shouldered when they returned to the Philippines. The compromise
agreement, apparently, was intended by the agency as a settlement with the respondents and others with similar claims, which explains
the inclusion of the two (Nangolinola and Gatchalian) who were not involved in the case with the NLRC. Under the circumstances, we
cannot see how the compromise agreements can be considered to have fully settled the respondents' claims before the NLRC — illegal
dismissal and monetary benefits arising from employment. We thus find no reversible error nor grave abuse of discretion in the rejection
by the NLRC and the CA of said agreements.

Fifth. The agency's objection to the application of the Serrano ruling in the present case is of no moment. Its argument that the ruling
cannot be given retroactive effect, because it is curative and remedial, is untenable. It points out, in this respect, that the respondents
filed the complaint in 2007, while the Serrano ruling was handed down in March 2009. The issue, as the respondents correctly argue, has
been resolved in Yap v. Thenamaris Ship's Management, 50 where the Court sustained the retroactive application of the Serrano ruling
which declared unconstitutional the subject clause in Section 10, paragraph 5 of R.A. 8042, limiting to three months the payment of
salaries to illegally dismissed Overseas Filipino Workers.

Undaunted, the agency posits that in any event, the Serrano ruling has been nullified by R.A. No. 10022, entitled "An Act Amending
Republic Act No. 8042, Otherwise Known as the Migrant Workers and Overseas Filipinos Act of 1995, As Amended, Further Improving
the Standard of Protection and Promotion of the Welfare of Migrant Workers, Their Families and Overseas Filipinos in Distress, and for
Other Purposes." 51 It argues that R.A. 10022, which lapsed into law (without the Signature of the President) on March 8, 2010, restored
the subject clause in the 5th paragraph, Section 10 of R.A. 8042. The amendment, contained in Section 7 of R.A. 10022, reads as follows:

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
or any unauthorized deductions from the migrant worker's salary, the worker shall be entitled to the full reimbursement
"of" his placement fee and the deductions made 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. 52 (emphasis ours) HcACTE

164
This argument fails to persuade us. Laws shall have no retroactive effect, unless the contrary is provided. 53 By its very nature, the
amendment introduced by R.A. 10022 — restoring a provision of R.A. 8042 declared unconstitutional — cannot be given retroactive
effect, not only because there is no express declaration of retroactivity in the law, but because retroactive application will result in an
impairment of a right that had accrued to the respondents by virtue of the Serrano ruling — entitlement to their salaries for the unexpired
portion of their employment contracts.

All statutes are to be construed as having only a prospective application, unless the purpose and intention of the legislature to give them
a retrospective effect are expressly declared or are necessarily implied from the language used.54 We thus see no reason to nullify the
application of the Serrano ruling in the present case. Whether or not R.A. 10022 is constitutional is not for us to rule upon in the present
case as this is an issue that is not squarely before us. In other words, this is an issue that awaits its proper day in court; in the meanwhile,
we make no pronouncement on it.

WHEREFORE, premises considered, the petition is DENIED. The assailed Decision dated May 9, 2011 and the Resolution dated June
23, 2011 of the Court of Appeals in CA-G.R. SP No. 114353 are AFFIRMED. Let this Decision be brought to the attention of the Honorable
Secretary of Labor and Employment and the Administrator of the Philippine Overseas Employment Administration as a black mark in the
deployment record of petitioner Pert/CPM Manpower Exponent Co., Inc., and as a record that should be considered in any similar future
violations. Costs against the petitioner.

SO ORDERED.

Hon. Sto. Tomas et al. vs. Salac GR No. 152642 November 13, 2012

FACTS: On June 7, 1995 Congress enacted Republic Act (R.A.) 8042 or the Migrant Workers and Overseas Filipinos Act of 1995 that,
for among other purposes, sets the Government's policies on overseas employment and establishes a higher standard of protection and
promotion of the welfare of migrant workers, their families, and overseas Filipinos in distress.

G.R. 152642 and G.R. 152710

(Constitutionality of Sections 29 and 30, R.A. 8042)

Sections 29 and 30 of the Act 1 commanded the Department of Labor and Employment (DOLE) to begin deregulating within one year of
its passage the business of handling the recruitment and migration of overseas Filipino workers and phase out within five years the
regulatory functions of the Philippine Overseas Employment Administration (POEA).

On January 8, 2002 respondents Rey Salac, Willie D. Espiritu, Mario Montenegro, Dodgie Belonio, Lolit Salinel, and Buddy Bonnevie
(Salac, et al.) filed a petition for certiorari, prohibition and mandamus with application for temporary restraining order (TRO) and
preliminary injunction against petitioners, the DOLE Secretary, the POEA Administrator, and the Technical Education and Skills
Development Authority (TESDA) Secretary-General before the Regional Trial Court (RTC) of Quezon City, Branch 96. 2

Salac, et al. sought to: 1) nullify DOLE Department Order 10 (DOLE DO 10) and POEA Memorandum Circular 15 (POEA MC 15); 2)
prohibit the DOLE, POEA, and TESDA from implementing the same and from further issuing rules and regulations that would regulate
the recruitment and placement of overseas Filipino workers (OFWs); and 3) also enjoin them to comply with the policy of deregulation
mandated under Sections 29 and 30 of Republic Act 8042.

On March 20, 2002 the Quezon City RTC granted Salac, et al.'s petition and ordered the government agencies mentioned to deregulate
the recruitment and placement of OFWs. The RTC also annulled DOLE DO 10, POEA MC 15, and all other orders, circulars and issuances
that are inconsistent with the policy of deregulation under R.A. 8042.

Prompted by the RTC's above actions, the government officials concerned filed the present petition in G.R. 152642 seeking to annul the
RTC's decision and have the same enjoined pending action on the petition.

On April 17, 2002 the Philippine Association of Service Exporters, Inc. intervened in the case before the Court, claiming that the RTC
March 20, 2002 Decision gravely affected them since it paralyzed the deployment abroad of OFWs and performing artists. The
Confederated Association of Licensed Entertainment Agencies, Incorporated (CALEA) intervened for the same purpose. 4

On May 23, 2002 the Court issued a TRO in the case, enjoining the Quezon City RTC, Branch 96, from enforcing its decision.

In a parallel case, on February 12, 2002 respondents Asian Recruitment Council Philippine Chapter, Inc. and others (Arcophil, et al.) filed
a petition for certiorari and prohibition with application for TRO and preliminary injunction against the DOLE Secretary, the POEA
Administrator, and the TESDA Director-General, before the RTC of Quezon City, Branch 220, to enjoin the latter from implementing the
2002 Rules and Regulations Governing the Recruitment and Employment of Overseas Workers and to cease and desist from issuing
other orders, circulars, and policies that tend to regulate the recruitment and placement of OFWs in violation of the policy of deregulation
provided in Sections 29 and 30 of R.A. 8042.

On March 12, 2002 the Quezon City RTC rendered an Order, granting the petition and enjoining the government agencies involved from
exercising regulatory functions over the recruitment and placement of OFWs. This prompted the DOLE Secretary, the POEA

165
Administrator, and the TESDA Director-General to file the present action in G.R. 152710. As in G.R. 152642, the Court issued on May
23, 2002 a TRO enjoining the Quezon City RTC, Branch 220 from enforcing its decision.

On December 4, 2008, however, the Republic informed 7 the Court that on April 10, 2007 former President Gloria Macapagal-Arroyo
signed into law R.A. 9422 8 which expressly repealed Sections 29 and 30 of R.A. 8042 and adopted the policy of close government
regulation of the recruitment and deployment of OFWs. R.A. 9422 pertinently provides:

SEC. 1. Section 23, paragraph (b.1) of Republic Act No. 8042, otherwise known as the "Migrant Workers and
Overseas Filipinos Act of 1995" is hereby amended to read as follows:

(b.1) Philippine Overseas Employment Administration — The Administration shall regulate private sector
participation in the recruitment and overseas placement of workers by setting up a licensing and registration
system. It shall also formulate and implement, in coordination with appropriate entities concerned, when
necessary, a system for promoting and monitoring the overseas employment of Filipino workers taking into
consideration their welfare and the domestic manpower requirements.

In addition to its powers and functions, the administration shall inform migrant workers not only of their rights
as workers but also of their rights as human beings, instruct and guide the workers how to assert their rights
and provide the available mechanism to redress violation of their rights.

In the recruitment and placement of workers to service the requirements for trained and competent Filipino
workers of foreign governments and their instrumentalities, and such other employers as public interests may
require, the administration shall deploy only to countries where the Philippines has concluded bilateral labor
agreements or arrangements: Provided, That such countries shall guarantee to protect the rights of Filipino
migrant workers; and: Provided, further, That such countries shall observe and/or comply with the international
laws and standards for migrant workers.

SEC. 2. Section 29 of the same law is hereby repealed.

SEC. 3. Section 30 of the same law is also hereby repealed.

On August 20, 2009 respondents Salac, et al. told the Court in G.R. 152642 that they agree 9 with the Republic's view that the repeal of
Sections 29 and 30 of R.A. 8042 renders the issues they raised by their action moot and academic. The Court has no reason to disagree.
Consequently, the two cases, G.R. 152642 and 152710, should be dismissed for being moot and academic.

G.R. 167590
(Constitutionality of Sections 6, 7, and 9 of R.A. 8042)

On August 21, 1995 respondent Philippine Association of Service Exporters, Inc. (PASEI) filed a petition for declaratory relief and
prohibition with prayer for issuance of TRO and writ of preliminary injunction before the RTC of Manila, seeking to annul Sections 6, 7,
and 9 of R.A. 8042 for being unconstitutional. (PASEI also sought to annul a portion of Section 10 but the Court will take up this point
later together with a related case.)

Section 6 defines the crime of "illegal recruitment" and enumerates the acts constituting the same. Section 7 provides the penalties for
prohibited acts. Thus:

SEC. 6.Definition. — For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract services, promising or
advertising for employment abroad, whether for profit or not, when undertaken by a non-license or non-holder of
authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the
Labor Code of the Philippines: Provided, That such non-license or non-holder, who, in any manner, offers or promises
for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise include the
following acts, whether committed by any person, whether a non-licensee, non-holder, licensee or holder of authority.

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 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.
166
Finally, Section 9 of R.A. 8042 allowed the filing of criminal actions arising from "illegal recruitment" before the RTC 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.

The RTC of Manila declared Section 6 unconstitutional after hearing on the ground that its definition of "illegal recruitment" is vague as it
fails to distinguish between licensed and non-licensed recruiters and for that reason gives undue advantage to the non-licensed recruiters
in violation of the right to equal protection of those that operate with government licenses or authorities.

But "illegal recruitment" as defined in Section 6 is clear and unambiguous and, contrary to the RTC's finding, actually makes a distinction
between licensed and non-licensed recruiters. By its terms, persons who engage in "canvassing, enlisting, contracting, transporting,
utilizing, hiring, or procuring workers" without the appropriate government license or authority are guilty of illegal recruitment whether or
not they commit the wrongful acts enumerated in that section. On the other hand, recruiters who engage in the canvassing, enlisting, etc.
of OFWs, although with the appropriate government license or authority, are guilty of illegal recruitment only if they commit any of the
wrongful acts enumerated in Section 6.

The Manila RTC also declared Section 7 unconstitutional on the ground that its sweeping application of the penalties failed to make any
distinction as to the seriousness of the act committed for the application of the penalty imposed on such violation. As an example, said
the trial court, the mere failure to render a report under Section 6 (h) or obstructing the inspection by the Labor Department under Section
6 (g) are penalized by imprisonment for six years and one day and a minimum fine of P200,000.00 but which could unreasonably go even
as high as life imprisonment if committed by at least three persons.

Apparently, the Manila RTC did not agree that the law can impose such grave penalties upon what it believed were specific acts that
were not as condemnable as the others in the lists. But, in fixing uniform penalties for each of the enumerated acts under Section 6,
Congress was within its prerogative to determine what individual acts are equally reprehensible, consistent with the State policy of
according full protection to labor, and deserving of the same penalties. It is not within the power of the Court to question the wisdom of
this kind of choice. Notably, this legislative policy has been further stressed in July 2010 with the enactment of R.A. 10022 which increased
even more the duration of the penalties of imprisonment and the amounts of fine for the commission of the acts listed under Section 7.

Obviously, in fixing such tough penalties, the law considered the unsettling fact that OFWs must work outside the country's borders and
beyond its immediate protection. The law must, therefore, make an effort to somehow protect them from conscienceless individuals within
its jurisdiction who, fueled by greed, are willing to ship them out without clear assurance that their contracted principals would treat such
OFWs fairly and humanely.

As the Court held in People v. Ventura, the State under its police power "may prescribe such regulations as in its judgment will secure or
tend to secure the general welfare of the people, to protect them against the consequence of ignorance and incapacity as well as of
deception and fraud." Police power is "that inherent and plenary power of the State which enables it to prohibit all things hurtful to the
comfort, safety, and welfare of society."

The Manila RTC also invalidated Section 9 of R.A. 8042 on the ground that allowing the offended parties to file the criminal case in their
place of residence would negate the general rule on venue of criminal cases which is the place where the crime or any of its essential
elements were committed. Venue, said the RTC, is jurisdictional in penal laws and, allowing the filing of criminal actions at the place of
residence of the offended parties violates their right to due process. Section 9 provides:

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.

But there is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for violations of Section 6 of R.A. 8042 that differs
from the venue established by the Rules on Criminal Procedure. Indeed, Section 15 (a), Rule 110 of the latter Rules allows exceptions
provided by laws. Thus:

SEC. 15. Place where action is to be instituted. — (a) Subject to existing laws, the criminal action shall be instituted
and tried in the court of the municipality or territory where the offense was committed or where any of its essential
ingredients occurred. (Emphasis supplied)

Section 9 of R.A. 8042, as an exception to the rule on venue of criminal actions is, consistent with that law's declared policy 15 of
providing a criminal justice system that protects and serves the best interests of the victims of illegal recruitment.

G.R. 167590, G.R. 182978-79, and G.R. 184298-99

(Constitutionality of Section 10, last sentence of 2nd paragraph)

G.R. 182978-79 and G.R. 184298-99 are consolidated cases. Respondent spouses Simplicio and Mila Cuaresma (the Cuaresmas) filed
a claim for death and insurance benefits and damages against petitioners Becmen Service Exporter and Promotion, Inc. (Becmen) and

167
White Falcon Services, Inc. (White Falcon) for the death of their daughter Jasmin Cuaresma while working as staff nurse in Riyadh, Saudi
Arabia.

The Labor Arbiter (LA) dismissed the claim on the ground that the Cuaresmas had already received insurance benefits arising from their
daughter's death from the Overseas Workers Welfare Administration (OWWA). The LA also gave due credence to the findings of the
Saudi Arabian authorities that Jasmin committed suicide.

On appeal, however, the National Labor Relations Commission (NLRC) found Becmen and White Falcon jointly and severally liable for
Jasmin's death and ordered them to pay the Cuaresmas the amount of US$113,000.00 as actual damages. The NLRC relied on the
Cabanatuan City Health Office's autopsy finding that Jasmin died of criminal violence and rape.

Becmen and White Falcon appealed the NLRC Decision to the Court of Appeals (CA). On June 28, 2006 the CA held Becmen and White
Falcon jointly and severally liable with their Saudi Arabian employer for actual damages, with Becmen having a right of reimbursement
from White Falcon. Becmen and White Falcon appealed the CA Decision to this Court.

On April 7, 2009 the Court found Jasmin's death not work-related or work-connected since her rape and death did not occur while she
was on duty at the hospital or doing acts incidental to her employment. The Court deleted the award of actual damages but ruled that
Becmen's corporate directors and officers are solidarily liable with their company for its failure to investigate the true nature of her death.
Becmen and White Falcon abandoned their legal, moral, and social duty to assist the Cuaresmas in obtaining justice for their daughter.
Consequently, the Court held the foreign employer Rajab and Silsilah, White Falcon, Becmen, and the latter's corporate directors and
officers jointly and severally liable to the Cuaresmas for: 1) P2,500,000.00 as moral damages; 2) P2,500,000.00 as exemplary damages;
3) attorney's fees of 10% of the total monetary award; and 4) cost of suit.

On July 16, 2009 the corporate directors and officers of Becmen, namely, Eufrocina Gumabay, Elvira Taguiam, Lourdes Bonifacio and
Eddie De Guzman (Gumabay, et al.) filed a motion for leave to Intervene. They questioned the constitutionality of the last sentence of the
second paragraph of Section 10, R.A. 8042 which holds the corporate directors, officers and partners jointly and solidarily liable with their
company for money claims filed by OFWs against their employers and the recruitment firms. On September 9, 2009 the Court allowed
the intervention and admitted Gumabay, et al.'s motion for reconsideration.

The key issue that Gumabay, et al. present is whether or not the 2nd paragraph of Section 10, R.A. 8042, which holds the corporate
directors, officers, and partners of recruitment and placement agencies jointly and solidarily liable for money claims and damages that
may be adjudged against the latter agencies, is unconstitutional.

In G.R. 167590 (the PASEI case), the Quezon City RTC held as unconstitutional the last sentence of the 2nd paragraph of Section 10 of
R.A. 8042. It pointed out that, absent sufficient proof that the corporate officers and directors of the erring company had knowledge of
and allowed the illegal recruitment, making them automatically liable would violate their right to due process of law.

The pertinent portion of Section 10 provides:

SEC. 10.Money Claims. — . . .

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 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.(Emphasis supplied)

But the Court has already held, pending adjudication of this case, that the liability of corporate directors and officers is not automatic. To
make them jointly and solidarily liable with their company, there must be a finding that they were remiss in directing the affairs of that
company, such as sponsoring or tolerating the conduct of illegal activities. In the case of Becmen and White Falcon, while there is
evidence that these companies were at fault in not investigating the cause of Jasmin's death, there is no mention of any evidence in the
case against them that intervenors Gumabay, et al., Becmen's corporate officers and directors, were personally involved in their
company's particular actions or omissions in Jasmin's case.

As a final note, R.A. 8042 is a police power measure intended to regulate the recruitment and deployment of OFWs. It aims to curb, if not
eliminate, the injustices and abuses suffered by numerous OFWs seeking to work abroad. The rule is settled that every statute has in its
favor the presumption of constitutionality. The Court cannot inquire into the wisdom or expediency of the laws enacted by the Legislative
Department. Hence, in the absence of a clear and unmistakable case that the statute is unconstitutional, the Court must uphold its validity.

The Court DISMISSES the petitions for having become moot and academic. In G.R. 167590, the Court SETS ASIDE the Decision of the
Regional Trial Court of Manila dated December 8, 2004 and DECLARES Sections 6, 7, and 9 of Republic Act 8042 valid and
constitutional. In G.R. 182978-79 and G.R. 184298-99 as well as in G.R. 167590, the Court HOLDS the last sentence of the second
paragraph of Section 10 of Republic Act 8042 valid and constitutional.
168
The Court, however, RECONSIDERS and SETS ASIDE the portion of its Decision in G.R. 182978-79 and G.R. 184298-99 that held
intervenors Eufrocina Gumabay, Elvira Taguiam, Lourdes Bonifacio, and Eddie De Guzman jointly and solidarily liable with respondent
Becmen Services Exporter and Promotion, Inc. to spouses Simplicio and Mila Cuaresma for lack of a finding in those cases that such
intervenors had a part in the act or omission imputed to their corporation.

Sameer Overseas Placement vs Cabiles

Facts:

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency. Respondent Joy Cabiles was
hired thus signed a one-year employment contract for a monthly salary of NT$15,360.00. Joy was deployed to work for Taiwan Wacoal,
Co. Ltd. (Wacoal) on June 26, 1997. She alleged that in her employment contract, she agreed to work as quality control for one year. In
Taiwan, she was asked to work as a cutter.

Sameer claims that on July 14, 1997, a certain Mr. Huwang from Wacoal informed Joy, without prior notice, that she was
terminated and that “she should immediately report to their office to get her salary and passport.” She was asked to “prepare for immediate
repatriation.” Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of NT$9,000.15 According to her,
Wacoal deducted NT$3,000 to cover her plane ticket to Manila.

Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency, negligence in her duties, and her
"failure to comply with the work requirements [of] her foreign [employer]". 21 The agency also claimed that it did not ask for a placement
fee of PhP70,000.00. As evidence, it showed Official Receipt No. 14860 dated June 10, 1997, bearing the amount of PhP20,360.00.
Petitioner added that Wacoal's accreditation with petitioner had already been transferred to the Pacific Manpower & Management
Services, Inc. (Pacific) as of August 6, 1997. Thus, petitioner asserts that it was already substituted by Pacific Manpower.

On October 15, 1997, Joy filed a complaint for illegal dismissal with the NLRC against petitioner and Wacoal. LA dismissed the
complaint. NLRC reversed LA’s decision. CA affirmed the ruling of the National Labor Relations Commission finding respondent illegally
dismissed and awarding her only three months’ worth of salary, the reimbursement of the cost of her repatriation, and attorney’s
fees

Issue: WON Cabiles was entitled to the unexpired portion of her salary due to illegal dismissal.

Ruling:

YES. Sameer Overseas Placement Agency failed to show that there was just cause for causing Joy's dismissal. The employer,
Wacoal, also failed to accord her due process of law. The burden of proving that there is just cause for termination is on the employer.

Security of tenure for labor is guaranteed by our Constitution and even if they move to different jurisdiction, still our labor laws
would apply following the principle lex loci contractus. Under our laws, the employer must affirmatively show rationally adequate evidence
that the dismissal was for a justifiable cause. Failure to show that there was valid or just cause for termination would necessarily mean
that the dismissal was illegal. To show that dismissal resulting from inefficiency in work is valid, it must be shown that:
1) the employer has set standards of conduct and workmanship against which the employee will be judged; 2) the standards of conduct
and workmanship must have been communicated to the employee; and 3) the communication was made at a reasonable time prior to
the employee's performance assessment. The bare allegations of petitioner are not sufficient to support a claim that there is just cause
for termination. There is no proof that respondent was legally terminated.

The Court also held that the award of the three-month equivalent of respondent’s salary should be increased to the amount
equivalent to the unexpired term of the employment contract.

Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance with Section 10 of
Republic Act No. 8042. The award of the three-month equivalence of respondent's salary must be modified accordingly. Since she started
working on June 26, 1997 and was terminated on July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June 25, 1998.
"To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that principals/employers
and recruitment/manning agencies may violate an OFW's security of tenure which an employment contract embodies and actually profit
from such violation based on an unconstitutional provision of law.

In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., this court ruled that the clause “or for three (3)
months for every year of the unexpired term, whichever is less” is unconstitutional for violating the equal protection clause and substantive
due process. A statute or provision which was declared unconstitutional is not a law. It “confers no rights; it imposes no duties; it affords
no protection; it creates no office; it is inoperative as if it has not been passed at all.”
169
 The Court said that they are aware that the clause “or for three (3) months for every year of the unexpired term, whichever is
less” was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010.

Ruling on the constitutional issue:

In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may exercise its powers in any
manner inconsistent with the Constitution, regardless of the existence of any law that supports such exercise. The Constitution cannot be
trumped by any other law. All laws must be read in light of the Constitution. Any law that is inconsistent with it is a nullity.

Thus, when a law or a provision of law is null because it is inconsistent with the Constitution, the nullity cannot be cured by
reincorporation or reenactment of the same or a similar law or provision. A law or provision of law that was already declared
unconstitutional remains as such unless circumstances have so changed as to warrant a reverse conclusion.

The Court observed that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the constitutional
rights to equal protection and due process. Petitioner as well as the Solicitor General have failed to show any compelling change in the
circumstances that would warrant us to revisit the precedent.

The Court declared, once again, the clause, “or for three (3) months for every year of the unexpired term, whichever is less” in
Section 7 of Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional and, therefore, null and
void.

Racelis vs United Philippine Lines

Facts:

Complainant Conchita J. Racelis, as the surviving spouse of Rodolfo L. Racelis, initiated a claim for death benefits pursuant to the
International Transport Workers’ Federation-Collective Bargaining Agreement (ITWF-CBA), of which her husband was a member.
However, her claim was denied by the employer on the ground that the death was not work-related as it was due to Brainstem (pontine)
Cavernous Malformation, which was congenital and it had familiar strains according to a doctor. Thus, complainant instituted a labor case
against them.

Previously, Rodolfo L. Racelis “was recruited and hired by respondent United Philippine Lines, Inc. (UPL) for its principal, respondent
Holland America Lines, Inc. (HAL) to serve as ‘Demi Chef De Partie’ on board the vessel MS Prinsendam, with a basic monthly salary
of US$799.55.5 The Contract of Employment was for a term of four (4) months, extendible for another two (2) months upon mutual
consent. After complying with the required pre-employment medical examination where he was declared fit to work, Rodolfo joined the
vessel on January 25, 2008. Prior thereto, Rodolfo was repeatedly contracted by said respondents and was deployed under various
contracts since December 17, 1985.”

On his last employment, Rodolfo experienced severe pain in his ears and high blood pressure causing him to collapse while in the
performance of his duties. He consulted a doctor in Argentina and was medically repatriated on February 20, 2008 for further medical
treatment. Upon arrival in Manila, he was immediately brought to Medical City, Pasig City, where he was seen by a company-designated
physician, Dr. Gerardo Legaspi, M.D. (Dr. Legaspi), and was diagnosed to be suffering from Brainstem (pontine) Cavernous Malformation.
He underwent surgery twice for the said ailment but developed complications and died on March 2, 2008.

Rodolfo's surviving spouse, herein petitioner, sought to claim death benefits pursuant to the International Transport Workers' Federation-
Collective Bargaining Agreement (ITWF-CBA), 18 of which her husband was a member, but to no avail. Consequently, she filed a
Complaint 19 for death benefits, burial assistance, moral and exemplary damages, and attorney's fees against herein respondents before
the LA.

170
The Labor Arbiter (LA) ruled in favor of petitioner, and thereby ordered respondents to pay her death benefits pursuant to the ITWF-CBA
in the amount of US$60,000.00, burial assistance in the amount of US$1,000.00, and attorney's fees equivalent to 10% of the total
monetary awards. The NLRC likewise affirmed the LA decision.

However, the CA granted respondents' certiorari petition, and thereby annulled and set aside the ruling of the NLRC granting petitioner's
claim for death benefits.

Issue: WON United Philippine Lines can be held liable for the death benefits of Rodolfo Racelis,

Ruling:

The employer is liable. “Deemed incorporated in every seafarer’s employment contract, denominated as the POEA-SEC or the Philippine
Overseas Employment Administration-Standard Employment Contract, is a set of standard provisions determined and implemented by
the POEA, called the ‘Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels,’
which are considered to be the minimum requirements acceptable to the government for the employment of Filipino seafarers on board
foreign ocean-going vessels.”

In the 2000 POEA-SEC, it stipulates that “the beneficiaries of a deceased seafarer may be able to claim death benefits for as long as
they are able to establish that (a) the seafarer’s death is work-related, and (b) such death had occurred during the term of his
employment contract.”

Under the 2000 POEA-SEC, “work-related injury” is defined as “injury(ies) resulting in disability or death arising out of and in the course
of employment.” On the other hand, “work-related illness” is defined as “any sickness resulting to disability or death as a result of an
occupational disease listed under Section 32-A of this contract with the conditions set therein satisfied.”

Jurisprudence provides that “[t]he words ‘arising out of’ refer to the origin or cause of the accident, and are descriptive of its character,
while the words ‘in the course of’ refer to the time, place, and circumstances under which the accident takes place. As a matter of general
proposition, an injury or accident is said to arise ‘in the course of employment’ when it takes place within the period of the employment,
at a place where the employee reasonably may be, and while he is fulfilling his duties or is engaged in doing something incidental thereto.”

Here, the death of the seafarer is evidently work-related. “While it is true that Brainstem (pontine) Cavernous Malformation is not listed
as an occupational disease under Section 32-A of the 2000 POEA-SEC, Section 20 (B) (4) of the same explicitly provides that ‘[t[he
liabilities of the employer when the seafarer suffers work-related injury or illness during the term of his contract are as follows: (t)hose
illnesses not listed in Section 32 of this Contract are dispuatbly presumed as work related.’ In other words, the 2000 POEA-SEC
‘has created a disputable presumption in favor of compensability[,] saying that those illnesses not listed in Section 32 are disputably
presumed as work-related. This means that even if the illness is not listed under Section 32-A of the POEA-SEC as an occupational
disease or illness, it will still be presumed as work-related, and it becomes incumbent on the employer to overcome the presumption.’
This presumption should be overturned only when the employer’s refutation is found to be supported by substantial evidence, which, as
traditionally defined is “such relevant evidence as a reasonable mind might accept as sufficient to support a conclusion.”

171
Further, the seafarer’s death occurred during the term of employment. “While it is true that a medical repatriation has the e ffect of
terminating the seafarer’s contract of employment, it is, however, enough that the work-related illness, which eventually becomes the
proximate cause of death, occurred while the contract was effective for recovery to be had.”

The 1987 Constitution affords full protection to labor. “Consistent with the State’s avowed policy to afford full protection to labor as
enshrined in Article XIII of the 1987 Philippine Constitution, the POEA-SEC was designed primarily for the protection and benefit of Filipino
seafarers in the pursuit of their employment on board ocean-going vessels. As such, it is a standing principle that its provisions are to be
construed and applied fairly, reasonably, and liberally in their favor.”

Guided by these principles, it has been held that “a medical repatriation case constitutes an exception to the second requirement under
Section 20 (A) (1) of the 2000 POEA-SEC, i.e., that the seafarer’s death had occurred during the term of his employment, in view of the
terminative consequences of a medical repatriation under Section 18 (B) of the same. In essence, the Court held that under such
circumstance, the work-related death need not precisely occur during the term of his employment as it is enough that the seafarer’s work-
related injury or illness which eventually causes his death had occurred during the term of his employment.”

As for the award, respondents never died and therefore admitted that “the late Rodolfo’s membership in the AMOSUP that had entered
into a collective bargaining agreement with HAL, or the ITWF-CBA” is applicable. Its provisions therefore must prevail over the standard
terms and benefits formulated by the POEA in its Standard Employment Contract. Hence, the NLRC’s award of US$60,000.00 as
compensation for the death of Rodolfo in accordance with Article 21.2.1 of the ITWF-CBA was in order. The same holds true for the award
of burial assistance in the amount of US$1,000.00 which is provided under Section 20 (A) (4) (c) of the 2000 POEA-SEC. Moreover,
conformably with existing case law, the NLRC’s grant of attorney’s fees in the amount of US$6,100.00 was called for since petitioner was
forced to litigate to protect her valid claim. Where an employee is forced to litigate and incur expenses to protect his right and interest, he
is entitled to an award of attorney’s fees equivalent to 10% of the award.
 145

172