SECOND DIVISION

G.R. No. 151228 August 15, 2002

ROLANDO Y. TAN, petitioner,

vs.
LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF APPEALS, respondents.

MENDOZA, J.:

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

The following are the facts.

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City. Private
respondent Leovigildo Lagrama is a painter, making ad billboards and murals
for the motion pictures shown at the Empress, Supreme, and Crown Theaters for
more than 10 years, from September 1, 1988 to October 17, 1998.

On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: "Nangihi na naman ka sulod sa imong drawinganan." ("You again
urinated inside your work area.") When Lagrama asked what Tan was saying,
Tan told him, "Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa.
Guikan karon, wala nay drawing. Gawas." ("Don't say anything further. I don't
want you to draw anymore. From now on, no more drawing. Get out.")

Lagrama denied the charge against him. He claimed that he was not the only
one who entered the drawing area and that, even if the charge was true, it was
a minor infraction to warrant his dismissal. However, everytime he spoke, Tan
shouted "Gawas" ("Get out"), leaving him with no other choice but to leave the
premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City. He alleged that he
had been illegally dismissed and sought reinvestigation and payment of 13th
month pay, service incentive leave pay, salary differential, and damages.

Petitioner Tan denied that Lagrama was his employee. He asserted that
Lagrama was an independent contractor who did his work according to his
methods, while he (petitioner) was only interested in the result thereof. He cited
the admission of Lagrama during the conferences before the Labor Arbiter that
he was paid on a fixed piece-work basis, i.e., that he was paid for every painting
turned out as ad billboard or mural for the pictures shown in the three theaters,
on the basis of a "no mural/billboard drawn, no pay" policy. He submitted the
affidavits of other cinema owners, an amusement park owner, and those
supervising the construction of a church to prove that the services of Lagrama
were contracted by them. He denied having dismissed Lagrama and alleged
that it was the latter who refused to paint for him after he was scolded for his
habits.

As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi

directed the parties to file their position papers. On June 17, 1999, he rendered a
decision, the dispositive portion of which reads:

WHEREFORE, premises considered judgment is hereby ordered:

1. Declaring complainant's [Lagrama's] dismissal illegal and

2. Ordering respondents [Tan] to pay complainant the following:

A. Separation Pay - P 59,000.00

B. Backwages - 47,200.00
(from 17 October 1998 to 17
June 1999)

C. 13th month pay (3 years) - 17,700.00

D. Service Incentive Leave - 2, 949.99

Pay (3 years)

E. Damages - 10,000.00
 TOTAL [P136,849.99]

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

Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro
City, which, on June 30, 2000, rendered a decision4 finding Lagrama to be an
independent contractor, and for this reason reversing the decision of the Labor
Arbiter.

Respondent Lagrama filed a motion for reconsideration, but it was denied for
lack of merit by the NLRC in a resolution of September 29, 2000. He then filed a
petition for certiorari under Rule 65 before the Court of Appeals.

The Court of Appeals found that petitioner exercised control over Lagrama's
work by dictating the time when Lagrama should submit his billboards and
murals and setting rules on the use of the work area and rest room. Although it
found that Lagrama did work for other cinema owners, the appeals court held it
to be a mere sideline insufficient to prove that he was not an employee of Tan.
The appeals court also found no evidence of any intention on the part of
Lagrama to leave his job or sever his employment relationship with Tan.
Accordingly, on May 31, 2001, the Court of Appeals rendered a decision, the
dispositive portion of which reads:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The
Resolutions of the Public Respondent issued on June 30, 2000 and
September 29, 2000 are ANNULLED. The Decision of the Honorable Labor
Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby REINSTATED.

Petitioner moved for a reconsideration, but the Court of Appeals found no

reason to reverse its decision and so denied his motion for lack of merit.5 Hence,
this petition for review on certiorari based on the following assignments of errors:

I. With all due respect, the decision of respondent Court of Appeals in CA-
G.R. SP NO. 63160 is bereft of any finding that Public Respondent NLRC,
5th Division, had no jurisdiction or exceeded it or otherwise gravely
abused its discretion in its Resolution of 30 June 2000 in NLRC CA-NO. M-
004950-99.
 II. With all due respect, respondent Court of Appeals, absent any positive
finding on its part that the Resolution of 30 June 2000 of the NLRC is not
supported by substantial evidence, is without authority to substitute its
conclusion for that of said NLRC.

III. With all due respect, respondent Court of Appeals' discourse on

"freelance artists and painters" in the decision in question is misplaced or
has no factual or legal basis in the record.

IV. With all due respect, respondent Court of Appeals' opening statement
in its decision as to "employment," "monthly salary of P1,475.00" and "work
schedule from Monday to Saturday, from 8:00 o'clock in the morning up to
5:00 o'clock in the afternoon" as "facts" is not supported by the evidence
on record.

V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317
SCRA 420 [G.R. No. 111042 October 26, 1999] relied upon by respondent
Court of Appeals is not applicable to the peculiar circumstances of this
case.6

The issues raised boil down to whether or not an employer-employee

relationship existed between petitioner and private respondent, and whether
petitioner is guilty of illegally dismissing private respondent. We find the answers
to these issues to be in the affirmative.

I.

In determining whether there is an employer-employee relationship, we have

applied a "four-fold test," to wit: (1) whether the alleged employer has the
power of selection and engagement of employees; (2) whether he has control
of the employee with respect to the means and methods by which work is to be
accomplished; (3) whether he has the power to dismiss; and (4) whether the
employee was paid wages.7 These elements of the employer-employee
relationship are present in this case.

First. The existence in this case of the first element is undisputed. It was petitioner
who engaged the services of Lagrama without the intervention of a third party.
It is the existence of the second element, the power of control, that requires
discussion here.

Of the four elements of the employer-employee relationship, the "control test" is

the most important. Compared to an employee, an independent contractor is
one who carries on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under its own
responsibility according to its own manner and method, free from the control
and direction of the principal in all matters connected with the performance of
the work except as to the results thereof.8 Hence, while an independent
contractor enjoys independence and freedom from the control and supervision
of his principal, an employee is subject to the employer's power to control the
means and methods by which the employee's work is to be performed and
accomplished.

In the case at bar, albeit petitioner Tan claims that private respondent Lagrama
was an independent contractor and never his employee, the evidence shows
that the latter performed his work as painter under the supervision and control of
petitioner. Lagrama worked in a designated work area inside the Crown Theater
of petitioner, for the use of which petitioner prescribed rules. The rules included
the observance of cleanliness and hygiene and a prohibition against urinating in
the work area and any place other than the toilet or the rest rooms.9 Petitioner's
control over Lagrama's work extended not only to the use of the work area, but
also to the result of Lagrama's work, and the manner and means by which the
work was to be accomplished.

Moreover, it would appear that petitioner not only provided the workplace, but
supplied as well the materials used for the paintings, because he admitted that
he paid Lagrama only for the latter's services.10

Private respondent Lagrama claimed that he worked daily, from 8 o'clock in the
morning to 5 o'clock in the afternoon. Petitioner disputed this allegation and
maintained that he paid Lagrama P1,475.00 per week for the murals for the
three theaters which the latter usually finished in 3 to 4 days in one week.11 Even
assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a
week proves regularity in his employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his
position paper submitted to the NLRC, the pertinent portions of which stated:

Complainant did not know how to use the available comfort rooms or
toilets in and about his work premises. He was urinating right at the place
where he was working when it was so easy for him, as everybody else did
and had he only wanted to, to go to the comfort rooms. But no, the
complainant had to make a virtual urinal out of his work place! The place
then stunk to high heavens, naturally, to the consternation of respondents
and everyone who could smell the malodor.

...

Given such circumstances, the respondents had every right, nay all the
compelling reason, to fire him from his painting job upon discovery and his
admission of such acts. Nonetheless, though thoroughly scolded, he was
not fired. It was he who stopped to paint for respondents.12

By stating that he had the right to fire Lagrama, petitioner in effect

acknowledged Lagrama to be his employee. For the right to hire and fire is
another important element of the employer-employee relationship.13 Indeed,
the fact that, as petitioner himself said, he waited for Lagrama to report for work
but the latter simply stopped reporting for work reinforces the conviction that
Lagrama was indeed an employee of petitioner. For only an employee can
nurture such an expectancy, the frustration of which, unless satisfactorily
explained, can bring about some disciplinary action on the part of the
employer.

Third. Payment of wages is one of the four factors to be considered in

determining the existence of employer-employee relation. Wages are defined
as "remuneration or earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by
an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be
rendered."14 That Lagrama worked for Tan on a fixed piece-work basis is of no
moment. Payment by result is a method of compensation and does not define
the essence of the relation.15 It is a method of computing compensation, not a
basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status, depending on
whether the elements of an employer-employee relationship are present or
not.16

The Rules Implementing the Labor Code require every employer to pay his
employees by means of payroll.17 The payroll should show among other things,
the employee's rate of pay, deductions made, and the amount actually paid to
the employee. In the case at bar, petitioner did not present the payroll to
support his claim that Lagrama was not his employee, raising speculations
whether his failure to do so proves that its presentation would be adverse to his
case.18

The primary standard for determining regular employment is the reasonable

connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer.19 In this case, there is
such a connection between the job of Lagrama painting billboards and murals
and the business of petitioner. To let the people know what movie was to be
shown in a movie theater requires billboards. Petitioner in fact admits that the
billboards are important to his business.20

The fact that Lagrama was not reported as an employee to the SSS is not
conclusive on the question of whether he was an employee of
petitioner.21 Otherwise, an employer would be rewarded for his failure or even
neglect to perform his obligation.22

Neither does the fact that Lagrama painted for other persons affect or alter his
employment relationship with petitioner. That he did so only during weekends
has not been denied by petitioner. On the other hand, Samuel Villalba, for
whom Lagrama had rendered service, admitted in a sworn statement that he
was told by Lagrama that the latter worked for petitioner.23

Lagrama had been employed by petitioner since 1988. Under the law,
therefore, he is deemed a regular employee and is thus entitled to security of
tenure, as provided in Art. 279 of Labor Code:
 ART. 279. Security of Tenure. — In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.

This Court has held that if the employee has been performing the job for at least
one year, even if not continuously but intermittently, the repeated and
continuing need for its performance is sufficient evidence of the necessity, if not
indispensability, of that activity to the business of his employer. Hence, the
employment is also considered regular, although with respect only to such
activity, and while such activity exists.24

It is claimed that Lagrama abandoned his work. There is no evidence to show

this. Abandonment requires two elements: (1) the failure to report for work or
absence without valid or justifiable reason, and (2) a clear intention to sever the
employer-employee relationship, with the second element as the more
determinative factor and being manifested by some overt acts.25 Mere
absence is not sufficient. What is more, the burden is on the employer to show a
deliberate and unjustified refusal on the part of the employee to resume his
employment without any intention of returning.26 In the case at bar, the Court of
Appeals correctly ruled:

Neither do we agree that Petitioner abandoned his job. In order for

abandonment to be a just and valid ground for dismissal, the employer
must show, by clear proof, the intention of the employee to abandon his
job. . . .

In the present recourse, the Private Respondent has not established clear
proof of the intention of the Petitioner to abandon his job or to sever the
employment relationship between him and the Private Respondent. On
the contrary, it was Private Respondent who told Petitioner that he did not
want the latter to draw for him and thereafter refused to give him work to
do or any mural or billboard to paint or draw on.
 More, after the repeated refusal of the Private Respondent to give
Petitioner murals or billboards to work on, the Petitioner filed, with the Sub-
Regional Arbitration Branch No. X of the National Labor Relations
Commission, a Complaint for "Illegal Dismissal and Money Claims." Such
act has, as the Supreme Court declared, negate any intention to sever
employment relationship. . . .27

II.

The second issue is whether private respondent Lagrama was illegally dismissed.
To begin, the employer has the burden of proving the lawfulness of his
employee's dismissal.28 The validity of the charge must be clearly established in a
manner consistent with due process. The Implementing Rules of the Labor
Code29 provide that no worker shall be dismissed except for a just or authorized
cause provided by law and after due process. This provision has two aspects: (1)
the legality of the act of dismissal, that is, dismissal under the grounds provided
for under Article 282 of the Labor Code and (2) the legality in the manner of
dismissal. The illegality of the act of dismissal constitutes discharge without just
cause, while illegality in the manner of dismissal is dismissal without due
process.30

In this case, by his refusal to give Lagrama work to do and ordering Lagrama to
get out of his sight as the latter tried to explain his side, petitioner made it plain
that Lagrama was dismissed. Urinating in a work place other than the one
designated for the purpose by the employer constitutes violation of reasonable
regulations intended to promote a healthy environment under Art. 282(1) of the
Labor Code for purposes of terminating employment, but the same must be
shown by evidence. Here there is no evidence that Lagrama did urinate in a
place other than a rest room in the premises of his work.

Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code,
the Labor Arbiter found that the relationship between the employer and the
employee has been so strained that the latter's reinstatement would no longer
serve any purpose. The parties do not dispute this finding. Hence, the grant of
separation pay in lieu of reinstatement is appropriate. This is of course in addition
to the payment of backwages which, in accordance with the ruling
in Bustamante v. NLRC,31 should be computed from the time of Lagrama's
dismissal up to the time of the finality of this decision, without any deduction or
qualification.

The Bureau of Working Conditions32 classifies workers paid by results into two
groups, namely; (1) those whose time and performance is supervised by the
employer, and (2) those whose time and performance is unsupervised by the
employer. The first involves an element of control and supervision over the
manner the work is to be performed, while the second does not. If a piece
worker is supervised, there is an employer-employee relationship, as in this case.
However, such an employee is not entitled to service incentive leave pay since,
as pointed out in Makati Haberdashery v. NLRC33 and Mark Roche International
v. NLRC,34 he is paid a fixed amount for work done, regardless of the time he
spent in accomplishing such work.

WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing
that the Court of Appeals committed any reversible error. The decision of the
Court of Appeals, reversing the decision of the National Labor Relations
Commission and reinstating the decision of the Labor Arbiter, is AFFIRMED with
the MODIFICATION that the backwages and other benefits awarded to private
respondent Leovigildo Lagrama should be computed from the time of his
dismissal up to the time of the finality of this decision, without any deduction and
qualification. However, the service incentive leave pay awarded to him
is DELETED.

SO ORDERED.

Bellosillo, Quisumbing, and Corona, JJ., concur.

Footnotes

1 Per Justice Romeo J. Callejo, Sr. and concurred in by Justice Renato C.

Dacudao and Justice Perlita J. Tria Tirona.

2 Id., Annex B; id., p. 57.

3 CA Rollo, p. 61.
4 Per Commissioner Oscar N. Abella and concurred in by Presiding
Commissioner Salic B. Dumarpa and Commissioner Leon G. Gonzaga, Jr.

5 Annex B of the Petition for Review on Certiorari; Rollo, p. 57.

6 Petition, pp. 11-12; id., pp. 22-23.

7 See Ramos v. Court of Appeals, G.R. No. 124354, April 11, 2002; Santos v.
NLRC, 293 SCRA 113 (1998) citing Jimenez v. NLRC, 256 SCRA 84 (1996);
Sandigan Savings and Loan Bank, Inc. v. NLRC, 254 SCRA 126 (1996); and
Viaña v. Al-Lagadan, 99 Phil 408 (1956); "Brotherhood" Labor Unity
Movement of the Philippines v. Zamora, 147 SCRA 49 (1987).

8 De los Santos v. NLRC, G.R. No. 121327, Dec. 20, 2001.

9 Sworn Statement of Rolando Tan, p. 2; CA Rollo, p. 81.

10 Id., pp. 1-3; id., pp. 164-166.

11 Id., p. 2; id., p. 81.

12 NLRC Position Paper for Respondent [Tan], pp. 2-3; Rollo, pp. 72-73
(underscoring supplied).

13 See Ramos v. Court of Appeals, 321 SCRA 584 (1999); Austria v. NLRC,
312 SCRA 410 (1999).

14 Labor Code, Art. 97 (f).

15 Lambo v. NLRC, 317 SCRA 420 (1999) citing Villuga v. NLRC, 225 SCRA
537 (1993).

16 C.A. Azucena, Everyone's Labor Code 59 (2000).

17 Book III, Rule X, Sec. 6(a).

18 Revised Rules on Evidence, Rule 131, §3(e). See Villaruel v. NLRC, 284
SCRA 399 (1998).

19 Ganzon v. NLRC, 321 SCRA 434 (1999); Bernardo v. NLRC, 310 SCRA 186
(1999).
 20 NLRC Position Paper for Respondent [Tan], p. 4; Rollo, p. 74.

21 Lambo v. NLRC, 317 SCRA 420 (1999).

22 See Santos v. NLRC, 293 SCRA 113 (1998).

23 CA Rollo, p. 167.

24 Conti v. NLRC, 271 SCRA 114 (1997) citing De Leon v. NLRC, 176 SCRA
615 (1989).

25 Hyatt Taxi Services Inc. v. Catinoy, G.R. No. 143204, June 26,
2001 citing Mendoza v. NLRC, 310 SCRA 846 (1999).

26 Labor v. NLRC, 248 SCRA 183 (1995).

27 CA Decision, p. 10; Rollo, p. 53.

28 EDI Staff Builders International, Inc. v. Magsino, G.R. No. 139430, June 20,
2001 citing Farrol v. Court of Appeals, 325 SCRA 331 (2000).

29 Book V, Rule XXIII, §2 and, again, in Book VI, Rule I, §2.

30 Shoemart, Inc. v. NLRC, 176 SCRA 385 (1989).

31 265 SCRA 61 (1996).

32 Letter of the Bureau of Working Conditions to the Law Firm of Nittoreda

and Nasser, June 26, 1990 cited in 1 Azucena, The Labor Code with
Comments and Cases 321 (1992).

33 179 SCRA 448 (1989).

34 313 SCRA 356 (1999) citing Omnibus Rules Implementing The Labor
Code, Bk. III, Rule V, §1(d).

SECOND DIVISION

G.R. No. 156367 May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,
vs.
ANTONIO BAUTISTA, respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and

Resolution2 of the Court of Appeals affirming the Decision3 of the National Labor
Relations Commission (NLRC). The NLRC ruling modified the Decision of the
Labor Arbiter (finding respondent entitled to the award of 13th month pay and
service incentive leave pay) by deleting the award of 13th month pay to
respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by

petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with
travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila
and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven
percent (7%) of the total gross income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta.
Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear
portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp
curve without giving any warning.

Respondent averred that the accident happened because he was compelled

by the management to go back to Roxas, Isabela, although he had not slept for
almost twenty-four (24) hours, as he had just arrived in Manila from Roxas,
Isabela. Respondent further alleged that he was not allowed to work until he
fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost
of repair of the damaged buses and that despite respondent’s pleas for
reconsideration, the same was ignored by management. After a month,
management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal
with Money Claims for nonpayment of 13th month pay and service incentive
leave pay against Autobus.

Petitioner, on the other hand, maintained that respondent’s employment was

replete with offenses involving reckless imprudence, gross negligence, and
dishonesty. To support its claim, petitioner presented copies of letters, memos,
irregularity reports, and warrants of arrest pertaining to several incidents wherein
respondent was involved.

Furthermore, petitioner avers that in the exercise of its management

prerogative, respondent’s employment was terminated only after the latter was
provided with an opportunity to explain his side regarding the accident on 03
January 2000.

On 29 September 2000, based on the pleadings and supporting evidence

presented by the parties, Labor Arbiter Monroe C. Tabingan promulgated a
Decision,4 the dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint

for Illegal Dismissal has no leg to stand on. It is hereby ordered DISMISSED,
as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent

must pay to the complainant the following:

a. his 13th month pay from the date of his hiring to the date of his
dismissal, presently computed at P78,117.87;

b. his service incentive leave pay for all the years he had been in
service with the respondent, presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby

dismissed for lack of merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the
decision to the NLRC which rendered its decision on 28 September 2001, the
decretal portion of which reads:
 [T]he Rules and Regulations Implementing Presidential Decree No. 851,
particularly Sec. 3 provides:

"Section 3. Employers covered. – The Decree shall apply to all

employers except to:

xxx xxx xxx

e) employers of those who are paid on purely commission,

boundary, or task basis, performing a specific work, irrespective of
the time consumed in the performance thereof. xxx."

Records show that complainant, in his position paper, admitted that he

was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the

assailed Decision by deleting the award of 13th month pay to the
complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by

deleting the award of 13th month pay. The other findings are AFFIRMED.6

In other words, the award of service incentive leave pay was maintained.
Petitioner thus sought a reconsideration of this aspect, which was subsequently
denied in a Resolution by the NLRC dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner
sought the review of said decision with the Court of Appeals which was
subsequently denied by the appellate court in a Decision dated 06 May 2002,
the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of

merit; and the assailed Decision of respondent Commission in NLRC NCR
CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.7

Hence, the instant petition.

ISSUES
1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article
291 of the Labor Code, as amended, is applicable to respondent’s claim of
service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of
Article 95 of the Labor Code vis-à-vis Section 1(D), Rule V, Book III of the
Implementing Rules and Regulations of the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five days with
pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. – This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is

unsupervised by the employer including those who are engaged on
task or contract basis, purely commission basis, or those who are
paid in a fixed amount for performing work irrespective of the time
consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the
grant of service incentive leave has been delimited by the Implementing Rules
and Regulations of the Labor Code to apply only to those employees not
explicitly excluded by Section 1 of Rule V. According to the Implementing Rules,
Service Incentive Leave shall not apply to employees classified as "field
personnel." The phrase "other employees whose performance is unsupervised by
the employer" must not be understood as a separate classification of employees
to which service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel under the
Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."8

The same is true with respect to the phrase "those who are engaged on task or
contract basis, purely commission basis." Said phrase should be related with
"field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they
follow.9 Hence, employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service
incentive leave, unless, they fall under the classification of field personnel.

Therefore, petitioner’s contention that respondent is not entitled to the grant of

service incentive leave just because he was paid on purely commission basis is
misplaced. What must be ascertained in order to resolve the issue of propriety of
the grant of service incentive leave to respondent is whether or not he is a field
personnel.

According to Article 82 of the Labor Code, "field personnel" shall refer to non-
agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. This
definition is further elaborated in the Bureau of Working Conditions (BWC),
Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association10 which states that:

As a general rule, [field personnel] are those whose performance of their

job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and
days of work cannot be determined with reasonable certainty; hence,
they are paid specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific times,
employees including drivers cannot be said to be field personnel despite
the fact that they are performing work away from the principal office of
the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under
said advisory opinion, no employee would ever be considered a field personnel
because every employer, in one way or another, exercises control over his
employees. Petitioner further argues that the only criterion that should be
considered is the nature of work of the employee in that, if the employee’s job
requires that he works away from the principal office like that of a messenger or
a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of
a "field personnel" is not merely concerned with the location where the
employee regularly performs his duties but also with the fact that the
employee’s performance is unsupervised by the employer. As discussed above,
field personnel are those who regularly perform their duties away from the
principal place of business of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty. Thus, in order to
conclude whether an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined with reasonable
certainty by the employer. In so doing, an inquiry must be made as to whether
or not the employee’s time and performance are constantly supervised by the
employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus
companies, there are its inspectors assigned at strategic places who
board the bus and inspect the passengers, the punched tickets, and the
conductor’s reports. There is also the mandatory once-a-week car barn or
shop day, where the bus is regularly checked as to its mechanical,
electrical, and hydraulic aspects, whether or not there are problems
thereon as reported by the driver and/or conductor. They too, must be at
specific place as [sic] specified time, as they generally observe prompt
departure and arrival from their point of origin to their point of destination.
In each and every depot, there is always the Dispatcher whose function is
precisely to see to it that the bus and its crew leave the premises at
specific times and arrive at the estimated proper time. These, are present
in the case at bar. The driver, the complainant herein, was therefore
under constant supervision while in the performance of this work. He
cannot be considered a field personnel.11
We agree in the above disquisition. Therefore, as correctly concluded by the
appellate court, respondent is not a field personnel but a regular employee who
performs tasks usually necessary and desirable to the usual trade of petitioner’s
business. Accordingly, respondent is entitled to the grant of service incentive
leave.

The question now that must be addressed is up to what amount of service

incentive leave pay respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether
or not the three (3)-year prescriptive period under Article 291 of the Labor Code
is applicable to respondent’s claim of service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-
employee relationship shall be filed within three (3) years from the time the
cause of action accrued; otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be
answered is when does the cause of action for money claims accrue in order to
determine the reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a
right in favor of the plaintiff by whatever means and under whatever law it arises
or is created; (2) an obligation on the part of the named defendant to respect
or not to violate such right; and (3) an act or omission on the part of such
defendant violative of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the
time when the third element of a cause of action transpired. Stated differently,
in the computation of the three-year prescriptive period, a determination must
be made as to the period when the act constituting a violation of the workers’
right to the benefits being claimed was committed. For if the cause of action
accrued more than three (3) years before the filing of the money claim, said
cause of action has already prescribed in accordance with Article 291.13

Consequently, in cases of nonpayment of allowances and other monetary

benefits, if it is established that the benefits being claimed have been withheld
from the employee for a period longer than three (3) years, the amount
pertaining to the period beyond the three-year prescriptive period is therefore
barred by prescription. The amount that can only be demanded by the
aggrieved employee shall be limited to the amount of the benefits withheld
within three (3) years before the filing of the complaint.14

It is essential at this point, however, to recognize that the service incentive leave
is a curious animal in relation to other benefits granted by the law to every
employee. In the case of service incentive leave, the employee may choose to
either use his leave credits or commute it to its monetary equivalent if not
exhausted at the end of the year.15 Furthermore, if the employee entitled to
service incentive leave does not use or commute the same, he is entitled upon
his resignation or separation from work to the commutation of his accrued
service incentive leave. As enunciated by the Court in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay
to workers in all establishments, subject to a few exceptions. Section 2,
Rule V, Book III of the Implementing Rules and Regulations provides that
"[e]very employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay." Service
incentive leave is a right which accrues to every employee who has
served "within 12 months, whether continuous or broken reckoned from
the date the employee started working, including authorized absences
and paid regular holidays unless the working days in the establishment as
a matter of practice or policy, or that provided in the employment
contracts, is less than 12 months, in which case said period shall be
considered as one year." It is also "commutable to its money equivalent if
not used or exhausted at the end of the year." In other words, an
employee who has served for one year is entitled to it. He may use it as
leave days or he may collect its monetary value. To limit the award to
three years, as the solicitor general recommends, is to unduly restrict such
right.17 [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of

an entitled employee to claim his service incentive leave pay accrues from the
moment the employer refuses to remunerate its monetary equivalent if the
employee did not make use of said leave credits but instead chose to avail of its
commutation. Accordingly, if the employee wishes to accumulate his leave
credits and opts for its commutation upon his resignation or separation from
employment, his cause of action to claim the whole amount of his accumulated
service incentive leave shall arise when the employer fails to pay such amount
at the time of his resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service
incentive leave, we can conclude that the three (3)-year prescriptive period
commences, not at the end of the year when the employee becomes entitled
to the commutation of his service incentive leave, but from the time when the
employer refuses to pay its monetary equivalent after demand of commutation
or upon termination of the employee’s services, as the case may be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in
keeping with the rudimentary principle that in the implementation and
interpretation of the provisions of the Labor Code and its implementing
regulations, the workingman’s welfare should be the primordial and paramount
consideration.18 The policy is to extend the applicability of the decree to a
greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum
aid and protection to labor.19

In the case at bar, respondent had not made use of his service incentive leave
nor demanded for its commutation until his employment was terminated by
petitioner. Neither did petitioner compensate his accumulated service incentive
leave pay at the time of his dismissal. It was only upon his filing of a complaint for
illegal dismissal, one month from the time of his dismissal, that respondent
demanded from his former employer commutation of his accumulated leave
credits. His cause of action to claim the payment of his accumulated service
incentive leave thus accrued from the time when his employer dismissed him
and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive
leave pay only commenced from the time the employer failed to compensate
his accumulated service incentive leave pay at the time of his dismissal. Since
respondent had filed his money claim after only one month from the time of his
dismissal, necessarily, his money claim was filed within the prescriptive period
provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The

assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby
AFFIRMED. No Costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Footnotes

1 CA-G.R. SP No. 68395, dated 06 May 2002, penned by Associate Justice

Andres B. Reyes, Jr. with Associate Justices Conrado M. Vasquez, Jr. and
Mario L. Guariña, III, concurring.

2 Dated 12 December 2002.

3 NLRC NCR CA No. 026584-2000 (NLRC Case No. RAB CAR 02-0088-00),
dated 28 September 2001.

4 NLRC Case No. RAB-CAR-02-0088-00.

5 Rollo, pp. 46-47.

6 Rollo, pp. 52-53.

7 CA Decision, p. 10; Rollo, p. 24.

8 See Mercidar Fishing Corporation v. NLRC, G.R. No. 112574, 08 October

1998, 297 SCRA440.

9 Cebu Institute of Technology v. Ople, G.R. No. L-58870, 18 December

1987, 156 SCRA 629, 672, citing Vera v. Cuevas, G.R. No. L-33693, 31 May
1979, 90 SCRA 379.

10 06 April 1989; Rollo. p. 20.

 11 Rollo, pp. 45-46.

12 Baliwag Transit, Inc. v. Ople, G.R. No. 57642, 16 March 1989, 171 SCRA
250, citing Agric. Credit & Cooperative Financing Administration v. Alpha
Ins. & Surety Co., Inc., G.R. No. L-24566, 29 July 1968, 24 SCRA 151; Summit
Guaranty and Insurance Co., Inc. v. De Guzman, G.R. No. L-50997, 30
June 1987, 151 SCRA 389; Tormon v. Cutanda, G.R. No. L-18785, 23
December 1963, 9 SCRA 698.

13 See De Guzman, et al. v. CA and Nasipit Lumber Co., G.R. No.132257,

12 October 1998, 297 SCRA 743.

14 See E. Ganzon, Inc. v. NLRC, G.R. No. 123769, 22 December 1999, 321
SCRA 434.

15 Fernandez v. NLRC, G.R. No. 105892, 28 January 1998, 349 Phil 65.

16 Ibid.

17 Ibid., pp. 94-95.

18 Abella v. NLRC, G.R. No. L-71813, 20 July 1987, 152 SCRA

140, citing Volkschel Labor Union v. Bureau of Labor Relations, G.R. No. L-
45824, 19 June 1985, 137 SCRA 43.

19 Sarmiento v. Employees’ Compensation Commission, G.R. No. L-68648,

24 September 1986, 144 SCRA 421, citing Cristobal v. Employees’
Compensation Commission, G.R. No. L-49280, 26 February 1981, 103 SCRA
329; Acosta v. Employees’ Compensation Commission, G.R. No. L-55464,
12 November 1981, 109 SCRA 209.

FIRST DIVISION

G.R. No. 160325 October 4, 2007

ROQUE S. DUTERTE, petitioner,

vs.
KINGSWOOD TRADING CO., INC., FILEMON LIM and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
 DECISION

GARCIA, J.:

By this petition for review on certiorari, petitioner Roque S. Duterte seeks the
review and setting aside of the decision1 dated June 20, 2003 of the Court of
Appeals (CA) in CA-G.R. SP No. 71729, as reiterated in its resolution2 of October
5, 2003, affirming an earlier resolution3 of the National Labor Relations
Commission (NLRC) which ruled that petitioner was not illegally dismissed from
employment due to disease under Article 284 of the Labor Code.

The facts:

In September 1993, petitioner was hired as truck/trailer driver by respondent

Kingswood Trading Company, Inc. (KTC) of which co-respondent Filemon Lim is
the President. Petitioner was on the 6:00 a.m. – 6:00 p.m. shift. He averaged 21
trips per month, getting P700 per trip. When not driving, petitioner was assigned
to clean and maintain respondent KTC’s equipment and vehicles for which he
was paid P125 per day. Regularly, petitioner would be seconded by respondent
Filemon Lim to drive for one of KTC’s clients, the Philippine National Oil
Corporation, but always subject to respondents’ convenience.

On November 8, 1998, petitioner had his first heart attack and was confined for
two weeks at the Philippine Heart Center (PHC). This was confirmed by
respondent KTC which admitted that petitioner was declared on sick leave with
corresponding notification.

A month later, petitioner returned to work armed with a medical certificate

signed by his attending physician at the PHC, attesting to petitioner’s fitness to
work. However, said certificate was not honored by the respondents who
refused to allow petitioner to work.

In February 1999, petitioner suffered a second heart attack and was again
confined at the PHC. Upon release, he stayed home and spent time to
recuperate.

In June 1999, petitioner attempted to report back to work but was told to look
for another job because he was unfit. Respondents refused to declare petitioner
fit to work unless physically examined by the company physician. Respondents’
promise to pay petitioner his separation pay turned out to be an empty one.
Instead, petitioner was presented, for his signature, a document as proof of his
receipt of the amount of P14,375.00 as first installment of his Social Security
System (SSS) benefits. Having received no such amount, petitioner refused to
affix his signature thereon and instead requested for the necessary documents
from respondents to enable him to claim his SSS benefits, but the latter did not
heed his request.

On November 11, 1999, petitioner filed against his employer a complaint for
illegal dismissal and damages.

In a decision4 dated September 26, 2000, the labor arbiter found for the
petitioner. However, while categorically declaring that petitioner’s dismissal was
illegal, the labor arbiter, instead of applying Article 2795 of the Labor Code on
illegal dismissals, applied Article 284 on Disease as ground for termination on the
rationale that since the respondents admitted that petitioner could not be
allowed back to work because of the latter’s disease, the case fell within the
ambit of Article 284. We quote the fallo of the labor arbiter’s decision:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered

declaring complainant to have been terminated from employment on
the ground that he has been suffering from a disease.

Respondents are hereby directed to pay complainant as follows:

1. Separation pay equivalent to one-half (1/2) month salary for

every year of service computed at six (6) years of service in the
amount of Forty-Two Thousand (P42,000.00) Pesos.

2. Holiday pay for three (3) years in the amount of Twenty-One

Thousand (P21,000.00) Pesos; and

3. Service Incentive Leave pay for three (3) years in the amount of
Ten Thousand (P10,000.00) Pesos.

All other claims herein sought are hereby denied for lack of merit and
factual basis.

SO ORDERED.
On respondents’ appeal, the NLRC, in its Resolution6 of April 24, 2002, set aside
the labor arbiter’s decision, ruling that Article 284 of the Labor Code has no
application to this case, there being "no illegal dismissal to speak of." The NLRC
accordingly dismissed petitioner’s complaint for illegal dismissal, thus:

WHEREFORE, the decision appealed from is VACATED and SET ASIDE.7 A

new one is hereby entered DISMISSING the instant case for lack of merit.

Therefrom, petitioner went on certiorari to the CA in CA-G.R. SP No. 71729. In the

herein assailed decision dated June 20, 2003, the CA upheld the NLRC
Resolution, saying that the Commission committed no grave abuse of discretion
in holding that petitioner was not illegally dismissed and could not be granted
any relief. With his motion for a reconsideration having been denied by the CA
in its resolution of October 5, 2003, petitioner is now with this Court via the
present recourse.

We REVERSE.

At bottom, this case involves the simple issue of the legality of one’s termination
from employment made complicated, however, by over analysis. Simply put,
the question at hand pivots on who has the onus of presenting the necessary
medical certificate to justify what would otherwise be classified as legal or
illegal, as the case may be, dismissal from the service. The following may be
another formulation of the issue: For purposes of Article 284 of the Labor Code,
would the dismissal of an employee on the ground of disease under the said
Article 284 still require the employer to present a certification from a competent
public health authority that the disease is of such a nature that it could not be
cured within a period of six months even with proper medical treatment? To
both the NLRC and the CA, a dismissal on the ground of disease under Article
284 of the Code is illegal only if the employee himself presents the required
certification from the proper health authority. Since, as in this case, petitioner
failed to produce such certification, his dismissal could not be illegal.

In the precise words of the NLRC which the CA effectively affirmed:

Neither can it be gainsaid that Article 284 of the Labor Code applies in
the instant case since the complainant [petitioner] failed to establish that
he is suffering from a disease and his continued employment is prohibited
 by law or prejudicial to his health or to the health of his co-employees nor
was he able to prove that his illness is of such nature or at such stage that
it cannot be cured within a period of six months even with proper
treatment.8

In order for the complainant to be covered by Article 284 of the Labor

Code, he must first present a certification by a competent public health
authority that his continued employment will result in the aforesaid
consequences, but unfortunately for the complainant, we find none in the
instant case. For the respondents to require the complainant to submit a
medical certificate showing that he is already physically fit as a condition
of his continued employment under the prevailing circumstance cannot
be considered as neither harsh nor oppressive. xxx

Prescinding from the above, there is no illegal dismissal to speak of. This
finding is further strengthened by the fact that no termination letter or
formal notice of dismissal was adduced to prove that complainant’s
services have been terminated. Considering that no illegal dismissal took
place, the complainant’s claim that his right to due process of law had
been violated finds no application to the case at bar. (Emphasis added).

The Court disagrees with the NLRC and CA.

Article 284 of the Labor Code explicitly provides:

Art. 284. DISEASE AS GROUND FOR TERMINATION. -- An employer may

terminate the services of an employee who has been found to be
suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid separation pay equivalent to
at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months
being considered as one (1) whole year.

Corollarily, in order to validly terminate employment on the basis of disease,

Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code
requires:
 Disease as a ground for dismissal. -- Where the employee suffers from a
disease and his continued employment is prohibited by law or prejudicial
to his health or to the health of his co-employees, the employer shall not
terminate his employment unless there is a certification by a competent
public health authority that the disease is of such nature or at such a
stage that it cannot be cured within a period of six (6) months even with
proper medical treatment. If the disease or ailment can be cured within
the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such
employee to his former position immediately upon the restoration of his
normal health. (Book VI, Rule 1, Sec. 8 of the Implementing Rules)

In a very real sense, both the NLRC and the appellate court placed on the
petitioner the burden of establishing, by a certification of a competent public
authority, that his ailment is such that it cannot be cured within a period of six
months even with proper medical treatment. And pursuing their logic, petitioner
could not claim having been illegally dismissed due to disease, failing, as he did,
to present such certification.

To be sure, the NLRC’s above posture is, to say the least, without basis in law and
jurisprudence. And when the CA affirmed the NLRC, the appellate court in
effect placed on the petitioner the onus of proving his entitlement to separation
pay and thereby validated herein respondents’ act of dismissing him from
employment even without proof of existence of a legal ground for dismissal.

The law is unequivocal: the employer, before it can legally dismiss its employee
on the ground of disease, must adduce a certification from a competent public
authority that the disease of which its employee is suffering is of such nature or
at such a stage that it cannot be cured within a period of six months even with
proper treatment.

Here, the record does not contain the required certification. And when the
respondents asked the petitioner to look for another job because he was unfit to
work, such unilateral declaration, even if backed up by the findings of its
company doctors, did not meet the quantum requirement mandated by the
law, i.e., there must be a certification by a competent public authority.9
For sure, the posture taken by both the NLRC and the CA is inconsistent with this
Court’s pronouncement in Tan v. National Labor Relations Commission,10 thus:

Consistent with the Labor Code state policy of affording protection to

labor and of liberal construction of labor laws in favor of the working class,
Sec. 8, Rule 1, Book VI, of the Omnibus Rules Implementing the Labor
Code provides – Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or
to the health of his co-employees, the employer shall not terminate his
employment, unless there is a certification by a competent public
authority that the disease is of such nature or at such a stage, that it
cannot be cured within a period of six (6) months even with proper
medical treatment.. There is absolutely nothing on record to show that
such a certification was ever obtained by [the employer] much less that
one was issued by a competent public authority …[o]n the contrary, what
appears on record is a Medical Certificate dated May 5, 1999 issued by
Dr. Lenita C. de Castro certifying to the contrary, i.e., that [the employee]
was in fact already fit to return to work. However, [the employer] did not
accept the certificate and insisted that [the employee] present one
issued by a government physician. For his failure to present such a
certificate, [the employee] was penalized with dismissal. Obviously, the
condition imposed by [the employer] finds no basis under the law. To
reiterate, contrary to [the employer’s] insistence that [the employee] first
obtain a medical certificate attesting that he was already cured of
pulmonary tuberculosis, the abovequoted Sec. 9, Rule 1, Book VI, of the
Omnibus Rules is clear that the burden is upon [the employer] not [the
employee] to justify the dismissal with a certificate public authority that
[the employee’s] disease is at such stage or of such nature that it cannot
be cured within six (6) months even with proper medical treatment. For
[the employer’s] blatant failure to present one, we can only rule that [the
employee’s] dismissal, like that of Garrido, is illegal, invalid and
unjustified. (Emphasis and words in brackets supplied.)

In Triple Eight Integrated Services, Inc. v. NLRC,11 the Court explains why the
submission of the requisite medical certificate is for the employer’s compliance,
thus:
 The requirement for a medical certificate under Article 284 of the Labor
Code cannot be dispensed with; otherwise, it would sanction the
unilateral and arbitrary determination by the employer of the gravity or
extent of the employee’s illness and thus defeat the public policy on the
protection of labor.

In thus ruling out an illegal dismissal situation in the instant case, the CA
effectively agreed with the NLRC’s view that the fact of dismissal must be
evidenced by positive and overt acts, citing Veterans Phil. Scout Security
Agency v. NLRC.12 Said case, however, is not on all fours with the present one.
In Veterans, the employer offered the complainant-employee a monthly cash
allowance and other benefit pending a new assignment. Therein, the employee
was not forthrightly nor constructively dismissed. In fact, the employee
in Veterans was found to be in bad faith as he filed his complaint for illegal
dismissal the day immediately after he accepted the company’s offer of
employment benefits. Hence, the Court’s ruling in Veterans that the fact of
dismissal must be evidenced by positive and overt acts indicating the intention
to dismiss. These considerations do not obtain here. Petitioner was not allowed
back to work. Neither did he receive any monetary assistance from his
employer, and, worse, respondents refused to give him the necessary
documents to enable him to claim his SSS benefits.

Much was made by the NLRC – and the CA – about petitioner’s refusal to
comply with respondents’ order to submit a medical certificate – irresistibly
implying that such refusal is what constrained them to refuse to take petitioner
back in.

We are not persuaded.

Even assuming, in gratia argumenti, that petitioner committed what may be

considered an act of insubordination for refusing to present a medical
certificate, such offense, without more, certainly did not warrant the latter’s
placement in a floating status, a veritable dismissal, and deprived of his only
source of livelihood.

We are not unmindful of the connection between the nature of petitioner’s

disease and his job as a truck/trailer driver. We are also fully aware that
petitioner’s job places at stake the safety of the public. However, we do not
agree with the NLRC that petitioner was validly dismissed because his continued
employment was prohibited by the basic legal mandate that reasonable
diligence must be exercised to prevent prejudice to the public, which justified
respondents in refusing work to petitioner. Petitioner could have been admitted
back to work performing other tasks, such as cleaning and maintaining
respondent company’s machine and transportation assets.

As a final consideration, the Court notes that the NLRC, as sustained by the CA,
considered the petitioner as a field worker and, on that basis, denied his claim
for benefits under Articles 9413 to 9514 of the Labor Code, such as holiday pay
and service incentive leave pay. Article 82 of the Code lists personnel who are
not entitled to the benefits aforementioned.15 Among the excluded group are
"field personnel," referring to non-agricultural employees who regularly perform
their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. As a general proposition, field personnel are those
whose job/service are not or cannot be effectively monitored by the employer
or his representative, their workplace being away from the principal office and
whose hours and days of work cannot be determined with reasonable certainty.
Field personnel are paid specific amount for rendering specific service or
performing specific work.

If required to be at specific places at specific times, employees, including

drivers, cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employer. Thus, to
determine whether an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined with reasonable
certainty by the employer. In so doing, an inquiry must be made as to whether
or not the employee’s time and performance are constantly supervised by the
employer.16

Guided by the foregoing norms, petitioner was definitely a regular employee of

respondent company and not its field personnel, as the term is used in the Labor
Code. As it were, he was based at the principal office of the respondent
company. His actual work hours, i.e., from 6:00 a.m. to 6:00 p.m., were
ascertainable with reasonable certainty. He averaged 21 trips per month. And if
not driving for the company, he was paid P125.00 per day for cleaning and
maintaining KTC’s equipment. Not falling under the category of field personnel,
petitioner is consequently entitled to both holiday pay and service incentive
leave pay, as mandated by Articles 94 and 95 of the Labor Code.

All told, we rule and so hold that petitioner’s dismissal did not comply with both
the substantive and procedural aspects of due process. Clearly, his dismissal is
tainted with invalidity.17

WHEREFORE, the assailed decision of the CA in CA-G.R. SP No.

71729 is REVERSED and SET ASIDE. Respondents are declared guilty of illegal
dismissal and are ordered to pay petitioner separation pay equivalent to one (1)
month pay for every year of service, in lieu of his reinstatement, plus his full
backwages from the time his employment was terminated up to the time this
Decision becomes final. For this purpose, let this case be REMANDED to the labor
arbiter for the computation of petitioner’s separation pay, backwages and
other monetary awards due him.

Costs against respondents.

SO ORDERED.

Puno, C.J., Chairperson, Sandoval-Gutierrez, Corona, Azcuna, JJ., concur.

Footnotes

1 Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices

Rodrigo V. Cosico and Hakim S. Abdulwahid, concurring; rollo, pp. 35-39.

2 Id. at 33.

3 Id. at 46-52.

4 Id. at 40-45.

5 Security of Tenure. - In cases of regular employment, the employer shall

not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to
his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.

6 Rollo, pp. 46-52.

7 Id. at 52.

8 Id. at 51.

9 Cebu Royal Plant v. Deputy Minister of Labor, G.R. No. L-58639, August
12, 1987, 153 SCRA 38.

10 G.R. No. 116807, April 14, 1997, 271 SCRA 216.

11 359 Phil. 955, 968 (1998).

12 G.R. Nos. L-78062 and 83927, June 28, 1989, 174 SCRA 347.

13 ART. 94. RIGHT TO HOLIDAY PAY. – (a) Every worker shall be paid his
regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers; xxx

14 ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. – (a) Every employee who
has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.

15 Azucena, Everyone’s Labor Code, 2001 ed., p. 57.

16 Auto BusTtransport Systems, Inc. v. Antonio Bautista, G.R. No. 156367,

May 16, 2005, 458 SCRA 578.

17 Sy v. Court of Appeals, G.R. No. 142293, February 27, 2003, 398 SCRA
301, 312.

FIRST DIVISION
G.R. No. 123938 May 21, 1998

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its members,
ANA MARIE OCAMPO, MARY INTAL, ANNABEL CARESO, MARLENE MELQIADES,
IRENE JACINTO, NANCY GARCIA, IMELDA SARMIENTO, LENITA VIRAY, GINA
JACINTO, ROSEMARIE DEL ROSARIO, CATHERINE ASPURNA, WINNIE PENA, VIVIAN
BAA, EMILY LAGMAN, LILIAN MARFIL, NANCY DERACO, JANET DERACO, MELODY
JACINTO, CAROLYN DIZON, IMELDA MANALOTO, NORY VIRAY, ELIZA SALAZAR,
GIGI MANALOTO, JOSEFINA BASILIO, MARY ANN MAYATI, ZENAIDA GARCIA,
MERLY CANLAS, ERLINDA MANALANG, ANGELINA QUIAMBAO, LANIE GARCIA,
ELVIRA PIEDRA, LOURDES PANLILIO, LUISA PANLILIO, LERIZA PANLILIO, ALMA
CASTRO, ALDA DAVID, MYRA T. OLALIA, MARIFE PINLAC, NENITA DE GUZMAN,
JULIE GACAD, EVELYN MANALO, NORA PATIO, JANETH CARREON, ROWENA
MENDOZA, ROWENA MANALO, LENY GARCIA, FELISISIMA PATIO, SUSANA
SALOMON, JOYDEE LANSANGAN, REMEDIOS AGUAS, JEANIE LANSANGAN,
ELIZABETH MERCADO, JOSELYN MANALESE, BERNADETH RALAR, LOLITA ESPIRITU,
AGNES SALAS, VIRGINIA MENDIOLA, GLENDA SALITA, JANETH RALAR, ERLINDA
BASILIO, CORA PATIO, ANTONIA CALMA, AGNES CARESO, GEMMA BONUS,
MARITESS OCAMPO, LIBERTY GELISANGA, JANETH MANARANG, AMALIA DELA
CRUZ, EVA CUEVAS, TERESA MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA
CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE MANABAT, ROSARIO
DIMATULAC, NYMPA TUAZON, DAIZY TUASON, ERLINDA NAVARRO, EMILY
MANARANG, EMELITA CAYANAN, MERCY CAYANAN, LUZVIMINDA CAYANAN,
ANABEL MANALO, SONIA DIZON, ERNA CANLAS, MARIAN BENEDICTA, DOLORES
DOLETIN, JULIE DAVID, GRACE VILLANUEVA, VIRGINIA MAGBAG, CORAZON
RILLION, PRECY MANALILI, ELENA RONOZ, IMELDA MENDOZA, EDNA CANLAS and
ANGELA CANLAS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO KEHYENG and MRS. EVELYN
KEHYENG, respondents.

DAVIDE, JR., J.:

In this special civil action for certiorari under Rule 65, petitioners seek to reverse
the 29 March 1995 resolution 1 of the National Labor Relations Commission
(NLRC) in NLRC RAB III Case No. 01-1964-91 which affirmed the Decision 2 of
Labor Arbiter Ariel C. Santos dismissing their complaint for utter lack of merit.

The antecedents of this case, as summarized by the Office of the Solicitor

General in its Manifestation and Motion in Lieu of Comment, 3 are as follows:

The 99 persons named as petitioners in this proceeding were rank-

and-file employees of respondent Empire Food Products, which
hired them on various dates (Paragraph 1, Annex "A" of Petition,
Annex "B;" Page 2, Annex "F" of Petition).

Petitioners filed against private respondents a complaint for

payment of money claim[s] and for violation of labor standard[s]
laws (NLRC Case No. RAB-111-10-1817-90). They also filed a petition
for direct certification of petitioner Labor Congress of the Philippines
as their bargaining representative (Case No. R0300-9010-RU-005).

On October 23, 1990, petitioners represented by LCP President

Benigno B. Navarro, Sr. and private respondents Gonzalo Kehyeng
and Evelyn Kehyeng in behalf of Empire Food Products, Inc. entered
into a Memorandum of Agreement which provided, among others,
the following:

1. That in connection with the pending Petition for Direct

Certification filed by the Labor Congress with the DOLE,
Management of the Empire Food Products has no objection [to] the
direct certification of the LCP Labor Congress and is now
recognizing the Labor Congress of the Philippines (LCP) and its
Local Chapter as the SOLE and EXCLUSIVE Bargaining Agent and
Representative for all rank and file employees of the Empire Food
Products regarding "WAGES, HOURS Of WORK, AND OTHER TERMS
AND CONDITIONS OF EMPLOYMENT;"

2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90

pending with the NLRC parties jointly and mutually agreed that the
issues thereof, shall be discussed by the parties and resolve[d]
during the negotiation of the Collective Bargaining Agreement;

3. That Management of the Empire Food Products shall make the

proper adjustment of the Employees Wages within fifteen (15) days
from the signing of this Agreement and further agreed to register all
the employees with the SSS;

4. That Employer, Empire Food Products thru its Management

agreed to deduct thru payroll deduction UNION DUES and other
Assessment[s] upon submission by the LCP Labor Congress individual
Check-Off Authorization[s] signed by the Union Members indicating
the amount to be deducted and further agreed all deduction[s]
made representing Union Dues and Assessment[s] shall be remitted
immediately to the LCP Labor Congress Treasurer or authorized
representative within three (3) or five (5) days upon deductions [sic],
Union dues not deducted during the period due, shall be refunded
or reimbursed by the Employer/Management.
Employer/Management further agreed to deduct Union dues from
non-union members the same amount deducted from union
members without need of individual Check-Off Authorizations [for]
Agency Fee;

5. That in consideration [of] the foregoing covenant, parties jointly

and mutually agreed that NLRC CASE NO. RAB-III-10-1817-90 shall
be considered provisionally withdrawn from the Calendar of the
National Labor Relations Commission (NLRC), while the Petition for
direct certification of the LCP Labor Congress parties jointly move
for the direct certification of the LCP Labor Congress;

6. That parties jointly and mutually agreed that upon signing of this
Agreement, no Harassments [sic], Threats, Interferences [sic] of their
respective rights under the law, no Vengeance or Revenge by
each partner nor any act of ULP which might disrupt the operations
of the business;

7. Parties jointly and mutually agreed that pending negotiations or

formalization of the propose[d] CBA, this Memorandum of
Agreement shall govern the parties in the exercise of their
respective rights involving the Management of the business and the
terms and condition[s] of employment, and whatever problems
and grievances may arise by and between the parties shall be
resolved by them, thru the most cordial and good harmonious
relationship by communicating the other party in writing indicating
said grievances before taking any action to another forum or
government agencies;

8. That parties [to] this Memorandum of Agreement jointly and

mutually agreed to respect, abide and comply with all the terms
and conditions hereof. Further agreed that violation by the parties
of any provision herein shall constitute an act of ULP. (Annex "A" of
Petition).

In an Order dated October 24, 1990, Mediator Arbiter Antonio

Cortez approved the memorandum of agreement and certified
LCP "as the sole and exclusive bargaining agent among the rank-
and-file employee of Empire Food Products for purposes of
collective bargaining with respect to wages, hours of work and
other terms and conditions of employment" (Annex "B" of Petition).

On November 9, 1990, petitioners through LCP President Navarro

submitted to private respondents a proposal for collective
bargaining (Annex "C" of Petition).

On January 23, 1991, petitioners filed a complaint docketed as

NLRC Case No. RAB-III-01-1964-91 against private respondents for:

a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;

b. Union busting thru Harassments [sic], threats, and interfering with

the rights of employees to self-organization;

c. Violation of the Memorandum of Agreement dated October 23,

1990;
 d. Underpayment of Wages in violation of R.A. No. 6640 and R.A.
No. 6727, such as Wages promulgated by the Regional Wage
Board;

e. Actual, Moral and Exemplary Damages. (Annex "D" of Petition)

After the submission by the parties of their respective position

papers and presentation of testimonial evidence, Labor Arbiter Ariel
C. Santos absolved private respondents of the charges of unfair
labor practice, union busting, violation of the memorandum of
agreement, underpayment of wages and denied petitioners'
prayer for actual, moral and exemplary damages. Labor Arbiter
Santos, however, directed the reinstatement of the individual
complainants:

The undersigned Labor Arbiter is not oblivious to the

fact that respondents have violated a cardinal rule in
every establishment that a payroll and other papers
evidencing hours of work, payments, etc. shall always
be maintained and subjected to inspection and
visitation by personnel of the Department of Labor and
Employment. As such penalty, respondents should not
escape liability for this technicality, hence, it is proper
that all individual complainants except those who
resigned and executed quitclaim[s] and releases prior
to the filing of this complaint should be reinstated to
their former position[s] with the admonition to
respondents that any harassment, intimidation,
coercion or any form of threat as a result of this
immediately executory reinstatement shall be dealt
with accordingly.

SO ORDERED. (Annex "G" of petition)

On appeal, the National Labor Relations Commission vacated the Decision

dated April 14, 1972 [sic] and remanded the case to the Labor Arbiter for further
proceedings for the following reasons:
The Labor Arbiter, through his decision, noted that ". . . complainant
did not present any single witness while respondent presented four
(4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo,
Evelyn Kehyeng and Elvira Bulagan . . ." (p. 183, Records), that ". . .
complainant before the National Labor Relations Commission must
prove with definiteness and clarity the offense charged. . . ."
(Record, p. 183); that ". . . complainant failed to specify under what
provision of the Labor Code particularly Art. 248 did respondents
violate so as to constitute unfair labor practice . . ." (Record, p. 183);
that "complainants failed to present any witness who may describe
in what manner respondents have committed unfair labor practice
. . ." (Record, p. 185); that ". . . complainant LCP failed to present
anyone of the so-called 99 complainants in order to testify who
committed the threats and intimidation . . ." (Record, p. 185).

Upon review of the minutes of the proceedings on record, however,

it appears that complainant presented witnesses, namely, BENIGNO
NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March 1991,
RECORD, p. 92, who adopted its POSITION PAPER AND
CONSOLIDATED AFFIDAVIT, as Exhibit "A" and the annexes thereto as
Exhibit "B", "B-1" to "B-9", inclusive. Minutes of the proceedings on
record show that complainant further presented other witnesses,
namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93; LOURDES
PANTILLO, MARIFE PINLAC, LENIE GARCIA (16 April 1991, Record,
p. 96, see back portion thereof ; 2 May 1991, Record, p. 102; 16 May
1991, Record, p. 103, 11 June 1991, Record, p. 105). Formal offer of
Documentary and Testimonial Evidence was made by complainant
on June 24, 1991 (Record, p. 106-109)

The Labor Arbiter must have overlooked the testimonies of some of

the individual complainants which are now on record. Other
individual complainants should have been summoned with the end
in view of receiving their testimonies. The complainants should be
afforded the time and opportunity to fully substantiate their claims
against the respondents. Judgment should be rendered only based
on the conflicting positions of the parties. The Labor Arbiter is called
 upon to consider and pass upon the issues of fact and law raised by
the parties.

Toward this end, therefore, it is Our considered view [that] the case
should be remanded to the Labor Arbiter of origin for further
proceedings. (Annex "H" of Petition)

In a Decision dated July 27, 1994, Labor Arbiter Santos made the following
determination:

Complainants failed to present with definiteness and clarity the

particular act or acts constitutive of unfair labor practice.

It is to be borne in mind that a declaration of unfair labor practice

connotes a finding of prima facie evidence of probability that a
criminal offense may have been committed so as to warrant the
filing of a criminal information before the regular court. Hence,
evidence which is more than a scintilla is required in order to
declare respondents/employers guilty of unfair labor practice.
Failing in this regard is fatal to the cause of complainants. Besides,
even the charge of illegal lockout has no leg to stand on because
of the testimony of respondents through their guard Orlando Cairo
(TSN, July 31, 1991 hearing; p. 5-35) that on January 21, 1991,
complainants refused and failed to report for work, hence guilty of
abandoning their post without permission from respondents. As a
result of complainants['] failure to report for work, the cheese curls
ready for repacking were all spoiled to the prejudice of
respondents. Under cross-examination, complainants failed to rebut
the authenticity of respondents' witness testimony.

As regards the issue of harassments [sic], threats and interference

with the rights of employees to self-organization which is actually an
ingredient of unfair labor practice, complainants failed to specify
what type of threats or intimidation was committed and who
committed the same. What are the acts or utterances constitutive
of harassments [sic] being complained of? These are the specifics
which should have been proven with definiteness and clarity by
complainants who chose to rely heavily on its position paper
through generalizations to prove their case.

Insofar as violation of [the] Memorandum of Agreement dated

October 23, 1990 is concerned, both parties agreed that:

2 — That with regards [sic] to the NLRC Case No. RAB III-
10-1817-90 pending with the NLRC, parties jointly and
mutually agreed that the issues thereof shall be
discussed by the parties and resolve[d] during the
negotiation of the CBA.

The aforequoted provision does not speak of [an] obligation on the

part of respondents but on a resolutory condition that may occur or
may not happen. This cannot be made the basis of an imposition of
an obligation over which the National Labor Relations Commission
has exclusive jurisdiction thereof.

Anent the charge that there was underpayment of wages, the

evidence points to the contrary. The enumeration of complainants'
wages in their consolidated Affidavits of merit and position paper
which implies underpayment has no leg to stand on in the light of
the fact that complainants' admission that they are piece workers
or paid on a pakiao [basis] i.e. a certain amount for every thousand
pieces of cheese curls or other products repacked. The only
limitation for piece workers or pakiao workers is that they should
receive compensation no less than the minimum wage for an eight
(8) hour work [sic]. And compliance therewith was satisfactorily
explained by respondent Gonzalo Kehyeng in his testimony (TSN, p.
12-30) during the July 31, 1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo Kehyeng's testimony
that complainants have been even receiving more than the
minimum wage for an average workers [sic]. Certainly, a lazy
worker earns less than the minimum wage but the same cannot be
attributable to respondents but to the lazy workers.
 Finally, the claim for moral and exemplary damages has no leg to
stand on when no malice, bad faith or fraud was ever proven to
have been perpetuated by respondents.

WHEREFORE, premises considered, the complaint is hereby

DISMISSED for utter lack of merit. (Annex "I" of Petition). 4

On appeal, the NLRC, in its Resolution dated 29 March 1995, 5 affirmed in

toto the decision of Labor Arbiter Santos. In so doing, the NLRC sustained the
Labor Arbiter's findings that: (a) there was a dearth of evidence to prove the
existence of unfair labor practice and union busting on the part of private
respondents; (b) the agreement of 23 October 1990 could not be made the
basis of an obligation within the ambit of the NLRC's jurisdiction, as the provisions
thereof, particularly Section 2, spoke of a resolutory condition which could or
could not happen; (c) the claims for underpayment of wages were without
basis as complainants were admittedly "pakiao" workers and paid on the basis
of their output subject to the lone limitation that the payment conformed to the
minimum wage rate for an eight-hour workday; and (d) petitioners were not
underpaid.

Their motion for reconsideration having been denied by the NLRC in its
Resolution of 31 October 1995, 6 petitioners filed the instant special civil action
for certiorari raising the following issues:

WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR

RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION WHEN IT
DISREGARDED OR IGNORED NOT ONLY THE EVIDENCE FAVORABLE
TO HEREIN PETITIONERS, APPLICABLE JURISPRUDENCE BUT ALSO ITS
OWN DECISIONS AND THAT OF THIS HONORABLE HIGHEST TRIBUNAL
WHICH [WAS] TANTAMOUNT NOT ONLY TO THE DEPRIVATION OF
PETITIONERS' RIGHT TO DUE PROCESS BUT WOULD RESULT [IN]
MANIFEST INJUSTICE.

II
 WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS
DISCRETION WHEN IT DEPRIVED THE PETITIONERS OF THEIR
CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, SECURITY OF
TENURE, PROTECTION TO LABOR, JUST AND HUMANE CONDITIONS OF
WORK AND DUE PROCESS.

III

WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF]

OR CONSTRUCTIVELY DISMISSED FROM THEIR ONLY MEANS OF
LIVELIHOOD.

IV

WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE

DATE OF THEIR DISMISSAL UP TO THE TIME OF THEIR REINSTATEMENT,
WITH BACKWAGES, STATUTORY BENEFITS, DAMAGES AND ATTORNEY'S
FEES. 7

We required respondents to file their respective Comments.

In their Manifestation and Comment, private respondents asserted that the

petition was filed out of time. As petitioners admitted in their Notice to File
Petition for Review on Certiorari that they received a copy of the resolution
(denying their motion for reconsideration) on 13 December 1995, they had only
until 29 December 1995 to file the petition. Having failed to do so, the NLRC thus
already entered judgment in private respondents' favor.

In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the
notice to file a petition for review on their behalf, mistook which reglementary
period to apply. Instead of using the "reasonable time" criterion
for certiorari under Rule 65, he used the 15-day period for petitions for review
on certiorari under Rule 45. They hastened to add that such was a mere
technicality which should not bar their petition from being decided on the merits
in furtherance of substantial justice, especially considering that respondents
neither denied nor contradicted the facts and issues raised in the petition.

In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor
General (OSG) sided with petitioners. It pointed out that the Labor Arbiter, in
finding that petitioners abandoned their jobs, relied solely on the testimony of
Security Guard Rolando Cairo that petitioners refused to work on 21 January
1991, resulting in the spoilage of cheese curls ready for repacking. However, the
OSG argued, this refusal to report for work for a single day did not constitute
abandonment, which pertains to a clear, deliberate and unjustified refusal to
resume employment, and not mere absence. In fact, the OSG stressed, two
days after allegedly abandoning their work, petitioners filed a complaint
for, inter alia, illegal lockout or illegal dismissal. Finally, the OSG questioned the
lack of explanation on the part of Labor Arbiter Santos as to why he abandoned
his original decision to reinstate petitioners.

In view of the stand of the OSG, we resolved to require the NLRC to file its own
Comment.

In its Comment, the NLRC invokes the general rule that factual findings of an
administrative agency bind a reviewing court and asserts that this case does not
fall under the exceptions. The NLRC further argues that grave abuse of discretion
may not be imputed to it, as it affirmed the factual findings and legal
conclusions of the Labor Arbiter only after carefully reviewing, weighing and
evaluating the evidence in support thereof, as well as the pertinent provisions of
law and jurisprudence.

In their Reply, petitioners claim that the decisions of the NLRC and the Labor
Arbiter were not supported by substantial evidence; that abandonment was not
proved; and that much credit was given to self-serving statements of Gonzalo
Kehyeng, owner of Empire Foods, as to payment of just wages.

On 7 July 1997, we gave due course to the petition and required the parties to
file their respective memoranda. However, only petitioners and private
respondents filed their memoranda, with the NLRC merely adopting its
Comment as its Memorandum.

We find for petitioners.

Invocation of the general rule that factual findings of the NLRC bind this Court is
unavailing under the circumstances. Initially, we are unable to discern any
compelling reason justifying the Labor Arbiter's volte face from his 14 April 1992
decision reinstating petitioners to his diametrically opposed 27 July 1994
decision, when in both instances, he had before him substantially the same
evidence. Neither do we find the 29 March 1995 NLRC resolution to have
sufficiently discussed the facts so as to comply with the standard of substantial
evidence. For one thing, the NLRC confessed its reluctance to inquire into the
veracity of the Labor Arbiter's factual findings, staunchly declaring that it was
"not about to substitute [its] judgment on matters that are within the province of
the trier of facts." Yet, in the 21 July 1992 NLRC resolution, 8 it chastised the Labor
Arbiter for his errors both in judgment and procedure; for which reason it
remanded the records of the case to the Labor Arbiter for compliance with the
pronouncements therein.

What cannot escape from our attention is that the Labor Arbiter did not heed
the observations and pronouncements of the NLRC in its resolution of 21 July
1992, neither did he understand the purpose of the remand of the records to
him. In said resolution, the NLRC summarized the grounds for the appeal to be:

1. that there is a prima facie evidence of abuse of discretion and

acts of gross incompetence committed by the Labor Arbiter in
rendering the decision.

2. that the Labor Arbiter in rendering the decision committed serious

errors in the findings of facts.

After which, the NLRC observed and found:

Complainant alleged that the Labor Arbiter disregarded the

testimonies of the 99 complainants who submitted their
Consolidated Affidavit of Merit and Position Paper which was
adopted as direct testimonies during the hearing and cross-
examined by respondents' counsel.

The Labor Arbiter, through his decision, noted that ". . . complainant
did not present any single witness while respondent presented four
(4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo,
Evelyn Kehyeng and Elvira Bulagan . . ." (Records, p. 183), that ". . .
complainant before the National Labor Relations Commission must
prove with definiteness and clarity the offense charged. . . ."
(Record, p. 183; that ". . . complainant failed to specify under what
provision of the Labor Code particularly Art. 248 did respondents
violate so as to constitute unfair labor practice . . ." (Record, p. 183);
that "complainants failed to present any witness who may describe
in what manner respondents have committed unfair labor practice
. . ." (Record, p. 185); that ". . . complainant a [sic] LCP failed to
present anyone of the so called 99 complainants in order to testify
who committed the threats and intimidation . . ." (Record, p.185).

Upon review of the minutes of the proceedings on record, however,

it appears that complainant presented witnesses, namely BENIGNO
NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March 1991,
RECORD, p. 92), who adopted its POSITION PAPER AND
CONSOLIDATED AFFIDAVIT as Exhibit A and the annexes thereto as
Exhibit B, B-1 to B-9, inclusive. Minutes of the proceedings on record
show that complainant further presented other witnesses, namely:
ERLINDA BASILIO (13 March 1991, RECORD, p. 93; LOURDES
PANTILLO, MARIFE PINLAC, LENI GARCIA (16 April 1991, Record, p.
96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May
1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of
Documentary and Testimonial Evidence was made by the
complainant on June 24, 1991 (Record, p.106-109).

The Labor Arbiter must have overlooked the testimonies of some of

the individual complainants which are now on record. Other
individual complainants should have been summoned with the end
in view of receiving their testimonies. The complainants should
[have been] afforded the time and opportunity to fully substantiate
their claims against the respondents. Judgment should [have been]
rendered only based on the conflicting positions of the parties. The
Labor Arbiter is called upon to consider and pass upon the issues of
fact and law raised by the parties.

Toward this end, therefore, it is Our considered view the case should
be remanded to the Labor Arbiter of origin for further proceedings.

Further, We take note that the decision does not contain a

dispositive portion or fallo. Such being the case, it may be well said
that the decision does not resolve the issues at hand. On another
plane, there is no portion of the decision which could be carried out
by way of execution.

It may be argued that the last paragraph of the decision may be

categorized as the dispositive portion thereof:

xxx xxx xxx

The undersigned Labor Arbiter is not oblivious [to] the

fact that respondents have violated a cardinal rule in
every establishment that a payroll and other papers
evidencing hour[s] of work, payment, etc. shall always
be maintained and subjected to inspection and
visitation by personnel of the Department of Labor and
Employment. As such penalty, respondents should not
escape liability for this technicality, hence, it is proper
that all the individual complainants except those who
resigned and executed quitclaim[s] and release[s] prior
to the filing of this complaint should be reinstated to
their former position with the admonition to
respondents that any harassment, intimidation,
coercion or any form of threat as a result of this
immediately executory reinstatement shall be dealt
with accordingly.

SO ORDERED.

It is Our considered view that even assuming arguendo that the

respondents failed to maintain their payroll and other papers
evidencing hours of work, payment etc., such circumstance,
standing alone, does not warrant the directive to reinstate
complainants to their former positions. It is [a] well settled rule that
there must be a finding of illegal dismissal before reinstatement be
mandated.
 In this regard, the LABOR ARBITER is hereby directed to include in his
clarificatory decision, after receiving evidence, considering and
resolving the same, the requisite dispositive portion.9

Apparently, the Labor Arbiter perceived that if not for petitioners, he would not
have fallen victim to this stinging rebuke at the hands of the NLRC. Thus does it
appear to us that the Labor Arbiter, in concluding in his 27 July 1994 Decision
that petitioners abandoned their work, was moved by, at worst, spite, or at best,
lackadaisically glossed over petitioner's evidence. On this score, we find the
following observations of the OSG most persuasive:

In finding that petitioner employees abandoned their work, the

Labor Arbiter and the NLRC relied on the testimony of Security
Guard Rolando Cairo that on January 21, 1991, petitioners refused
to work. As a result of their failure to work, the cheese curls ready for
repacking on said date were spoiled.

The failure to work for one day, which resulted in the spoilage of
cheese curls does not amount to abandonment of work. In fact two
(2) days after the reported abandonment of work or on January 23,
1991, petitioners filed a complaint for, among others, unfair labor
practice, illegal lockout and/or illegal dismissal. In several cases, this
Honorable Court held that "one could not possibly abandon his
work and shortly thereafter vigorously pursue his complaint for illegal
dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v. NLRC, 212
SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas
Consolidated Mining and Development Corp. v. NLRC, 190 SCRA
505; Hua Bee Shirt Factory v. NLRC, 186 SCRA 586; Mabaylan v.
NLRC, 203 SCRA 570 and Flexo Manufacturing v. NLRC, 135 SCRA
145). In Atlas Consolidated, supra, this Honorable Court explicitly
stated:

It would be illogical for Caballo, to abandon his work

and then immediately file an action seeking for his
reinstatement. We can not believe that Caballo, who
had worked for Atlas for two years and ten months,
would simply walk away from his job unmindful of the
 consequence of his act. i.e. the forfeiture of his
accrued employment benefits. In opting to finally to
[sic] contest the legality of his dismissal instead of just
claiming his separation pay and other benefits, which
he actually did but which proved to be futile after all,
ably supports his sincere intention to return to work, thus
negating Atlas' stand that he had abandoned his job.

In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is

the clear, deliberate and unjustified refusal to resume employment
and not mere absence that constitutes abandonment. The
absence of petitioner employees for one day on January 21, 1991
as testified [to] by Security Guard Orlando Cairo did not constitute
abandonment.

In his first decision, Labor Arbiter Santos expressly directed the

reinstatement of the petitioner employees and admonished the
private respondents that "any harassment, intimidation, coercion or
any form of threat as a result of this immediately executory
reinstatement shall be dealt with accordingly.

In his second decision, Labor Arbiter Santos did not state why he
was abandoning his previous decision directing the reinstatement
of petitioner employees.

By directing in his first decision the reinstatement of petitioner

employees, the Labor Arbiter impliedly held that they did not
abandon their work but were not allowed to work without just
cause.

That petitioner employees are "pakyao" or piece workers does not

imply that they are not regular employees entitled to reinstatement.
Private respondent Empire Food Products, Inc. is a food and fruit
processing company. In Tabas v. California Manufacturing Co., Inc.
(169 SCRA 497), this Honorable Court held that the work of
merchandisers of processed food, who coordinate with grocery
stores and other outlets for the sale of the processed food is
necessary in the day-to-day operation[s] of the company. With
 more reason, the work of processed food repackers is necessary in
the day-to-day operation[s] of respondent Empire Food Products. 10

It may likewise be stressed that the burden of proving the existence of just cause
for dismissing an employee, such as abandonment, rests on the employer, 11 a
burden private respondents failed to discharge.

Private respondents, moreover, in considering petitioners' employment to have

been terminated by abandonment, violated their rights to security of tenure
and constitutional right to due process in not even serving them with a written
notice of such termination. 12 Section 2, Rule XIV, Book V of the Omnibus Rules
Implementing the Labor Code provides:

Sec. 2. Notice of Dismissal — Any employer who seeks to dismiss a

worker shall furnish him a written notice stating the particular acts or
omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the worker's
last known address.

Petitioners are therefore entitled to reinstatement with full back wages pursuant
to Article 279 of the Labor Code, as amended by R.A. No. 6715. Nevertheless,
the records disclose that taking into account the number of employees
involved, the length of time that has lapsed since their dismissal, and the
perceptible resentment and enmity between petitioners and private
respondents which necessarily strained their relationship, reinstatement would
be impractical and hardly promotive of the best interests of the parties. In lieu of
reinstatement then, separation pay at the rate of one month for every year of
service, with
a fraction of at least six (6) months of service considered as one (1) year, is in
order. 13

That being said, the amount of back wages to which each petitioner is entitled,
however, cannot be fully settled at this time. Petitioners, as piece-rate workers
having been paid by the piece, 14 there is need to determine the varying
degrees of production and days worked by each worker. Clearly, this issue is
best left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13th month pay
and service incentive leave which the labor arbiter failed to rule on but which
petitioners prayed for in their complaint, 15 we hold that petitioners are so
entitled to these benefits. Three (3) factors lead us to conclude that petitioners,
although piece-rate workers, were regular employees of private respondents.
First, as to the nature of petitioners' tasks, their job of repacking snack food was
necessary or desirable in the usual business of private respondents, who were
engaged in the manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the year, their
employment not having been dependent on a specific project or season; and
third, the length of time 16 that petitioners worked for private respondents. Thus,
while petitioners' mode of compensation was on a "per piece basis," the status
and nature of their employment was that of regular employees.

The Rules Implementing the Labor Code exclude certain employees from
receiving benefits such as nighttime pay, holiday pay, service incentive
leave 17 and 13th month pay, 18 inter alia, "field personnel and other employees
whose time and performance is unsupervised by the employer, including those
who are engaged on task or contract basis, purely commission basis, or those
who are paid a fixed amount for performing work irrespective of the time
consumed in the performance thereof." Plainly, petitioners as piece-rate workers
do not fall within this group. As mentioned earlier, not only did petitioners labor
under the control of private respondents as their employer, likewise did
petitioners toil throughout the year with the fulfillment of their quota as supposed
basis for compensation. Further, in Section 8 (b), Rule IV, Book III which we quote
hereunder, piece workers are specifically mentioned as being entitled to
holiday pay.

Sec. 8. Holiday pay of certain employees. —

(b) Where a covered employee is paid by

results or output, such as payment on
piece work, his holiday pay shall not be less
than his average daily earnings for the last
seven (7) actual working days preceding
the regular holiday: Provided, however,
that in no case shall the holiday pay be
 less than the applicable statutory minimum
wage rate.

In addition, the Revised Guidelines on the Implementation of the 13th Month

Pay Law, in view of the modifications to P.D. No. 851 19 by Memorandum Order
No. 28, clearly exclude the employer of piece rate workers from those
exempted from paying 13th month pay, to wit:

2. EXEMPTED EMPLOYERS

The following employers are still not covered by P.D. No. 851:

d. Employers of those who are paid on

purely commission, boundary or task basis,
and those who are paid a fixed amount for
performing specific work, irrespective of
the time consumed in the performance
thereof, except where the workers are
paid on piece-rate basis in which case the
employer shall grant the required 13th
month pay to such workers. (emphasis
supplied)

The Revised Guidelines as well as the Rules and Regulations identify those
workers who fall under the piece-rate category as those who are paid a
standard amount for every piece or unit of work produced that is more or
less regularly replicated, without regard to the time spent in producing the
same. 20

As to overtime pay, the rules, however, are different. According to Sec. 2(e),
Rule I, Book III of the Implementing Rules, workers who are paid by results
including those who are paid on piece-work, takay, pakiao, or task basis, if their
output rates are in accordance with the standards prescribed under Sec. 8, Rule
VII, Book III, of these regulations, or where such rates have been fixed by the
Secretary of Labor in accordance with the aforesaid section, are not entitled to
receive overtime pay. Here, private respondents did not allege adherence to
the standards set forth in Sec. 8 nor with the rates prescribed by the Secretary of
Labor. As such, petitioners are beyond the ambit of exempted persons and are
therefore entitled to overtime pay. Once more, the National Labor Relations
Commission would be in a better position to determine the exact amounts
owed petitioners, if any.

As to the claim that private respondents violated petitioners' right to self-

organization, the evidence on record does not support this claim. Petitioners
relied almost entirely on documentary evidence which, per se, did not prove
any wrongdoing on private respondents' part. For example, petitioners
presented their complaint 21 to prove the violation of labor laws committed by
private respondents. The complaint, however, is merely "the pleading alleging
the plaintiff's cause or causes of action." 22 Its contents are merely allegations,
the verity of which shall have to be proved during the trial. They likewise offered
their Consolidated Affidavit of Merit and Position Paper 23 which, like the offer of
their Complaint, was a tautological exercise, and did not help nor prove their
cause. In like manner, the petition for certification election 24 and the
subsequent order of certification 25 merely proved that petitioners sought and
acquired the status of bargaining agent for all rank-and-file employees. Finally,
the existence of the memorandum of agreement 26 offered to substantiate
private respondents' non-compliance therewith, did not prove either
compliance or non-compliance, absent evidence of concrete, overt acts in
contravention of the provisions of the memorandum.

IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution of the
National Labor Relations Commission of 29 March 1995 and the Decision of the
Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-III-01-1964-91 are hereby SET
ASIDE, and another is hereby rendered:

1. DECLARING petitioners to have been illegally

dismissed by private respondents, thus entitled to full
back wages and other privileges, and separation pay
in lieu of reinstatement at the rate of one month's salary
for every year of service with a fraction of six months of
service considered as one year;

2. REMANDING the records of this case to the National

Labor Relations Commission for its determination of the
 back wages and other benefits and separation pay,
taking into account the foregoing observations; and

3. DIRECTING the National Labor Relations Commission

to resolve the referred issues within sixty (60) days from
its receipt of a copy of this decision and of the records
of the case and to submit to this Court a report of its
compliance hereof within ten (10) days from the
rendition of its resolution.

Costs against private respondents.

SO ORDERED.

Davide, Jr., Bellosillo, Vitug, Panganiban and Quisumbing, JJ., concur.

Footnotes

1 Annex "J" of Petition. Per Commissioner Tanodra, J., with Presiding

Commissioner Javier, L., and Commissioner Bernardo, I.,
concurring; Rollo, 98-108.

2 Annex "I" of Petition, Rollo, 91-97.

3 Rollo, 137 et seq.

4 Rollo, 138-148.

5 Supra note 1.

6 Rollo, 109-110.

7 Id., 21-22.

8 Annex "H" of Petition, Id, 85-90. Per Commissioner Rayala, R.I., with
Commissioners Javier, L,. and Bernardo, I., concurring.

9 Rollo, 86-90.

10 Rollo, 150-153.
11 Lim v. NLRC, 259 SCRA 485, 497 [1996]; Metro Transit Organization,
Inc., 263 SCRA 3163, 321 [1996]; De la Cruz v. NLRC, 268 SCRA 458,
468 [1997].

12 See Tiu v. NLRC, 215 SCRA 540, 550-552 [1992]; Radio

Communications of the Phils. V. NLRC, 223 SCRA 656, 667-668 [1993].

13 Globe-Mackay Cable and Radio Corp. v. NLRC, 206 SCRA 701,

709-710 [1992]; Kathy-O Enterprises v. NLRC, G.R. No. 117610, 2
March 1998.

14 See Dy Keh Beng v. International Labor, 90 SCRA 161 [1979];

"Brotherhood" Unity Movement of the Phils. v. Zamora, 147 SCRA 49
(1987).

15 Rollo, 51.

16 RJL Mariner Fishing Corp. v. NLRC, 127 SCRA 454, 462 [1984].

17 Section 1 (e), Rule II, Sec. 1(e) Rule IV and Sec. 1(d), Rule V of
Book II.

18 P.D. No. 851, as modified by Memorandum No. 28.

19 Requiring All Employers To Pay Their Employees A [sic] 13TH-

MONTH PAY.

20 This distinction was also used in Sec. 3(e) Rules and Regulations
Implementing P.D. 851.

21 Exhibit "C", OR, 42-43.

22 Section 3, Rule 6, Revised Rules of Court.

23 Exhibit "J", OR, 56-78.

24 Exhibit "D", Id, 44-45.

25 Exhibit "F", Id., 50.

26 Exhibit "E", Id., 46-49.

 THIRD DIVISION

G.R. No. 105892 January 28, 1998

LEIDEN FERNANDEZ, BRENDA GADIANO, GLORIA ADRIANO, EMELIA NEGAPATAN,

JESUS TOMONGHA, ELEONOR QUIÑANOLA, ASTERIA CAMPO, FLORIDA
VILLACERAN, FLORIDA TALLEDO, MARILYN LIM and JOSEPH
CANONIGO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION;
MARGUERITE1 LHUILLIER AND/OR AGENCIA CEBUANA-H. LHUILLIER, respondents.

PANGANIBAN, J.:

Is failure to attend hearings before the labor arbiter a waiver of the right to
present evidence? Are moral damages included in the computation of
"monetary award" for purposes of determining the amount of the appeal
bond? Is there a limit to the amount of service incentive leave pay and
backwages that may be awarded to an illegally dismissed employee?

The Case

These are the main questions raised in this petition for certiorari under Rule
65 of the Rules of Court assailing the March 11, 1992 Decision2 of
Respondent National Labor Relations Commission (NLRC),3 the dispositive
portion of which reads:4

WHEREFORE, premises considered, the appealed decision is hereby

declared VACATED and the entire records of these cases are
hereby ordered remanded to the Regional Arbitration Branch VII for
further proceedings.

This petition also challenges the NLRC's May 29, 1992 Resolution denying
the motion for reconsideration.
 The decision5 vacated by the NLRC and penned by Labor Arbiter Gabino
A. Velasquez, Jr. disposed as follows:6

WHEREFORE, judgment is hereby rendered in favor of the

complainants and against the respondent. The respondent is
hereby ordered:

1. To reinstate the complainants to their respective position [sic] at

the Agencia Cebuana with full backwages without qualification; if
reinstatement is not feasible, for one reason or another, to pay to
the complainants their respective separation pay, service incentive
leave pay with full backwages without qualification computed
hereunder as follows:

1. LEIDEN FERNANDEZ:

a) Separation Pay for 6 years P

8,640.00

b) Service Incentive Leave (6 yrs.) 3,322.50

c) Backwages for one year only 34,560.00

TOTAL P
46,522.50

2. GLORIA ADRIANO:

a) Separation Pay for 17 years P

28,560.00

b) Service Incentive Leave (17 yrs.) 10,986.25

c) Backwages for one year only 40,320.00

TOTAL P
79,866.25

3. EMELIA NEGAPATAN:

a) Separation Pay for 24 years P

35,760.00
b) Service Incentive Leave (24 yrs.) 13,752.00

c) Backwages for one year only 35,760.00

TOTAL P
85,272.00

4. JESUS P. TOMONGHA:

a) Separation Pay for 33 years P

50,655.00

b) Service Incentive Leave 19,478.25

c) Backwages for one year only 36,840.00

TOTAL P
106,973.25

5. ELEONOR QUIÑANOLA:

a) Separation Pay for 14 years P

20,860.00

b) Service Incentive Leave 8,022.00

c) Backwages for one year only 35,760.00

TOTAL P
64,642.00

6. ASTERIA CAMPO:

a) Separation Pay for 13 years P

19,240.00

b) Service Incentive Leave (13 yrs.) 7,400.00

c) Backwages for one year only 35,520.00

TOTAL P
62,160.25

7. FLORIDA VILLACERAN:
a) Separation Pay for 17 years P
25,160.00

b) Service Incentive Leave (17 yrs.) 9,677.25

c) Backwages for one year only 35,520.00

TOTAL P
70,357.25

8. FLORIDA TALLEDO:

a) Separation Pay for 18 years P

27,450.00

b) Service Incentive Leave (18 yrs.) 10,557.00

c) Backwages for one year only 36,600.00

TOTAL P
74,607.00

9. BRENDA GADIANO:

a) Separation Pay for 13 years P

19,597.50

b) Service Incentive Leave (13 yrs.) 7,536.75

c) Backwages for one year only 36,180.00

TOTAL P
63,313.25

10. MARILYN LIM:

a) Separation Pay for 7 years P

12,950.00

b) Service Incentive Leave (7 yrs.) 4,980.50

c) Backwages for one year only 44,400.00

TOTAL P
 62,330.00

11. JOSEPH CANONIGO:

a) Separation Pay for 2 years P

2,700.00

b) Service Incentive Leave (2 yrs.) 1,038.50

c) Backwages for one year only 32,400.00

TOTAL P
36,138.50

2) To pay to all complainants the amount of P100,000.00 for moral

damages and the amount of another P100,000.00 for exemplary
damages, plus the amount of P98,018.25 as attorney's fees
representing 10% of the total award and the amount of P30,000.00
for litigation expenses.

The totality of the award amounting to P1,078,200.55 must be

deposited with this Office ten (10) days from receipt of this decision
for further disposition. However, the payment of backwages will be
computed as of the actual date of payment provided it will not
exceed a period of three years.

The Facts

The factual milieu of this case is recited by the solicitor general in his
Comment dated December 21, 1992 as follows:7

1. The instant case stemmed from a consolidated complaint against

private respondents Agencia Cebuana-H. Lhuillier and/or
Margueritte Lhuillier (Lhuillier) for illegal dismissal (Rec., pp. 56-58).
The Agencia Cebuana is a sole proprietorship operated by
Margueritte Lhuillier.

2. Two (2) Position Papers were filed by petitioners, one by Leiden E.

Fernandez, Gloria B. Adriano, Emilia A. Negapatan, Jesus P.
Tomongha, Eleonor A. Quiñanola, Asteria C. Ocampo [sic], Florida
 Villaceran, Florida B. Tallado [sic] and Brenda A. Gadiano (Rec., pp.
79-88) and the other by Marilyn E. Lim and Joseph Canonigo (Exhibit
"C-4").

3. In their Position Papers, petitioners alleged that they were

employed by Lhuillier, as follows:

Name Position Date of Latest Date of

Employment Salary/Month Dismissal

1. Leiden E. Cashier Dec. 3, 1984 P2,880.00 July 19, 1990

Fernandez

2. Gloria B. Appraiser July 10, 1973 3,360.00 July 19, 1990

Adriano

3. Emilia A. Sales Girl March 9, 2,980.00 July 19, 1990

Negapatan 1966

4. Jesus P. Office Clerk July 1957 3,070.00 July 19, 1990

Tomongha

5. Eleonor A. Office Clerk Dec. 8, 1976 2,980.00 July 21, 1990

Quiñanola

6. Asteria C. Clerk May 27, 2,960.00 July 19, 1990

Campo 1977

7. Florida Sales Clerk March 8, 2,960.00 July 19, 1990

Villaceran 1973

8. Florida B. Pawnshop June 19, 3,050.00 July 19, 1990

Talledo Writer 1972

9. Brenda A. Pawnshop March 7, 3,015.00 July 19, 1990

Gadiano Teller 1977

10. Marilyn Branch June 1984 3,700.00 Feb. 16,

E. Lim Manager 1990

11. Joseph Record June 1988 2,700.00 July 14, 1990

M. Keeper
Canonigo

Petitioners Fernandez, Adriano, Negapatan, Tomongha, Quiñanola,

Campo, Villaceran, Talledo, and Gadiano further alleged that prior
to and during early July 1990, they "demanded" from Margueritte
Lhuillier an increase in their salaries since her business was making
good and that she was evading payment of taxes by making false
entries in her records of account; that Lhuillier became angry and
threatened them that something would happen to their
employment if they would report her to the BIR; that shortly
thereafter, Lhuillier suspected them of stealing jewelry from the
pawnshop; that on July 19, 1990, Lhuillier verbally informed them not
to report for work as their employment had been terminated; that
from July 20, 1990 they did not report for work; and on July 23, 1990,
they filed the instant complaint (Rec., pp. 79-88).

On their part, petitioners Lim and Canonigo alleged that in early

January 1990 and in June 1990, respectively, they demanded
increases in their salaries since they noted that Lhuillier had a very
lucrative business besides evading tax payments by making false
entries in her records of account; that they also informed her that
they intended to join the Associated Labor Union (ALU), which
made Lhuillier angry, causing her to threaten them that should they
report her to the BIR and join the ALU something would happen to
their employment; that Lhuillier advised them to tender their
resignations as they were reportedly responsible for some anomalies
at the Agencia Cebuana-H Lhuillier; that Lhuillier assured them that
they will be given separation pay; that they asked Lhuillier that they
be allowed to confront the persons who reported to her about their
supposed involvement in the alleged anomalies but she ignored it
and told them to tender their respective resignations effective
February 16, 1990 (for Lim) and July 14, 1990 (for Canonigo); and
that they were not given separation pay (Decision, pp. 6-8; Rec.,
pp. 256-258).
5. In her Position Paper, Lhuillier, represented initially by Atty.
Malcolm V. Seno, alleged that:

a) In the case of Marilyn Lim, on January 13, 1990, she

was informed that an investigation will be conducted
by Lhuillier because of the report received by Flora Go,
also an employee of Lhuillier, that Lim sold to a
company consumer her own jewelry, in violation of the
company house rules; on January 22, 1990, a Notice of
Intended Termination was served upon her requiring
her to submit a written explanation within 48 hours from
receipt; Lim did not submit a written explanation but
actively participated in the investigation where she
admitted having committed the violation complained
of; in view of her admission of guilt, the company
lawyer recommended to the management her
demotion and transfer without reduction of salary; after
Lim's receipt of a copy of the investigation report, she
sent through her lawyer a letter signifying her intention
to resign and her willingness to execute a promissory
note for her indebtedness; the company gave Lim a
draft of the promissory note which was never returned
by her; on February 24, 1990 she tendered an
irrevocable letter of resignation, hence, she was not
terminated; and because of the malicious and false
complaint filed by Lim, the company was compelled to
file a counter-complaint for Perjury against her before
the Office of the City Prosecutor of Cebu City (Rec.,
pp. 92-93; 97).

b) In the case of Jesus Tomongha, he was found to

have stolen "rematado" jewelries worth P70,670.00
sometime in March 1990; instead of attending the
investigation scheduled for this offense, he abandoned
his job although his application for leave of absence
was not approved; Lhuillier asked the company lawyer
to talk with Tomongha for him to return to work so that
he could pay his pecuniary liability out of his salary;
Lhuillier made it a pre-condition for his return to work
that he executes a promissory note for his
indebtedness; on April 10, 1990, he executed a
promissory note and was allowed to return to work; on
July 20, 1990, he and the other petitioners, abandoned
their employment; he was not dismissed but he was
allowed to return to work and was only made to
execute a promissory note when the company found
out sometime in March 1990 that he had stolen
"rematado" jewelries worth P70,670.00 (Rec., pp. 97-
101).

c) In the case of the other petitioners, on July 19, 1990,

Gloria Adriano was found by Flora Go to have over-
declared the weights and values of certain items of
jewelry pawned to the company, as a result of which,
upon investigation, the pawnshop was found to have
lost the amount of P174,850.00; a letter dated July 19,
1990 was served upon Adriano to explain within 72
hours why she should not be terminated; on July 20,
1990, Gloria Adriano, Florida Villaceran, Emilia
Negapatan, Brenda Gadiano, Leiden Fernandez, Jesus
Tomongha, Asteria Campo and Florida Talledo did not
report for work although no requests for leave of
absence were filed by them, which absence violated
company rules; on July 21, 1990, the said employees
did not report for work; another employee, Eleonor
Quiñanola, also did not report for work although she
did not file a request for leave of absence; on July 23,
1990 the said nine (9) employees did not report for
work; because of this unusual incident, the
management decided to make an inventory of the
transactions in Agencia Cebuana and the "rematado"
diamond-studded jewelry; the inventory showed that
the pawnshop incurred a considerable loss as a result
of the anomalous overpricing of pawned items and the
employees immediately responsible were Gloria
Adriano, Florida Talledo and Leiden Fernandez, being
the appraiser, writer and prayer, respectively; the
inventory also showed that of the "rematado"
diamond-studded jewelries, items worth P1,592,200.00
were lost for which Florida Villaceran and Emilia
Negapatan were directly responsible, being the
employees entrusted with their safekeeping; a case of
Estafa was filed on July 24, 1990 before the Office of
the City Prosecutor of Cebu City against Gloria
Adriano, Florida Talledo, Leiden Fernandez, Asteria
Campo, Brenda Gadiano, Florida Villaceran, Emilia
Negapatan, and Jesus Tomongha and three (3) other
unknown persons; a case of Theft was filed on August
16, 1990 with the Office of the City Prosecutor of Cebu
City against Florida Villaceran and Emilia Negapatan;
when Lhuillier left for Hongkong on July 19, 1990; she did
not terminate the employment of Gloria Adriano nor
was she advised not to report for work, although a
letter was served upon her requiring her to explain
within 72 hours why she should not be terminated from
her employment; when Lhuillier arrived from Hongkong,
she caused to be served upon the eight (8) petitioners
who joined Adriano, letter dated July 25, 1990 requiring
them to explain the sudden abandonment of their
posts; petitioners, except Lim, instead of giving an
explanation, claimed that their employment[s] were
terminated on July 19, 1990; Lhuillier was prevented
from pursuing any action in respect of the illegal
abandonment of their work by the nine (9) petitioners
because she was served with summons in the instant
case; petitioners did not report for work and voluntarily
abandoned their work on July 19, 1990 in order to
dramatize their sympathy for Gloria Adriano, and they
 were not dismissed from their employment; their
demand for an award of damages and attorney's fees
was unwarranted; petitioners had no cause of action
against Lhuillier because they were not terminated
from employment; and Quiñanola could not have
been terminated from employment on July 21, 1990
because Lhuillier was in Hongkong at that time (Rec.,
pp. 96-108).

6. Trial on the merits ensued and hearings were scheduled on July 5,

8, and 12, 1991.

7. The hearing scheduled on July 5, 1991 was, however, postponed

by agreement of the parties as shown in the minutes of the
proceedings on July 8, 1991:

xxx xxx xxx

REMARKS

This case was scheduled for the cross-examination of

the last witnesses (sic), Marilyn Lim, who is one of the
complainants of this (sic) consolidated cases.

The scheduled dates was (sic) July 5, 8, and 12, 1991

which dates were for the crossexamination (sic) of
Marilyn Lim and for the respondents to present their
evidence.

The July 5, 1991 (sic) was postponed upon agreement

[sic] of the parties and counsels and that it was
aggreed (sic) the repondents (sic) counsel will cross
examine Marilyn Lim on July 8, 1991 and for the
respondents to present their evidence on July 12, 1991.
In as much (sic) as the respondents and their counsel
failed to appear today to cross-examine Marilyn Lim,
we moved that the respondent be declared having
 waived their rights (sic) to cross-examine Marilyn Lim.
(Rec., p. 176).

8. On July 8, 1991, counsel for petitioners filed Complainants' Formal

Offer of Evidence (Rec., pp. 182-187).

9. At the hearing scheduled on July 12, 1991, Atty. Seno and Lhuillier
failed to appear. Thus, counsel for petitioners submitted the instant
case for resolution (Rec., p.181).

10. On July 18, 1991, a "Ruling" was issued by Labor Arbiter

Velasquez, admitting complainants' exhibits (Rec., pp. 189-190).

11. On July 30, 1991, counsel for petitioners filed an Urgent Motion
For Early Decision (Rec., pp. 191-193).

12. On August 6, 1991, Atty. Seno filed a Comment to the Offer of

Exhibits With Counter-Manifestation stating that:

[T]he failure of undersigned to appear on the date of

hearing was for the reason that his car bogged down,
as in fact he called up the Office of the Hearing
Officer. While his absence may be considered a waiver
to cross-examine the witness, it cannot be taken to
mean forfeiture of the right to present admissible
evidence against the complainant witness. (Rec., pp.
195-197)

13. On August 9, 1991, Atty. Seno filed his Comment on

Complainants' Urgent Motion For Early Decision praying that Lhuillier
be given a period of ten (10) days from August 9, 1991 within which
to submit additional affidavits and thereafter to consider the cases
submitted for resolution (Rec., pp. 199-200).

14. On August 15, 1991, petitioners filed a "Counter-Comment On

Respondent's Comment of [sic] Motion For Early Decision' alleging
that under Rule VII, Section 10 (c) of the Revised Rules of Court of
the NLRC which reads:
 xxx xxx xxx

c) In case of unjustified non-appearance by the

respondent during her/his turn to present evidence,
despite due notice, the case shall be considered
submitted for decision on the basis of the evidence so
far presented.

the non-appearance of Lhuillier or its counsel on the scheduled

dates of hearing on July 8 and 12, 1991, was clearly unjustified
(Rec., pp. 202-205).

15. On October 14, 1991, Atty. Seno filed a Motion Reiterating The
Request For Submission Of Additional Affidavits therein alleging that
Lhuillier's previous motion to present additional affidavits had not
been acted upon; and that he had not received an order
considering the instant case submitted for resolution. With the
motion, Lhuillier submitted the affidavits of additional witnesses,
praying that said supplemental affidavits be admitted and
presentation of additional evidence be allowed (Rec., pp. 207-209).

16. On October 16, 1991, petitioners filed an Opposition On [sic]

Respondents' Request For Submission Of Additional Affidavits And
Urgent Motion To Release Decision, alleging that counsel for Lhuillier
was given ample opportunity to present his evidence; that by his
failure to appear at the scheduled hearings without any reason or
prior motion for postponement, he was deemed to have waived his
right to present evidence; and that about the later part of August
1991, upon learning that Labor Arbiter Velasquez would be
transferred to NLRC, Tacloban, they (petitioners) inquired about the
status of the instant case and they were informed by Labor Arbiter
Velasquez that a Decision was already rendered (Rec., pp. 203-
205).

On August 30, 1991, the labor arbiter rendered a decision in favor of

petitioners. On appeal, Respondent NLRC vacated the labor arbiter's
order and remanded the case for further proceedings. It subsequently
denied the motion for reconsideration.
 Respondent NLRC's Ruling

Ruled the NLRC:8

In resolving this issue [of due process], it is necessary to go over the

pertinent provisions of the 1990 NLRC Rules of Procedure, more
particularly Sec. 11, Rule V.

Rule V — Proceedings Before the Labor Arbiters:

Sec. 11. Non-appearance of Parties at

Conference/Hearings. — (a) Two (2) successive
absences at a conference/hearing by the
complainant or petitioner, who was duly notified
thereof may be sufficient cause to dismiss the case
without prejudice. Where proper justification, however,
is shown by proper motion to warrant the re-opening of
the case, the Labor Arbiter shall call a second hearing
and continue the proceedings until the case is finally
decided. Dismissal of the case for the second time due
to the unjustified non-appearance of the complainant
or petitioner who was duly notified thereof shall be with
prejudice.

b) In case of two (2) successive non-appearances by

the respondent, despite due notice, during the
complainant's presentation of evidence, the
complainant shall be allowed to present evidence ex-
parte, subject to cross-examination by the respondent,
where proper, at the next hearing. Upon completion of
such presentation of evidence for the complainant,
another notice of hearing for the reception of the
respondent's evidence shall be issued, with a warning
that failure of the respondent to appear shall be
construed as submission by him of the case for
resolution without presenting his evidence.
 c) In case of two (2) successive unjustified non-
appearances by the respondent during his turn to
present evidence, despite due notice, the case shall
be considered submitted for decision on the basis of
the evidence so far presented.

The established fact is that July 8 and 12, 1991 were the scheduled
dates for the cross-examination of Marilyn Lim, last witness for the
complainants and the start of respondents' presentation of
evidence. It is also not disputed that respondent and counsel failed
to appear at the July 8 hearing. A scrutiny of the minutes of the July
8, 1991 hearing would however reveal that date was alloted [sic]
purposely for the cross-examination of Marilyn Lim and that
respondents' presentation of evidence would start on July 12,
1991. (page 176, records) Technically, the Labor Arbiter was correct
in ruling that respondent had waived her right to cross-examine
complainant Marilyn Lim when she failed to appear on July 8,
1991. But definitely, it was error for him to consider the case
submitted for decision when respondent failed to appear on July
12, 1991. The above-cited rules are clear and explicit. It takes two
successive and unjustified non-appearance on the part of
respondent before he or she can be considered to have waived
his/her right to present evidence and thereafter to consider the
case submitted for decision on the basis of the evidence thus far
presented. Respondent's absence on July 12, 1991 was but her first
since, as pointed out, it was on that day that she was supposed to
start presenting her evidence. What the Labor Arbiter should have
done was to set another date for the reception of respondent's
evidence. If she still failed to appear, his reliance on Sec. 11 (c),
Rule V of the New Rules of Procedure of the NLRC would have been
justified and this Commission would not hesitate to uphold him on
that respect. As it is, the questioned ruling was, indeed, premature
to say the least. While concern for the less privileged workers and
speediin [sic] the disposition of labor cases are highly
commendable, those considerations should not run roughshod over
well-established principles of due process.
 It may be argued that the evidence sought to be introduced by
respondent are contained in the additional affidavits which now
form part of the records, hence this Commission can now decide
this appeal on the merits. It is with more reason that this case should
be remanded not only to allow respondent to formally present her
evidence, but also to allow complainants to cross-examine and
confront their accusers. (Emphasis supplied.)

Not satisfied, petitioners filed the present petition before us under Rule 65
of the Rules of Court.9

The Issues

Petitioners submit to this Court the following issues:10

The Honorable Commission has committed serious reversible error

amounting to a grave abuse of discretion and in excess of
jurisdiction in finding that the private respondent was not afforded
due process by the hearing labor arbiter, particularly the reception
of private respondent's evidence.

The Honorable Commission has committed serious reversible error

amounting to a grave abuse of discretion and in excess of
jurisdiction in finding that the declaration by the hearing labor
arbiter submitting these cases for decision on July 12, 1991 was not
in accordance with Rule V Section II of the 1990 New Rules of
Procedure of the NLRC (attached hereto as annex "C").

The Honorable Commission has committed serious reversible error

amounting to a grave abuse of discretion and in excess of
jurisdiction in giving importance to private respondent's additional
alleged affidavits which were filed only on October 14, 1991
(attached hereto as annex "G-1"), by way of attaching the same in
 private respondent's motion reiterating request for submission of
additional affidavits (attached hereto as annex "G"), long after the
hearing labor arbiter rendered a decision on August 30, 1992
(attached hereto as annex "E"), contrary to the private respondent's
prayer and commitment (attached hereto as annex "F-1").

The Honorable Commission has committed serious reversible error

amounting to a grave abuse of discretion, in substance and in law,
in not modifying the appealed decision of the hearing labor arbiter
(attached hereto as annex "E") with respect to the accuracy of the
monetary awards pursuant to the pertinent provisions of the Labor
Code, its implementing rules and regulations and pursuant
particularly to the celebrated case of Roche (Philippines), et als.
[sic] vs. NLRC, et als., [sic] G.R. No. 83335, October 12, 1989.

The Honorable Commission has no jurisdiction to entertain private

respondent's two appeals.

Put differently but more plainly, the issues in this case are as follows:

1. Did the NLRC acquire jurisdiction over the appeal notwithstanding the
alleged insufficiency of the appeal bond?

2. Were private respondents deprived of due process of law by the labor

arbiter?

3. Were petitioners illegally dismissed?

4. Assuming petitioners were illegally dismissed, was the computation of

the backwages, service incentive leave pay and damages valid and
correct?

The Court's Ruling

The petition is meritorious. We hold that the private respondents were not
denied due process of law by the labor arbiter; and that nine of the
petitioners were illegally dismissed, but that Petitioners Lim and Canonigo
were not.

First Issue: Insufficiency of Appeal Bond

Petitioners contend that Respondent NLRC did not acquire jurisdiction

over the appeal of private respondents because the appeal bond was
insufficient. Although the total monetary award in their favor was
P1,078,200.55, private respondents posted a cash bond in the amount of
P752,183.00 only. In computing the monetary award for the purpose of
posting an appeal bond, private respondents relied on Rule VI, Section 6
of the 1990 New Rules of Procedure of the NLRC and excluded the award
for damages, litigation expenses and attorney's fees. Petitioners argue
however that the said rule cannot prevail over Article 223 of the Labor
Code, which does not provide for such exclusion.

We agree with private respondents. Article 223 of the Labor Code

provides:

xxx xxx xxx

In case of a judgment involving a monetary award, an appeal by

the employer may be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the
monetary award in the judgment appealed from.

In any event, the decision of the Labor Arbiter reinstating a

dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even
pending appeal. The employee shall either be admitted back to
work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer
shall not stay the execution for reinstatement provided therein . . .
(Emphasis supplied.)
On the other hand, Rule VI, Section 6 of the 1990 NLRC New Rules of
Procedure,11 invoked by private respondent, provides:

Sec. 6. Bond. In case of the decision of a Labor Arbiter involves a

monetary award, an appeal by the employer shall be perfected
only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Commission or
the Supreme Court in an amount equivalent to the monetary
award.

The Commission may, in meritorious cases and upon Motion of the

Appellant, reduce the amount of the bond. However, an appeal is
deemed perfected upon the posting of the bond equivalent to the
monetary award exclusive of moral and exemplary damages as
well as attorney's fees.

Nothing herein however, shall be construed as extending the period

of appeal. (Emphasis supplied.)

There is no conflict between the two provisions. Article 223 lays down the
requirement that an appeal bond should be filed. The implementing rule,
on the other hand, explains how the appeal bond shall be computed. The
rule explicitly excludes moral and exemplary damages and attorney's fees
from the computation of the appeal bond. This exclusion has been
recognized by the Court in a number of cases. Hence, in Erectors
vs. NLRC,12 the Court nullified an NLRC order requiring the posting of an
appeal bond which, among others, "even included in the computation
the award of P400,000.00 for moral and exemplary damages." Indeed, the
said implementing rule is a contemporaneous construction of Article 223
by the NLRC pursuant to the mandate of the Labor Code; hence, it is
accorded great respect by this Court.13

In line with the desired objective of our labor laws to resolve controversies
on their merits, the Court has held that the filing of a bond in appeals
involving monetary awards should be given liberal construction.14 The rule
requiring the employer to post a cash or surety bond to perfect his appeal
assures the workers that they will receive the money judgment awarded
to them upon the dismissal of the employer's appeal. It also discourages
employers from using an appeal to delay or even evade their obligation
to satisfy the just and lawful claims of their employees.15

Hence, deducting from the total monetary award of P1,078,200.55 the

amount of P200,000.00 for moral and exemplary damages, P98,018.25 for
attorney's fees and P30,000.00 for litigation expenses, the amount of the
bond should be P750,182.55. Thus, the appeal bond actually posted in the
amount of P752,183 is even more than the amount of appeal bond that
may be required from private respondents under Respondent NLRC's rules.

Second Issue: No Denial of Due Process

The NLRC ruled that private respondents were denied due process
because the labor arbiter deemed the case submitted for resolution when
they failed to attend the hearings on July 8 and 12, 1991. Under the NLRC
Rules of Procedure, a case may be deemed submitted for decision on the
basis of the evidence thus far adduced in the event respondent incurs
two successive absences "during his turn to present evidence." While the
hearing on July 12, 1991 was for the presentation of herein private
respondents' evidence, the NLRC found that the hearing on July 8, 1991
was scheduled for the cross-examination of petitioners' witness. Since the
absences were not made during respondents' "turn to present evidence,"
public respondent remanded the case to the labor arbiter for "further
proceedings."

Petitioners dispute the NLRC ruling, contending that the parties in this case
were able to submit their respective position papers together with
supporting affidavits and other documents. They stress that private
respondents' failure to attend the hearings on July 8 and 12, 1991, without
any justification or motion for postponement, warranted the submission of
the case for decision pursuant to Section 11, Rule V of the 1990 New Rules
of Procedure of the NLRC. They insist that the hearing on July 8, 1991 was
scheduled to afford private respondents not only an opportunity "to cross-
examine petitioner's last witness, Marilyn Lim, [but also] to start the
presentation of [their] evidence . . ."16

On the other hand, private respondents argue that the labor arbiter erred
in considering the absence of their counsel during the hearings scheduled
on July 8 and July 12, 1991 as waiver not only of the right to cross-examine
but of the right to present evidence. They further contend that the labor
arbiter released his decision notwithstanding the pendency of three
unresolved motions.17 These circumstances clearly show that they were
not afforded due process of law.18

To make a clear ruling, we again cite Rule V, Section 11 of the 1990 Rules
of Procedure of Respondent NLRC, which provides:

Sec. 11. Non-appearance of Parties at Conference/Hearings. — (a)

Two (2) successive absences at a conference/hearing by the
complainant or petitioner, who was duly notified thereof, may be
sufficient cause to dismiss the case without prejudice. Where proper
justification, however, is shown by proper motion to warrant the re-
opening of the case, the Labor Arbiter shall call a second hearing
and continue the proceedings until the case is finally decided.
Dismissal of the case of the second time due to the unjustified non-
appearance of the complainant or petitioner who was duly notified
thereof shall be with prejudice.

(b) In case of two (2) successive non-appearances by the

respondent, despite due notice, during the complainant's
presentation of evidence, the complainant shall be allowed to
present evidence ex parte, subject to cross-examination by the
respondent, where proper, at the next hearing. Upon completion of
such presentation of evidence for the complainant, another notice
of hearing for the reception of the respondent's evidence shall be
issued, with a warning that failure of the respondent to appear shall
be construed as submission by him of the case for resolution without
presenting his evidence.

(c) In case of two (2) successive unjustified non-appearances by

the respondent during his turn to present evidence, despite due
notice, the case shall be considered submitted for decision on the
basis of the evidence so far presented. (Emphasis supplied).

It is undisputed that private respondents' counsel failed to attend the

hearings on the two aforementioned dates. Moreover, the labor
arbiter19 and the NLRC held that the hearing on July 8, 1991 was only for
the cross-examination of herein petitioners' witness, while that on July 12,
1991 was for the reception of private respondents' evidence. This
notwithstanding, we hold that the NLRC committed grave abuse of
discretion in remanding the case to the labor arbiter.

Private respondents were able to file their respective position papers and
the documents in support thereof, and all these were duly considered by
the labor arbiter.20 Indeed, the requirements of due process are satisfied
where the parties are given the opportunity to submit position papers.21 In
any event, Respondent NLRC and the labor arbiter are authorized under
the Labor Code to decide a case on the basis of the position papers and
documents submitted.22 The holding of an adversarial trial depends on the
discretion of the labor arbiter, and the parties cannot demand it as a
matter of right. In other words, the filing of position papers and supporting
documents fulfilled the requirements of due process.23 Therefore, there
was no denial of this right because private respondents were given the
opportunity to present their side.24

Moreover, it should be noted that private respondents did not dispute the
order of the labor arbiter submitting the case for decision immediately
after its issuance. Likewise, they failed to present additional evidence on
the date they themselves specified. It was only on August 6, 1991 that
private respondents' counsel, in his Comments to the Offer of
Exhibits25 with counter-manifestation, explained his failure to appear at the
hearing on July 8, 1991. His explanation, quoted below, is not
compelling.26

The failure of the undersigned to appear on the date of hearing

was for the reason that his car bogged down, as in fact he called
up the Office of the Hearing Officer. While his absence may be
considered a waiver to cross-examine the witness, it cannot be
taken to mean forfeiture of the right to present admissible evidence
against the complainant-witness.

Three days later on August 9, 1991, private respondents moved that they
be given a "period of ten days from August 9, 1991" — or until August 19,
1991— within which to submit additional affidavits, "after which, the cases
will be deemed submitted for resolution on the basis of complainants'
evidence and respondents' position paper and the additional
affidavits."27 Counsel, however, failed to submit the supposed evidence
on said date. On October 14, 1991, private respondents filed a Motion
Reiterating the Request for Submission of Additional Affidavits.28 Again,
private respondents did not submit the said documents.

As earlier noted, the essence of due process is simply an opportunity to be

heard, to explain one's side, or to seek a reconsideration of the action or
ruling complained of. In the case at bar, private respondents were given
ample opportunity to do just that but they failed, for unknown reasons, to
avail themselves of such opportunity. They themselves moved that they
be allowed to present additional affidavits on August 19, 1991, but they
never did; no valid reason was given for their failure to do so. Their
contention that the labor arbiter failed to rule on their motion deserves
scant consideration. It is axiomatic — in fact, it is plainly commonsensical
— that when a counsel asks for an extension of time within which to file a
pleading, he must be ready with that pleading on the date specified in his
motion, even absent a resolution or order disposing of his motion.

We cannot remand the instant case to the labor arbiter for further
proceedings. Respondent NLRC, on the basis of the evidence on record,
could have resolved the dispute. To remand it to the labor arbiter is to
delay needlessly the disposition of this case, which has been pending
since July 23, 1990. It becomes our duty under the circumstances to
determine the validity of the allegations of the parties. Remanding the
case to the labor arbiter will just frustrate speedy justice and, in any event,
would be a futile exercise, as in all probability the case would end up with
this Court. We shall thus rule on the substantial claims of the parties.

Third Issue: Petitioners Were Illegally Dismissed

Private respondents controvert the claim of illegal dismissal by maintaining

that petitioners abandoned their employment. They aver that on July 19,
1990, Petitioner Gloria Adriano, pawnshop appraiser, over-declared the
weights and values of pawned pieces of jewelry, which allegedly caused
a loss of at least P174,850. In a letter dated July 19, 1990, they required
Petitioner Adriano to explain within 72 hours why her employment should
not be terminated. On July 20, 1990, however, Petitioner Adriano together
with Petitioners Asteria Campo, Leiden Fernandez, Brenda Gadiano,
Emilia Negapatan, Eleonor Quiñanola, Jesus Tomongha, Florida Talledo
and Florida Villaceran allegedly did not report for work without any
excuse. Thus, private respondents concluded that petitioners abandoned
their employment. They also state that they intended to pursue legal
action against the said petitioners for "illegal abandonment." But before
they could do so, they received summons requiring them to respond to
the complaints of illegal dismissal filed by the said nine petitioners.29

On the other hand, petitioners maintain that on July 19, 1990, Private
Respondent Marguerite Lhuillier, the pawnshop owner, told them not to
report for work because their employment had been terminated. Thus,
they did not report for work the following day, July 20, 1990. On July 23,
1990, they filed their respective complaints before the Regional Arbitration
Board of Respondent NLRC.

In view of the conflicting claims of the parties, we examined the records

of this case and found that private respondents did not abandon their
employment; rather, they were illegally dismissed.

To succeed in pleading abandonment as a valid ground for dismissal, the

employer must prove (1) the intention of an employee to abandon his or
her employment and (2) an overt act from which such intention may be
inferred; i.e., the employee showed no desire to resume his work.30 Mere
absence is not sufficient. The employer must prove a deliberate and
unjustified refusal of the employee to resume his employment without any
intention of returning.31 Private respondents failed to discharge this
burden. The claim of abandonment was inconsistent with the immediate
filing of petitioners' complaint for illegal dismissal and prayer for
reinstatement. For how can an inference be made that an employee had
no intention of returning to work, when he filed a complaint for illegal
dismissal praying for reinstatement three days after the alleged
abandonment?32 Moreover, considering that petitioner had been with
Pawnshop Lhuillier for several years — ranging from six (6) years to thirty
three (33) years — it is unlikely that they would simply leave their
employment. Clearly, there is no cogent basis for private respondents'
theory that said petitioners abandoned their work. In this light, we sustain
the finding of the labor arbiter that said petitioners were illegally dismissed,
with neither just cause nor due process.

Petitioners Lim and Canonigo Resigned

The foregoing holding cannot apply to Petitioners Marilyn Lim and Joseph
Canonigo, however.

Lim claims that Private Respondent Lhuillier forced her to resign, but at the
same time assured her of separation pay.33 On February 5, 1990, prior to
Lim's letter of resignation dated February 24, 1990,34 her lawyer proposed
the following to Private Respondent Lhuillier:35

1. That our client Ms. Marilyn Lim be given immediately a clearance

upon resignation from your good company and payment of
separation pay at the rate of one month per year of service; and

2. That our client is willing to execute a promissory note on her

indebtedness, and will pay upon the same terms prevailing before
her resignation. Our client's ability to settle her indebtedness should
be given kind consideration by your company considering that her
eventual resignation will render her jobless for a while. Besides, per
Investigation Report No. 2, Series of 1990, conducted by your
Resident Counsel, Atty. Malcolm V. Seno, our client has impressed
your Resident Counsel as a person of much valor and great
determination when she immediately admitted her guilt.

3. That the various checks she endorsed to your company be

returned to our client, so that she could file a case against the
issuers or drawers of the same, be it criminal or civil in nature.
(Emphasis supplied).

Petitioner Lim's testimony36 that she has never been informed of any
wrongdoing until her termination is belied by her assertions in the
aforequoted letter. Her admission of the offense charged shows that she
was not coerced to resign. Besides, the fact that her complaint for illegal
dismissal was filed long after her resignation on February 24, 1990 suggests
that it was a mere afterthought.

On the other hand, Petitioner Canonigo contends that he was forced to

sign his letter of resignation dated July 14, 1990, because Private
Respondent Lhuillier received reports from other employees that he was
responsible for some anomalies in the pawnshop. He also stated that he
resigned because he was assured of separation pay.37 Like Petitioner Lim,
he did not immediately file a complaint for illegal dismissal, doing so only
on July 23, 1990. From the foregoing facts, we see no cogent basis for
holding that he was forced to resign. On the contrary, we find that he
voluntarily tendered his resignation on the assurance of separation pay.
Clearly, Petitioner Canonigo, like Lim, was not dismissed; rather, he
resigned voluntarily.

Fourth Issue: Service Incentive Leave Pay and Damages

In his decision, the labor arbiter granted varying amounts of service

incentive leave pay to the petitioners based on the length of their
tenure; i.e., the shortest was six years and the longest was thirty-three
years. While recommending that the labor arbiter's decision be reinstated
substantially, the solicitor general recommended that the award of
service incentive leave be limited to three years. This is based on Article
291 of the Labor Code which provides:

Art. 291. Money Claims. — All money claims arising from employer-
employee relations accruing during the effectivity of this Code shall
be filed within three (3) years from the time the cause of action
accrued; otherwise they shall be forever barred.

xxx xxx xxx

Petitioners counter that Article 291 "speaks clearly on the prescription of

filing [an] action upon monetary claims within three (3) years from the
time the cause of action accrued, but it is not a prescription of a period of
time for the computation of monetary claims."38
The clear policy of the Labor Code is to grant service incentive leave pay
to workers in all establishments, subject to a few exceptions. Section 2,
Rule V, Book III of the Implementing Rules and Regulations39 provides that
"[e]very employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay." Service
incentive leave is a right which accrues to every employee who has
served "within 12 months, whether continuous or broken reckoned from
the date the employee started working, including authorized absences
and paid regular holidays unless the working days in the establishment as
a matter of practice or policy, or that provided in the employment
contracts, is less than 12 months, in which case said period shall be
considered as one year."40 It is also "commutable to its money equivalent
if not used or exhausted at the end of the year."41 In other words, an
employee who has served for one year is entitled to it. He may use it as
leave days or he may collect its monetary value. To limit the award to
three years, as the solicitor general recommends, is to unduly restrict such
right. The law indeed does not prohibit its commutation. Moreover, the
solicitor general's recommendation is contrary to the ruling of the Court
in Bustamante et al. vs. NLRC et al.,42 lifting the three-year restriction on
the amount of backwages and other allowances that may be awarded
an illegally dismissed employee, thus:

Therefore, in accordance with R.A. No. 6715, petitioners are entitled

to their full backwages, inclusive of allowances and other benefits
or their monetary equivalent, from the time their actual
compensation was withheld from them up to the time of their
actual reinstatement. (Emphasis supplied.).

Since a service incentive leave is clearly demandable after one year of

service — whether continuous or broken — or its equivalent period, and it
is one of the "benefits" which would have accrued if an employee was not
otherwise illegally dismissed, it is fair and legal that its computation should
be up to the date of reinstatement as provided under Section 279 of the
Labor Code, as amended, which reads:

Art. 279. Security of Tenure. — An employee who is unjustly dismissed

from work shall be entitled to reinstatement without loss of seniority
 rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation is withheld
from him up to the time of his actual reinstatement. (emphasis
supplied).

However, the Implementing Rules clearly state that entitlement to "benefit

provided under this Rule shall start December 16, 1975, the date the
amendatory provision of the [Labor] Code took effect."43 Hence,
petitioners, except Lim and Canonigo, should be entitled to service
incentive leave pay from December 16, 1975 up to their actual
reinstatement.

Petitioners, citing Roche Philippines et al. vs. NLRC et al.,44 further contend
that the award of damages in the case at bar should be increased, for
"there are eleven (11) complainants/petitioners whose long years of
employment was illegally, oppressively and wantonly terminated by the
private
respondent."45

We disagree. Determination of the amount of moral damages and

attorney's fees is best left to the discretion of the labor arbiter.46 Moral
damages are recoverable where the dismissal of the employee was
attended by bad faith or fraud, or it constituted an act oppressive to
labor, or it was done in a manner contrary to morals, good customs or
public policy.47 In the case before us, records show that petitioners'
dismissals were done oppressively and in bad faith, for they were just
summarily dismissed without even the benefit of notice and hearing. The
well-settled rule is that the employer shall be sanctioned for
noncompliance with the requirements of, or for failure to observe, due
process in dismissing its employees.48 Petitioners were likewise subjected to
unnecessary embarrassment or humiliation because of the filing of the
criminal charge of qualified theft, which was later dismissed49 by the
investigating prosecutor.50 It follows then that the award of attorney's fees
is likewise proper, for the "defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect his
interest."51
Full Backwages for Dismissals
Effected After March 21, 1989

Having determined that petitioners, except Lim and Canonigo, were

illegally dismissed, we next resolve the question of whether Respondent
NLRC gravely abused its discretion in ordering the reinstatement of
dismissed employees and the payment to them of full backwages; or, if
reinstatement was no longer feasible, whether the grant to them of
separation pay plus backwages was correct. In several cases,52 this Court
has held that illegally dismissed employees are entitled to reinstatement
and full backwages. If reinstatement is not possible, the employees are
entitled to separation pay and full backwages. Accordingly, the award to
petitioners of backwages for three years should be modified in
accordance with Article 27953 Of the Labor Code, as amended by R.A.
6715, by giving them full backwages without conditions and limitations,
the dismissals having occurred after the effectivity of the amendatory law
on March 21, 1989.54 Thus, the Court held in Bustamante.55

The clear legislative intent of the amendment in Rep. Act No. 6715 is
to give more benefits to workers than was previously given them
under the Mercury Drug rule or the "deduction of earnings
elsewhere" rule. Thus, a closer adherence to the legislative policy
behind Rep. Act No. 6715 points to "full backwages" as meaning
exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period
of his illegal dismissal.

WHEREFORE, the petition is hereby GRANTED and the assailed Decision

and Resolution are REVERSED and SET ASIDE. The labor arbiter's decision is
REINSTATED with MODIFICATIONS, such that the award of separation pay is
deleted and the service incentive leave pay is computed from December
16, 1975 up to petitioners' actual reinstatement. Full backwages, including
the accrued thirteenth month pay, are also awarded to the nine
petitioners — Leiden Fernandez, Brenda Gadiano, Gloria Adriano, Emelia
Negapatan, Jesus Tomongha, Eleonor Quiñanola, Asteria Campo, Florida
Villaceran and Florida Talledo — from the date of their illegal dismissal to
 the time of their actual reinstatement. Petitioners Lim and Canonigo,
whom we find to have voluntarily resigned, are not entitled to any benefit.

SO ORDERED.

Narvasa, C.J., Romero, Melo and Francisco, JJ., concur.

Footnotes

1 Spelled "Marguerite" in the petition, it was "Margueritte" in the

OSG's Comment dated December 21, 1992.

2 Rollo, pp. 154-158.

3 Fourth Division, composed of Commissioner Bernabe S.

Batuhan, ponente; and Presiding Commissioner Ernesto G. Ladrido
III and Commissioner Irenea E. Ceniza, concurring.

4 Decision, p. 5; rollo, p. 158.

5 Rollo, pp. 79-109.

6 Labor Arbiter's decision, pp. 29-31; rollo, pp. 107-109.

7 Rollo, pp. 203-214. There was no paragraph no. 4 in this Comment.

8 Rollo, pp. 155-158.

9 The case was deemed submitted for resolution upon the posting
of private respondent's memorandum on October 18, 1996. (Rollo,
p. 380.)

10 Rollo, pp. 18-20; original text in upper case.

11 Effective October 9, 1990. (Diola vs. National Labor Relations

Commission, 222 SCRA 860, May 31, 1993.). Although this section
was amended on November 5, 1993, its provision for the
computation of the bond remains essentially the same.
12 202 SCRA 597, October 10, 1991, per Narvasa, J. (now Chief
Justice): See also Star Angel Handicraft vs. NLRC, 236 SCRA 580;
September 20, 1994.

13 Bagatsing vs. Committee on Privatization, 246 SCRA 334, July 14,

1995 citing Nestle Philippines, Inc. vs. Court of Appeals, 203 SCRA
504, November 13, 1991; Enrique vs. Court of Appeals, 229 SCRA
180, 186, January 10, 1994 citing Soriano vs. Offshore Shipping and
Manning Corporation, 177 SCRA 513, September 14, 1989.

14 Manila Mandarin Employees Union vs. NLRC, 264 SCRA 320, 331
November 19, 1996; Star Angel Handicraft vs. National Labor
Relations Commission, 236 SCRA 580, September 20, 1994;
Blancaflor vs. National Labor Relations Commission, 218 SCRA 366,
February 2, 1993; Rada vs. National Labor Relations Commission, 205
SCRA 69, January 9, 1992; Erectors, Inc. vs. NLRC, 202 SCRA 597,
October 10, 1991; YBL (Your Bus Line) vs. National Labor Relations
Commission, 190 SCRA 160, September 28, 1990.

15 Viron Garments Manufacturing, Co., Inc., et al. vs. NLRC et al.,

207 SCRA 339, March 18, 1992.

16 Petition, p. 19; rollo, p. 22.

17 Rollo, p. 171. These are:

a. Urgent Motion Reiterating the Request for Submission

of Additional Affidavits dated October 14, 1991
submitted by Atty. Malcolm Seno,

b. Urgent Motion to Resolve Respondents' Pending

Motion and Comments on Petitioner's "Urgent Motion
To Release Decision" dated November 25, 1991
submitted by Atty. Luis V. Diores,

c. Urgent Motion to Allow Respondents to Cross-

Examine Complainants and To Present Evidence Under
Rule V, Sec. 11 (b) and (c) of the New Rules of
Procedure of the NLRC.
18 Rollo, pp. 170-172.

19 Labor arbiter's decision, p. 25; rollo, p. 103. The labor arbiter held
that "[o]n July 8, 1991 and July 12, 1991, the scheduled dates for the
respondent to cross-examine complainant, Marilyn Lim and for the
respondent to present her evidence, respectively, respondent and
her counsel without giving reason nor filed [sic] any motion to
postpone failed to appear on the said scheduled dates." (Emphasis
supplied). In effect, the labor arbiter belied petitioner's contention
that the hearing on July 8, 1991 was for the cross-examination of the
petitioner's witness and for the reception of private respondents'
evidence.

20 Ibid., pp. 27-28; rollo, pp. 105-106.

21 Odin Security Agency vs. De La Serna, et al., 182 SCRA 472, 479,
February 21, 1990; Pacific Timber Export Corp. vs. NLRC, 224 SCRA
860, July 30, 1993.

22 Cagampan et al. v. NLRC et al., 195 SCRA 533, 539, March 22,
1991; Salonga vs. National Labor Relations Commission, 254 SCRA
111, 115, February 23, 1996 citing Lawrence vs. National Labor
Relations Commission, 205 SCRA 737, 750, February 4, 1992. See
also Pacific Timber Export Corp. vs. NLRC, 224 SCRA 860, 862, July 30,
1993; Commando Security Agency vs. NLRC, 211 SCRA 645, 649,
July 20, 1992; Robusta Agro Marine Products, Inc. vs. Gorombalem,
175 SCRA 93, 98, July 5, 1989.

23 Yap vs. Inciong, 186 SCRA 664, June 21, 1990; B. Sta. Rita &
Company, Inc. vs. Arroyo and NLRC, 168 SCRA 581, December 20,
1988.

24 Divine Word High School vs. NLRC, 143 SCRA 346, August 6, 1986;
Municipality of Daet vs. Hidalgo Enterprises, Inc., 138 SCRA 265,
August 28, 1985.

25 Rollo, pp. 75-77.

26 Comments to the Offer of Exhibits, p. 2; rollo, p. 76.

27 Ibid.,

28 Rollo, pp. 112-114.

29 NLRC Records, p. 116; rollo, pp. 89-92.

30 Jackson Building Condominium Corporation vs. National Labor

Relations Commission, 246 SCRA 329, 332, July 14, 1995; Wyeth-
Suaco Laboratories, Inc. vs. National Labor Relations Commission,
219 SCRA 356, March 2, 1993; Dagupan Bus Co., Inc. vs. NLRC, 191
SCRA 328, November 9, 1990.

31 Labor vs. National Labor Relations Commission, 248 SCRA 183,

198, September 14, 1995 citing Kingsize Manufacturing Corp. vs.
NLRC, 238 SCRA 349, November 24, 1994; F.R.F. Enterprises, Inc. vs.
NLRC, 243 SCRA 593, April 21, 1995.

32 Jackson Building Condominium Corporations vs. National Labor

Relations Commission, supra, at pp. 332-333; Remerco Garments
Manufacturing vs. Minister of Labor and Employment, 135 SCRA 167,
February 28, 1985; Judric Canning Corp. vs. Inciong, 115 SCRA 887,
August 19, 1982.

33 NLRC Records, pp. 312-313; TSN, February 27, 1991, pp. 19-20.

34 NLRC Records, p. 113.

35 NLRC Records, pp. 111-112.

36 TSN, February 27, 1991, p. 13.

37 NLRC Records, pp. 326-327; TSN, February 27, 1991, pp. 33-34.

38 Rollo, p. 242; emphasis omitted.

39 Entitled "Right to service incentive leave."

40 Section 3, Rule V, Book III, Implementing Rules and Regulations of

the Labor Code.
41 Section 5, Rule V, Book III, Implementing Rules and Regulations of
the Labor Code.

42 G.R. No. 111651, pp. 8-9, November 28, 1996, per Padilla, J.

43 Section 4, Rule V, Book III, Implementing Rules and Regulations of

the Labor Code.

44 178 SCRA 386, October 5, 1989, per Gancayco, J.

45 Rollo, p. 243; emphasis omitted.

46 Cf. Suario vs. Bank of the Philippine Islands, 176 SCRA 688, 696,
August 25, 1989 citing Primero vs. Intermediate Appellate Court, 156
SCRA 435, December 14, 1987.

47 Article 2220 of the New Civil Code.

48 Magnolia Dairy Products Corp. vs. NLRC, 252 SCRA 483, 491,
January 29, 1996.

49 As of the filing of petition on June 10, 1992, a petition for review

of the dismissal was still pending at the Department of Justice.

50 Roche (Philippines) vs. National Labor Relations Commission, 178

SCRA 386, 397, October 5, 1989; Lopez vs. Javier, 252 SCRA 68, 79,
January 22, 1996 citing Spartan Security and Detective Agency, Inc.
vs. NLRC, et al., 213 SCRA 528, 1992; Octot vs. Ybañez, 111 SCRA 79.

51 Article 2208, paragraph (2) of the Civil Code.

52 Citytrust Banking Corporation vs. NLRC, 258 SCRA 621, 630, July
11, 1996 citing Article 279 of the Labor Code as amended by RA
6715; Gold City Integrated Port Service, Inc. vs. National Labor
Relations Commission, 245 SCRA 627, July 6, 1995; Torillo vs.
Leogardo, 197 SCRA 471, May 27, 1991; Indophil Acrylic Mfg. Corp.
vs. NLRC, 226 SCRA 723, September 27, 1993; Quinoñes vs. National
Labor Relations Commission, 246 SCRA 294, 298, July 14, 1995;
Molave Tours Corporation vs. National Labor Relations Commission,
250 SCRA 325, 329, November 24, 1995; Polymedic General Hospital
 vs. NLRC, 134 SCRA 420, January 31, 1985; Egyptair vs. National
Labor Relations Commission, 148 SCRA 125, February 27, 1987.

53 Art. 279. Security of Tenure. [as amended by Section 34 of RA

6715]. — In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.

54 Bustamante vs. NLRC, supra.

55 Ibid., p. 8.

SECOND DIVISION

G.R. No. 148415 July 14, 2008

RICARDO G. PALOMA, Petitioner,

vs.
PHILIPPINE AIRLINES, INC. and THE NATIONAL LABOR RELATIONS
COMMISSION, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 156764

PHILIPPINE AIRLINES, INC., Petitioner,

vs.
RICARDO G. PALOMA, Respondent.

DECISION

VELASCO, JR., J.:

The Case
Before us are these two consolidated petitions for review under Rule 45
separately interposed by Ricardo G. Paloma and Philippine Airlines, Inc. (PAL) to
nullify and set aside the Amended Decision1 dated May 31, 2001 of the Court of
Appeals (CA) in CA-G.R. SP No. 56429, as effectively reiterated in its
Resolution2 of January 14, 2003.

The Facts

Paloma worked with PAL from September 1957, rising from the ranks to retire,
after 35 years of continuous service, as senior vice president for finance. In
March 1992, or some nine (9) months before Paloma retired on November 30,
1992, PAL was privatized.

By way of post-employment benefits, PAL paid Paloma the total amount of PhP
5,163,325.64 which represented his separation/retirement gratuity and accrued
vacation leave pay. For the benefits thus received, Paloma signed a document
denominated Release and Quitclaim3 but inscribed the following reservation
therein: "Without prejudice to my claim for further leave benefits embodied in
my aide memoire transmitted to Mr. Roberto Anonas covered by my 27 Nov.
1992 letter x x x."

The leave benefits Paloma claimed being entitled to refer to his 450-day
accrued sick leave credits which PAL allegedly only paid the equivalent of 18
days. He anchored his entitlement on Executive Order No. (EO) 10774 dated
January 9, 1986, and his having accumulated a certain number of days of sick
leave credits, as acknowledged in a letter of Alvia R. Leaño, then an
administrative assistant in PAL. Leaño’s letter dated November 12, 1992
pertinently reads:

At your request, we are pleased to confirm herewith the balance of your sick
leave credits as they appear in our records: 230 days.

According to our existing policy, an employee is entitled to accumulate sick

leave with pay only up to a maximum of 230 days.

Had there been no ceiling as mandated by Company policy, your sick leave
credits would have totaled 450 days to date.5
Answering Paloma’s written demands for conversion to cash of his accrued sick
leave credits, PAL asserted having paid all of Paloma’s commutable sick leave
credits due him pursuant to company policy made applicable to PAL officers
starting 1990.

The company leave policy adverted to grants PAL’s regular ground personnel a
graduated sick leave benefits, those having rendered at least 25 years of
service being entitled to 20 days of sick leave for every year of service. An
employee, under the policy, may accumulate sick leaves with pay up to 230
days. Subject to defined qualifications, sick leave credits in excess of 230 days
shall be commutable to cash at the employee’s option and shall be paid in
lump sum on or before May 31st of the following year they were earned.6 Per
PAL’s records, Paloma appears to have, for the period from 1990 to 1992,
commuted 58 days of his sick leave credits, broken down as follows: 20 days
each in 1990 and 1991 and 18 days in 1992.

Subsequently, Paloma filed before the Arbitration Branch of the National Labor
Relations Commission (NLRC) a Complaint7 for Commutation of Accrued Sick
Leaves Totaling 392 days. In the complaint, docketed as NLRC-NCR-Case No.
00-08-05792-94, Paloma alleged having accrued sick leave credits of 450 days
commutable upon his retirement pursuant to EO 1077 which allows retiring
government employees to commute, without limit, all his accrued vacation and
sick leave credits. And of the 450-day credit, Paloma added, he had commuted
only 58 days, leaving him a balance of 392 days of accrued sick leave credits
for commutation.

Ruling of the Labor Arbiter

Issues having been joined with the filing by the parties of their respective position
papers,8 the labor arbiter rendered on June 30, 1995 a Decision9 dispositively
reading:

WHEREFORE, premises considered, respondent PHILIPPINE AIRLINE[S], INC. is

hereby ordered to pay within ten (10) days from receipt hereof herein
complainant Ricardo G. Paloma, the sum of Six Hundred Seventy Five Thousand
Pesos (P675,000.00) representing his one Hundred sixty two days [162]
accumulated sick leave credits, plus ten (10%) percent attorney’s fees of
P67,500.00, or a total sum of P742,500.00.
SO ORDERED.

The labor arbiter held that PAL is not covered by the civil service system and,
accordingly, its employees, like Paloma, cannot avail themselves of the
beneficent provision of EO 1077. This executive issuance, per the labor arbiter’s
decision, applies only to government officers and employees covered by the
civil service, exclusive of the members of the judiciary whose leave and
retirement system is covered by a special law.

However, the labor arbiter ruled that Paloma is entitled to a commutation of his
alternative claim for 202 accrued sick leave credits less 40 days for 1990 and
1991. Thus, the grant of commutation for 162 accrued leave credits.

Both parties appealed10 the decision of the labor arbiter to the NLRC.

Ruling of the NLRC in NLRC NCR CA No. 009652-95

(NLRC-NCR-Case No. 00-08-05792-94)

On November 26, 1997, the First Division of the NLRC rendered a Decision
affirming that of the labor arbiter, thus:

WHEREFORE, as recommended, both appeals are DISMISSED. The decision of

Labor Arbiter Felipe T. Garduque II dated June 30, 1995 is AFFIRMED.

SO ORDERED.11

Both parties moved for reconsideration. In its Resolution of November 10, 1999,
the NLRC, finding Paloma to have, upon his retirement, commutable
accumulated sick leave credits of 230 days, modified its earlier decision,
disposing as follows:

In view of all the foregoing, our decision dated November 26, 1997, be modified
by increasing the sick leave benefits of complainant to be commuted to cash
from 162 days to 230 days.

SO ORDERED.12

From the above modificatory resolution of the NLRC, PAL went to the CA on a
petition for certiorari under Rule 65, the recourse docketed as CA-G.R. SP No.
56429.
 Ruling of the CA in its April 28, 2000 Decision

By a Decision dated April 28, 2000, the CA found for PAL, thus:

WHEREFORE, the petition is granted. Public respondent’s November 10, 1999

Resolution is set aside. And the complaint of Ricardo Paloma is hereby
DISMISSED. Without costs.

SO ORDERED.13

In time, Paloma sought reconsideration.14

The May 31, 2001 Amended Decision

On May 31, 2001, the CA issued the assailed Amended Decision reversing its
April 28, 2000 Decision. The fallo of the Amended Decision reads:

WHEREFORE, premises considered, our Judgment, dated 28 April 2000 is hereby

vacated and, set aside, and another one entered reinstating the Resolution,
dated 10 November 1999, issued by the public respondent National Labor
Relations Commission in NLRC NCR Case No. 00-08-05792-94 [NLRC NCR CA No.
009652-95], entitled Ricardo G. Paloma v. Philippine Airlines, Incorporated, with
the only modification that the total sums granted by Labor Arbiter Felipe T.
Garduque II (P742,500.00, inclusive of the ten percent (10%) attorney’s fees), as
affirmed by public respondent National Labor Relations Commission, First
Division, in said NLRC Case No. 00-08-05792-94, shall earn legal interest from the
date of the institution of the complaint until fully paid/discharged. (Art. 2212,
New Civil Code).

SO ORDERED.15

Justifying its amendatory action, the CA stated that EO 1077 applies to PAL and
necessarily to Paloma on the following rationale: Section 2(1) of Article IX(B) of
the 1987 Constitution applies prospectively and, thus, the expressed limitation
therein on the applicability of the civil service law only to government-owned
and controlled corporations (GOCCs) with original charters does not preclude
the applicability of EO 1077 to PAL and its then employees. This conclusion, the
CA added, becomes all the more pressing considering that PAL, at the time of
the issuance of EO 1077, was still a GOCC and that Paloma had already 29
years of service at that time. The appellate court also stated that since PAL had
then no existing retirement program, the provisions of EO 1077 shall serve as a
retirement program for Paloma who had meanwhile acquired vested rights
under the EO pursuant to Arts. 10016 and 28717 of the Labor Code.

Significantly, despite affirmatively positing the applicability of EO 1077, the

Amended Decision still deferred to PAL’s existing policy on the 230-day limit for
accrued sick leave with pay that may be credited to its employees.
Incongruously, while the CA reinstated the November 10, 1999 Resolution of the
NLRC, it decreed the implementation of the labor arbiter’s Decision dated June
30, 1995. As may be recalled, the NLRC, in its November 10, 1999 Resolution,
allowed a 230-day sick leave commutation, up from the 162 days granted
under the June 30, 1995 Decision of the labor arbiter.

Paloma immediately appealed the CA’s Amended Decision via a Petition for
Review on Certiorari under Rule 45, docketed as G.R. No. 148415. On the other
hand, PAL first sought reconsideration of the Amended Decision, coming to us
after the CA, per its January 14, 2003 Resolution, denied the desired
reconsideration. In net effect then, PAL’s Petition for Review on Certiorari,
docketed as G.R. No. 156764, assails both the Amended Decision and Resolution
of the CA.

The Issues

In G.R. No. 148415, Paloma raises the sole issue of:

WHETHER OR NOT THE [CA], IN HOLDING THAT E.O. NO. 1077 IS APPLICABLE TO
PETITIONER AND YET APPLYING COMPANY POLICY BY AWARDING THE CASH
EQUIVALENT OF ONLY 162 DAYS SICK LEAVE CREDITS INSTEAD OF THE 450 DAYS
SICK LEAVE CREDITS PETITIONER IS ENTITLED TO UNDER E.O. NO. 1077, DECIDED A
QUESTION OF SUBSTANCE IN A MANNER CONTRARY TO LAW AND APPLICABLE
JURISPRUDENCE.18

In G.R. No. 156764, PAL raises the following issues for our consideration:

1. May an employee of a non-government corporation [invoke EO] 1077

which the then President Ferdinand E. Marcos issued on January 9, 1986,
 solely for the benefit of government officers and employees covered by
the civil service?

2. Can a judicial body modify or alter a company policy by ordering the

commutation of sick leave credits which, under company policy is non-
commutable?19

The issues submitted boil down to the question of whether or not EO 1077, before
PAL’s privatization, applies to its employees, and corollarily, whether or not
Paloma is entitled to a commutation of his accrued sick leave credits.
Subsumed to the main issue because EO 1077 applies only to government
employees subject to civil service law is the question of whether or not PAL—
which, as early as 1960 until its privatization, had been considered as a
government-controlled corporation—is covered by and subject to the limitations
peculiar under the civil service system.

There can be no quibbling, as a preliminary consideration, about PAL having

been incorporated as a private corporation whose controlling stocks were later
acquired by the GSIS, which is wholly owned by the government. Through the
years before GSIS divested itself of its controlling interests over the airline, PAL
was considered a government-controlled corporation, as we said as much in
Phil. Air Lines Employees’ Assn. v. Phil. Air Lines, Inc.,20 a case commenced in
August 1958 and finally resolved by the Court in 1964. The late Blas Ople, former
Labor Secretary and a member of the 1986 Constitutional Commission,
described PAL and other like entities spun off from the GSIS as "second
generation corporations functioning as private subsidiaries."21 Before the coming
into force of the 1973 Constitution, a subsidiary of a wholly government-owned
corporation or a government corporation with original charter was covered by
the Labor Code. Following the ratification of the 1973 Constitution, these
subsidiaries theoretically came within the pale of the civil service on the strength
of this provision: "[T]he civil service embraces every branch, agency, subdivision
and instrumentality of the Government, including every [GOCC] x x x."22 Then
came the 1987 Constitution which contextually delimited the coverage of the
civil service only to a GOCC "with original charter."23

The Court’s Ruling

Considering the applicable law and jurisprudence in the light of the undisputed
factual milieu of the instant case, the setting aside of the assailed amended
decision and resolution of the CA is indicated.

Core Issue: Applicability of EO 1077

Insofar as relevant, EO 1077 dated January 9, 1986, entitled Revising the

Computation of Creditable Vacation and Sick Leaves of Government Officers
and Employees, provides:

WHEREAS, under existing law and civil service regulations, the number of days of
vacation and sick leaves creditable to a government officer or employee is
limited to 300 days;

WHEREAS, by special law, members of the judiciary are not subject to such
restriction;

WHEREAS, it is the continuing policy of the government to institute to the extent

possible a uniform and equitable system of compensation and benefits and to
enhance the morale and performance in the civil service.

xxxx

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by

virtue of the powers vested in me by the Constitution, do hereby order and
direct the following:

Section 1. Any officer [or] employee of the government who retires or voluntary
resigns or is separated from the service through no fault of his own and whose
leave benefits are not covered by special law, shall be entitled to the
commutation of all the accumulated vacation and/or sick leaves to his credit,
exclusive of Saturdays, Sundays, and holidays, without limitation as to the
number of days of vacation and sick leaves that he may accumulate.
(Emphasis supplied.)

Paloma maintains that he comes within the coverage of EO 1077, the same
having been issued in 1986, before he severed official relations with PAL, and at
a time when the applicable constitutional provision on the coverage of the civil
service made no distinction between GOCCs with original charters and those
without, like PAL which was incorporated under the Corporation Code. Implicit
in Paloma’s contention is the submission that he earned the bulk of his sick leave
credits under the aegis of the 1973 Constitution when PAL, being then a
government-controlled corporation, was under civil service coverage.

The contention is without merit.

PAL never ceased to be operated as a private corporation, and was not

subjected to the Civil Service Law

The Court can allow that PAL, during the period material, was a government-
controlled corporation in the sense that the GSIS owned a controlling interest
over its stocks. One stubborn fact, however, remains: Through the years, PAL
functioned as a private corporation and managed as such for profit. Their
personnel were never considered government employees. It may perhaps not
be amiss for the Court to take judicial notice of the fact that the civil service law
and rules and regulations have not actually been made to apply to PAL and its
employees. Of governing application to them was the Labor Code. Consider:
(a) Even during the effectivity of the 1973 Constitution but prior to the
promulgation on January 17, 1985 of the decision in No. L-64313 entitled
National Housing Corporation v. Juco,24 the Court no less recognized the
applicability of the Labor Code to, and the authority of the NLRC to exercise
jurisdiction over, disputes involving discipline, personnel movements, and
dismissal in GOCCs, among them PAL;25 (b) Company policy and collective
bargaining agreements (CBAs), instead of the civil service law and rules, govern
the terms and conditions of employment in PAL. In fact, Ople rhetorically asked
how PAL can be covered by the civil service law when, at one time, there were
three (3) CBAs in PAL, one for the ground crew, one for the flight attendants,
and one for the pilots;26 and (c) When public sector unionism was just an
abstract concept, labor unions in PAL with the right to engage in strike and other
concerted activities were already active.27

Not to be overlooked of course is the 1964 case of Phil. Air Lines Employees’
Assn., wherein the Court stated that "the Civil Service Law has not been actually
applied to PAL."28

Given the foregoing considerations, Paloma cannot plausibly be accorded the

benefits of EO 1077 which, to stress, was issued to narrow the gap between the
leave privileges between the members of the judiciary, on one hand, and other
government officers and employees in the civil service, on the other. That PAL
and Paloma may have, at a time, come within the embrace of the civil service
by virtue of the 1973 Constitution is of little moment at this juncture. As held
in National Service Corporation v. National Labor Relations Commission
(NASECO),29 the issue of whether or not a given GOCC falls within the ambit of
the civil service subject, vis-à-vis disputes respecting terms and conditions of
employment, to the jurisdiction of the Civil Service Commission or the NLRC, as
the case may be, resolves itself into the question of which between the 1973
Constitution, which does not distinguish between a GOCC with or without an
original charter, and the 1987 Constitution, which does, is in place. To borrow
from the 1988 NASECO ruling, it is the 1987 Constitution, which delimits the
coverage of the civil service, that should govern this case because it is the
Constitution in place at the time the case was decided, even if, incidentally, the
cause of action accrued during the effectivity of the 1973 Constitution. This has
been the consistent holding of the Court in subsequent cases involving GOCCs
without original charters.30

It cannot be overemphasized that when Paloma filed his complaint for

commutation of sick leave credits, private interests already controlled, if not
owned, PAL. Be this as it may, Paloma, when he filed said complaint, cannot
even assert being covered by the civil service and, hence, entitled to the
benefits attached to civil service employment, such as the right under EO 1077
to accumulate and commute leave credits without limit. In all, then, Paloma,
while with PAL, was never a government employee covered by the civil service
law. As such, he did not acquire any vested rights on the retirement benefits
accorded by EO 1077.

Paloma not entitled to the benefits granted in EO 1077; existing company policy
on the matter applies

What governs Paloma’s entitlement to sick leave benefits and the computation
and commutation of creditable benefits is not EO 1077, as the labor arbiter and
originally the NLRC correctly held, but PAL’s company policy on the matter
which, as found below, took effect in 1990. The text of the policy is reproduced
in the CA’s April 28, 2000 Decision and sets out the following pertinent rules:
POLICY

Regular employees shall be entitled to a yearly period of sick leave with pay, the
exact number of days to be determined on the basis of the employee’s
category and length of service in the company.

RULES

A. For ground personnel

2. Sick leave shall be granted only upon certification by a company physician

that an employee is incapable of discharging his duties due to illness or injury x x
x.

xxxx

3. Sick leave entitlement accrues from the date of an employee’s regular

employment x x x.

In case of direct conversion from temporary/daily/project/contract to regular

status, regular employment shall be deemed to have begun on the date of the
employee’s conversion as a regular employee.

xxxx

4. An employee may accumulate sick leave with pay up to Two Hundred Thirty
(230) days;

An employee who has accumulated seventy-five (75) days sick leave credit at
the end of each year may, at his option, commute seventy-five percent (75%) of
his current sick leave entitlement to cash and the other twenty-five percent
(25%) to be added to his accrued sick leave credits up to two hundred thirty
(230) calendar days.

The seventy-five percent (75%) commutable to cash as above provided, shall

be paid up in lump sum on or before May 31st of the following year.

Sick leave credits in excess of two hundred thirty (230) days shall be
commutable to cash at the employee’s option, and shall be paid in lump sum
on or before May 31st of the following year it was earned.31 (Emphasis ours.)
As may be gathered from the records, accrued sick leave credits in excess of
230 days were not, if earned before 1990 when the above policy took effect,
commutable to cash; they were simply forfeited. Those earned after 1990, but
still subject to the 230-day threshold rule, were commutable to cash to the
extent of 75% of the employee’s current entitlement, and payable on or before
May 31st of the following year, necessarily implying that the privilege to
commute is time-bound.

It appears that Paloma had, as of 1990, more than 230 days of accrued sick
leave credits. Following company policy, Paloma was deemed to have forfeited
the monetary value of his leave credits in excess of the 230-day ceiling. Now,
then, it is undisputed that he earned additional accrued sick leave credits of 20
days in 1990 and 1991 and 18 days in 1992, which he duly commuted pursuant
to company policy and received with the corresponding cash value. Therefore,
PAL is correct in contending that Paloma had received whatever was due on
the commutation of his accrued sick leave credits in excess of the 230 days limit,
specifically the 58 days commutation for 1990, 1991, and 1992.

No commutation of 230 days accrued sick leave credits

The query that comes next is how the 230 days accrued sick leave credits
Paloma undoubtedly had when he retired are to be treated. Is this otherwise
earned credits commutable to cash? These should be answered in the
negative.

The labor arbiter granted 162 days commutation, while the NLRC allowed the
commutation of the maximum 230 days. The CA, while seemingly affirming the
NLRC’s grant of 230 days commutation, actually decreed a 162-day
commutation. We cannot sustain any of the dispositions thus reached for lack of
legal basis, for PAL’s company policy upon which either disposition was
predicated did not provide for a commutation of the first 230 days accrued sick
leave credits employees may have upon their retirement. Hence, the NLRC and
the CA, by their act of allowing commutation to cash, erred as they virtually
read in the policy something not written or intended therein. Indeed, no law
provides for commutation of unused or accrued sick leave credits in the private
sector. Commutation is allowed by way of voluntary endowment by an
employer through a company policy or by a CBA. None of such medium
presently obtains and it would be incongruous if the Court fills up the vacuum.

Confronted with a similar situation as depicted above, the Court, in Baltazar v.

San Miguel Brewery, Inc., declared as follows:

In connection with the question of whether or not appellee is entitled to the

cash value of six months accumulated sick leave, it appears that while under
the last paragraph of Article 5 of appellant’s Rules and Regulations of the
Health, Welfare and Retirement Plan (Exhibit 3), unused sick leave may be
accumulated up to a maximum of six months, the same is not commutable or
payable in cash upon the employee’s option.

In our view, the only meaning and import of said rule and regulation is that if an
employee does not choose to enjoy his yearly sick leave of thirty days, he may
accumulate such sick leave up to a maximum of six months and enjoy this six
months sick leave at the end of the sixth year but may not commute it to
cash.321avvphi1

In fine, absent any provision in the applicable company policy authorizing the
commutation of the 230 days accrued sick leave credits existing upon
retirement, Paloma may not, as a matter of enforceable right, insist on the
commutation of his sick leave credits to cash.

As PAL’s senior vice-president for finance upon his retirement, Paloma knew or at
least ought to have known the company policy on accrued sick leave credits
and how it was being implemented. Had he acted on that knowledge in utmost
good faith, these proceedings would have not come to pass.

WHEREFORE, the petition under G.R. No. 148415 is hereby DISMISSED for lack of
merit, while the petition under G.R. No. 156764 is hereby GIVEN DUE COURSE. The
Amended Decision dated May 31, 2001 of the CA in CA-G.R. SP No. 56429 and
its Resolution of January 14, 2003 are hereby ANNULLED and SET ASIDE, and the
CA Decision dated April 28, 2000 is accordingly REINSTATED.

Costs against Ricardo G. Paloma.

SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairperson’s Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes
1 Rollo (G.R. No. 148415), pp. 55-65. Penned by Associate Justice Renato
C. Dacudao (now retired) and concurred in by Associate Justices Bennie
A. Adefuin-de la Cruz and Eliezer R. de los Santos.

2 Rollo (G.R. No. 156764), pp. 56-57.

3 Id. at 83.

4 "Revising the Computation of Creditable Vacation and Sick Leaves of

Government Officers and Employees."

5 Rollo (G.R. No. 148415), pp. 63-64.

6 Rollo (G.R. No. 148415), pp. 45-46.

7 Id. at 59-60, dated August 5, 1994.

8 Rollo (G.R. No. 156764), pp. 61-73, Position Paper for Complainant, dated
September 28, 1994; id. at 74-82, Position Paper for Respondent, dated
October 24, 1994.

9 Id. at 67-75, per Labor Arbiter Felipe T. Garduque II.

10 Id. at 102-115, PAL’s Appeal to NLRC, dated August 15, 1995; id. at 123-
137, Paloma’s Memorandum on Appeal, dated August 16, 1995.

11 Id. at 149-160. Penned by Commissioner Vicente S.E. Veloso and

concurred in by Commissioner Alberto R. Quimpo.

12 Id. at 88-94. Penned by Commissioner Alberto R. Quimpo and

concurred in by then Presiding Commissioner Rogelio I. Rayala.
Commissioner Vicente S.E. Veloso did not take part.

13 Id. at 222-231. Penned by Associate Justice Renato C. Dacudao and

concurred in by Associate Justices Quirino D. Abad Santos, Jr. and Bennie
A. Adefuin-de la Cruz.

14 Id. at 233-243, dated June 8, 2000.

15 Id. at 64.
16 Art. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF
BENEFITS. Nothing in this Book shall be construed to eliminate or in any way
diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code.

17 Art. 287. RETIREMENT.

xxxx

In case of retirement, the employee shall be entitled to receive

such retirement benefits as he may have earned under existing laws
and any collective bargaining or other agreements x x x.

18 Rollo (G.R. No. 148415), p. 236.

19 Rollo (G.R. No. 156764), p. 13.

20 No. L-18559, June 30, 1964, 11 SCRA 387.

21 National Service Corporation v. NLRC, Nos. L-69870 & L-70295,

November 29, 1988, 168 SCRA 122, 135.

22 Art. II-B, Sec I(1) of the 1973 Constitution.

23 Art. IX-B, Sec. 2(1) of the 1987 Constitution.

24 134 SCRA 172.

25 National Service Corporation, supra note 21, at 133; citing Philippine

Airlines, Inc. v. NLRC, No. L-62961, September 2, 1983, 124 SCRA 583.

26 Record of the Constitutional Commission, Vol. I, pp. 583-585; cited in

National Service Corporation, supra.

27 Phil. Air Lines Employees’ Assn., supra note 20.

28 Supra at 397.

29 Supra note 21.

30 See Postigo v. Philippine Tuberculosis Society, Inc., G.R. No. 155146,

January 24, 2006, 479 SCRA 628; Juco v. NLRC, G.R. No. 98107, August 18,
 1997, 277 SCRA 528; Davao City Water District v. Civil Service Commission,
G.R. Nos. 95237-38, September 13, 1991, 201 SCRA 593; PNOC-Energy
Development Corporation v. NLRC, G.R. No. 79182, September 11, 1991,
201 SCRA 487; PNOC-Energy Development Corporation v. Leogardo, G.R.
No. 58494, July 5, 1989, 175 SCRA 26; Trade Union of the Philippines and
Allied Services (TUPAS) v. National Housing Corporation, G.R. No. 49677,
May 4, 1989, 173 SCRA 33; Lumanta v. NLRC, G.R. No. 82819, February 8,
1989, 170 SCRA 79.

31 Rollo (G.R. No. 148415), pp. 45-46.

32 No. L-23076, February 27, 1969, 27 SCRA 71, 74-75.

THIRD DIVISION

G.R. No. 141380 April 14, 2004

TEXON MANUFACTURING AND BETTY CHUA, petitioners,

vs.
GRACE MILLENA AND MARILYN MILLENA, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

For resolution is a petition for review on certiorari assailing the Decision1 dated
August 9, 1999 and Resolution2 dated December 29, 1999 of the Court of
Appeals in CA-G.R. SP No. 51838, "Texon Manufacturing and/or Betty Chua vs.
Grace and Marilyn Millena."

The facts as culled from the records are:

Sometime in February 1990 and May 1990, Marilyn and Grace Millena,
respondents, were employed by Texon Manufacturing, petitioner company.

However, in the summer of 1995, petitioner company terminated the services of

respondent Grace Millena, prompting her to file with the Labor Arbiter, on
August 21, 1995, a complaint for money claims representing underpayment and
non-payment of wages, overtime and holiday pay. Impleaded as respondents
were petitioner company and its owner, Betty Chua. The case was docketed as
NLRC Case No. 00-08-05918-95.

Similarly, on September 8, 1995, petitioner company terminated the services of

respondent Marilyn Millena. The following day, she went to petitioner’s office to
get her salary. Betty Chua then offered her the sum of ₱1,500.00 as a starting
capital for a small business. At that instance, Francisco Tan, Betty Chua’s
husband, asked her to sign a blank piece of paper. Thinking that it was a receipt
for the amount of ₱1,500.00 given by Betty Chua, respondent signed the blank
sheet. However, it turned out that it was a resignation letter and quitclaim of her
back salaries. Thus, on September 11, 1995, she filed with the Labor Arbiter a
complaint for illegal dismissal with prayer for payment of full backwages and
benefits, docketed as NLRC Case No. 00-09-06215-95. Forthwith, the two (2)
cases were consolidated.

On November 21, 1995, petitioners filed a motion to dismiss both complaints on

the ground of prescription.

On January 10, 1996, the Labor Arbiter issued an Order3 denying the motion to
dismiss.

Petitioners then interposed an appeal to the National Labor Relations

Commission (NLRC).

On February 27, 1997, the NLRC promulgated an Order4 dismissing the appeal
and affirming the Arbiter’s Order.

Petitioners filed a motion for reconsideration but was denied by the NLRC.

Consequently, petitioners filed a petition for certiorari with the Court of Appeals.

On August 9, 1999, the Appellate Court rendered a Decision affirming the NLRC
Order. In sustaining the denial by the NLRC of petitioners’ motion to dismiss, the
Court of Appeals held:

"Admittedly, the three year prescriptive period under Article 291 of the
Labor Code, is supposedly counted from the time the cause of action
accrued.
 xxx

"We repeat, Grace and Marilyn were employed in May 1990 and February
1990, respectively, but were terminated in the summer of 1995 and
September 8, 1995.

"We rule, the three-year period did not yet prescribe, considering that
Grace filed her complaint on August 21, 1995, while Marilyn filed her
complaint in September 1995.

xxx

"Indeed, there is no merit in the contention of petitioner that Article 291 of

the Labor Code is applicable in the case at bar insofar as respondent
Marilyn Millena is concerned. The action for illegal dismissal,
underpayment of wages, holiday pay, overtime pay, service incentive
leave pay was filed by private respondent Marilyn Millena on September
11, 1995, or two (2) days after the alleged effectivity date of her dismissal
on September 8, 1995 which was well within the four (4) year prescriptive
period provided for in Article 1146 of the New Civil Code.

"Article 291 of the Labor Code however, is applicable insofar as private

respondent Grace Millena is concerned. Nevertheless, the claim for
underpayment of wages, non-payment of overtime pay, holiday pay
should still subsist. It should be noted that private respondent Grace
Millena filed her claim for underpayment of wages, non-payment of
overtime pay and holiday pay, one (1) year, one (1) month and twenty
one (21) days after the last effectivity of her employment on May 31, 1994,
which is well within the three (3) year prescriptive period provided for in
Article 291 of the Labor Code.

xxx

"THE FOREGOING CONSIDERED, the contested Resolution dated February

27, 1997, is affirmed; and the Petition for Certiorari is hereby dismissed.

"SO ORDERED."
Petitioners filed a motion for reconsideration, but was denied by the Court of
Appeals in a Resolution dated December 29, 1999.

Petitioners, in the instant petition for review on certiorari, contend (1) that
prescription has extinguished respondents’ money claims considering that under
Article 291 of the Labor Code, as amended, the three-year prescriptive period is
counted from the time their causes of action accrued; and (2) that their appeal
to the NLRC should have been sustained by the Court of Appeals, being in
accordance with Article 223 of the same Code.

ON THE ISSUE OF PRESCRIPTION

The pivotal question is when respondents’ causes of action accrued for this will
determine the reckoning date of the prescriptive period.

In Baliwag Transit, Inc. vs. Ople,5 we held:

"Since a cause of action requires, as essential elements, not only a legal

right of the plaintiff and a correlative obligation of the defendant but also
an act or omission of the defendant in violation of said legal right, the
cause of action does not accrue until the party obligated refuses,
expressly or impliedly, to comply with its duty."

ON RESPONDENT GRACE MILLENA'S MONEY CLAIM

The applicable law is Article 291 of the Labor Code, as amended, which
provides:

"Article 291. Money claims. – All money claims arising from employer-
employee relations accruing during the effectivity of this Code shall be
filed within three years from the time the cause of action accrued,
otherwise they shall be forever barred."

We disagree with petitioners’ contention that respondent Grace Millena’s cause

of action for money claims accrued "in the summer of 1991 and 1992" when, by
reason of her employment, she became entitled to the company’s monetary
benefits. Records show that it was only after petitioner company terminated her
services, sometime in the summer of 1995, that she decided to file with the Labor
Arbiter her complaint for money claim. The three (3) year prescriptive period
should then be counted, not from 1991 or 1992, but from 1995. Respondent’s
complaint was filed on August 21, 1995 or barely three (3) months after the
termination of her employment in the summer of 1995. There is, therefore, no
question that her complaint was seasonably filed.

ON RESPONDENT MARILYN MILLENA’S SUIT FOR ILLEGAL DISMISSAL

Article 1146 of the New Civil Code provides:

"Art. 1146. The following actions must be instituted within four years:

(1) Upon an injury to the rights of the plaintiff;

(2) Upon a quasi-delict."

Our ruling in Callanta vs. Carnation Philippines, Inc.6 is pertinent, thus:

"One’s employment or profession is a ‘property right’ and the wrongful

interference therewith is an actionable wrong. The right is considered to
be property within the protection of the constitutional guarantee of due
process of law. Clearly then, when one is arbitrarily and unjustly deprived
of his job or means of livelihood, the action instituted to contest the
legality of one’s dismissal from employment constitutes, in essence, an
action predicated ‘upon an injury to the rights of the plaintiff,’ as
contemplated under Article 1146 of the New Civil Code, which must be
brought within 4 years."

Respondent’s complaint for illegal dismissal with prayer for the grant of money
claims and benefits is one covered by Article 1146 of the Civil Code, quoted
earlier, that must be filed with the Labor Arbiter within four (4) years.
Respondent’s complaint was filed on September 11, 1995 or only three (3)
days after petitioners terminated her services on September 8, 1995. Clearly, her
suit was filed on time.

We thus hold that the Court of Appeals correctly ruled that both respondents’
actions have not yet prescribed.
Petitioners also contend that the NLRC should not have dismissed their appeal
from the Decision of the Labor Arbiter, citing Article 223 of the Labor Code, as
amended, which provides:

"Article 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are
final and executory unless appealed to the Commission by any or both
parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. x x x.

In dismissing petitioners’ appeal, the NLRC relied on the provisions of Section 15,
Rule V (now Section 3, Rule V) of the NLRC Rules of Procedure, as amended by
NLRC Resolution No. 01-02, Series of 2002, quoted as follows:

"Section 3. Motion to Dismiss. x x x. An order denying the motion to

dismiss or suspending its resolution until the final determination of the
case is not appealable."

The Solicitor General, in his comment, maintains that the above Rule does not
contravene Article 223 of the Labor Code. Hence, the NLRC’s reliance on the
same Rule is in order. The Solicitor General explains:

"The orders contemplated in Article 223 of the Labor Code are decisions,
awards or orders which are final in character and not merely interlocutory
orders, as in the case of an order denying a motion to dismiss.

xxx

In the instant case, the order of the Labor Arbiter denying petitioners’
motion to dismiss was not yet final as there was something else to be
done, namely the filing of the answer and the subsequent proceedings
wherein the respective parties would ventilate their respective sides."

We agree with the Solicitor General.

The Order of the Labor Arbiter denying petitioners’ motion to dismiss is

interlocutory. It is well-settled that a denial of a motion to dismiss a complaint is
an interlocutory order and hence, cannot be appealed, until a final judgment
on the merits of the case is rendered.7
WHEREFORE, the assailed Decision dated August 9, 1999 and Resolution dated
December 29, 1999 of the Court of Appeals in CA-G.R. SP No. 51838 are
hereby AFFIRMED. The case is remanded to the Labor Arbiter for further
proceedings.

Costs against petitioners.

SO ORDERED.

Vitug, Corona, and Morales, JJ., concur.

Footnotes

1 Annex "A" of the Petition for Review, Rollo at 20-31.

2 Annex "B", id. at 32-33.

3 Annex "E", id. at 45.

4 Annex "D", id. at 38-44.

5 G.R. No. 57642, March 16, 1999, 171 SCRA 250, cited in Serrano vs. Court
of Appeals, G.R. No. 139420, August 15, 2001, 363 SCRA 223, 230.

6 G.R. No. L-70615, October 28, 1986, 145 SCRA 268, 279, cited in Baliwag
Transit, Inc. vs. Ople, supra at 257.

7 Emergency Loan Pawnshop Incorporated vs. Court of Appeals, G.R. No.

129184, February 28, 2001, 353 SCRA 89, 92, citing Gonzales vs. Court of
Appeals, 277 SCRA 518 (2000).