G.R. No.
L-48926 December 14, 1987 July 20, 1976
MANUEL SOSITO, petitioner,
vs.
AGUINALDO DEVELOPMENT CORPORATION, respondent.
CRUZ, J.:
We gave due course to this petition and required the parties to file simultaneous
memoranda on the sole question of whether or not the petitioner is entitled to separation
pay under the retrenchment program of the private respondent.
The facts are as follows:
Petitioner Manuel Sosito was employed in 1964 by the private respondent, a logging
company, and was in charge of logging importation, with a monthly salary of P675.00,
when he went on indefinite leave with the consent of the company on January 16, 1976. 2
On July 20, 1976, the private respondent, through its president, announced a
retrenchment program and offered separation pay to employees in the active service as of
June 30, 1976, who would tender their resignations not later than July 31, 1976. The
petitioner decided to accept this offer and so submitted his resignation on July 29, 1976,
"to avail himself of the gratuity benefits" promised. 3 However, his resignation was not
acted upon and he was never given the separation pay he expected. The petitioner
complained to the Department of Labor, where he was sustained by the labor arbiter. 4 The
company was ordered to pay Sosito the sum of P 4,387.50, representing his salary for six
and a half months. On appeal to the National Labor Relations Commission, this decision
was reversed and it was held that the petitioner was not covered by the retrenchment
program. 5 The petitioner then came to us.
For a better understanding of this case, the memorandum of the private respondent on its
retrenchment program is reproduced in full as follows:
Memorandum To: ALL EMPLOYEES
Re: RETRENCHMENT PROGRAM
As you are all aware, the operations of wood-based industries in the
Philippines for the last two (2) years were adversely affected by the
worldwide decline in the demand for and prices of logs and wood
products. Our company was no exception to this general decline in the
market, and has suffered tremendous losses. In 1975 alone, such losses
amounted to nearly P20,000,000.00.
The company has made a general review of its operations and has come
to the unhappy decision of the need to make adjustments in its
manpower strength if it is to survive. This is indeed an unfortunate and
painful decision to make, but it leaves the company no alternative but to
reduce its tremendous and excessive overhead expense in order to
prevent an ultimate closure.
Although the law allows the Company, in a situation such as this, to
drastically reduce it manpower strength without any obligation to pay
separation benefits, we recognize the need to provide our employees
some financial assistance while they are looking for other jobs.
The Company therefore is adopting a retrenchment program whereby
employees who are in the active service as of June 30, 1976 will be paid
separation benefits in an amount equivalent to the employee's one-half
(1/2) month's basic salary multiplied by his/her years of service with the
Company. Employees interested in availing of the separation benefits
offered by the Company must manifest such intention by submitting
written letters of resignation to the Management not later than July 31,
1976. Those whose resignations are accepted shall be informed
accordingly and shall be paid their separation benefits.
After July 31, 1976, this offer of payment of separation benefits will no
longer be available. Thereafter, the Company shall apply for a clearance
to terminate the services of such number of employees as may be
necessary in order to reduce the manpower strength to such desired
level as to prevent further losses.
 (SGD.) JOSE G. RICAFORT
President
N.B.
For additional information
and/or resignation forms,
please see Mr. Vic Maceda
or Atty. Ben Aritao. 6
It is clear from the memorandum that the offer of separation pay was extended only to
those who were in the active service of the company as of June 30, 1976. It is equally clear
that the petitioner was not eligible for the promised gratuity as he was not actually working
with the company as of the said date. Being on indefinite leave, he was not in the active
service of the private respondent although, if one were to be technical, he was still in its
employ. Even so, during the period of indefinite leave, he was not entitled to receive any
salary or to enjoy any other benefits available to those in the active service.
It seems to us that the petitioner wants to enjoy the best of two worlds at the expense of
the private respondent. He has insulated himself from the insecurities of the floundering
firm but at the same time would demand the benefits it offers. Being on indefinite leave
from the company, he could seek and try other employment and remain there if he should
find it acceptable; but if not, he could go back to his former work and argue that he still
had the right to return as he was only on leave.
There is no claim that the petitioner was temporarily laid off or forced to go on leave; on
the contrary, the record shows that he voluntarily sought the indefinite leave which the
private respondent granted. It is strange that the company should agree to such an open-
ended arrangement, which is obviously one-sided. The company would not be free to
replace the petitioner but the petitioner would have a right to resume his work as and
when he saw fit.
We note that under the law then in force the private respondent could have validly
reduced its work force because of its financial reverses without the obligation to grant
separation pay. This was permitted under the original Article 272(a), of the Labor Code, 7
which was in force at the time. To its credit, however, the company voluntarily offered
gratuities to those who would agree to be phased out pursuant to the terms and
conditions of its retrenchment program, in recognition of their loyalty and to tide them
over their own financial difficulties. The Court feels that such compassionate measure
deserves commendation and support but at the same time rules that it should be available
only to those who are qualified therefore. We hold that the petitioner is not one of them.
While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its own rights which, as such, are entitled
to respect and enforcement in the interest of simple fair play. Out of its concern for those
with less privileges in life, this Court has inclined more often than not toward the worker
and upheld his cause in his conflicts with the employer. Such favoritism, however, has not
blinded us to the rule that justice is in every case for the deserving, to be dispensed in the
light of the established facts and the applicable law and doctrine.
WHEREFORE, the petition is DISMISSED and the challenged decision AFFIRMED, with costs
against the petitioner.
SO ORDERED.
G.R. No. 148340 January 26, 2004
J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JOSE F. MASCARINAS, Respondents.
DECISION
QUISUMBING, J.:
For review are the Decision1 dated February 27, 2001 of the Court of Appeals in CA-G.R. SP
No. 60337, and its Resolution2 dated May 28, 2001, denying the motion for
reconsideration. The Court of Appeals dismissed the petition for certiorari filed by
petitioners and affirmed the Resolution3 of the National Labor Relations Commission
(NLRC), Third Division, which affirmed the Decision4 of Labor Arbiter Jose G. De Vera in
NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for illegal dismissal and
ordered petitioners to pay private respondent Jose Mascarinas separation pay, backwages,
legal holiday pay, service incentive leave pay and 13th month pay in the aggregate sum of
₱85,871.00.
The facts, as culled from the records, are as follows:
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship
engaged in the business of selling second-hand heavy equipment. JAT is owned by its
namesake, co-petitioner Jesusa Adlawan Torobu. Sometime in April 1997, JAT hired private
respondent Jose F. Mascarinas as helper tasked to coordinate with the cleaning and
delivery of the heavy equipment sold to customers. Initially, private respondent was hired
as a probationary employee and was paid ₱165 per day that was increased to ₱180 in July
1997 and ₱185 in January 1998.
In October 1997, the sales of heavy equipment declined because of the Asian currency
crisis. Consequently, JAT temporarily suspended its operations. It advised its employees,
including private respondent, not to report for work starting on the first week of March
1998. JAT indefinitely closed shop effective May 1998.
A few days after, private respondent filed a case for illegal dismissal and underpayment of
wages against petitioners before the NLRC.
In his Complaint, private respondent alleged that he started as helper mechanic of JAT on
January 6, 1997 with an initial salary rate of ₱165.00 per day, which was increased to
₱180.00 per day after six (6) months in employment. He related that he was one of those
retrenched from employment by JAT and was allegedly required to sign a piece of paper
which he refused, causing his termination from employment.
On December 14, 1998, JAT filed an Establishment Termination Report with the
Department of Labor and Employment (DOLE), notifying the latter of its decision to close
its business operations due to business losses and financial reverses.
After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding
the dismissal of herein private respondent unjustified and ordering JAT to pay private
respondent separation pay and backwages, among others. The decretal portion of the
decision reads as follows:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
ordering the respondents [herein petitioners] to pay complainant the aggregate sum of
₱85,871.00.
5
SO ORDERED.
The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas’ dismissal was
unjustified because of petitioners’ failure to serve upon the private respondent and the
DOLE the required written notice of termination at least one month prior to the effectivity
thereof and to submit proof showing that petitioners suffered a business slowdown in
operations and sales effective January 1998; (2) private respondent may recover
backwages from March 1, 1998 up to March 1, 1999 or ₱66,924.006 and separation pay, in
lieu of reinstatement, at the rate of one (1) month pay for every year of service, or
₱10,296.00;7 (3) the payrolls submitted by JAT showed that effective May 1, 1997, private
respondent’s wages did not conform to the prevailing minimum wage, hence, private
respondent is entitled to salary differentials from May 1, 1997 to January 6, 1998, in the
amount of ₱1,066.00;8 (4) that private respondent be awarded legal holiday pay in the
amount of ₱1,850.00,9 service incentive leave pay in the amount of ₱925.00 10 and 13th
month pay for 1997 in the amount of ₱4,810.00.11
On appeal, the NLRC affirmed the decision of the labor arbiter. 12 The NLRC found that the
financial statements submitted on appeal were questionable, unreliable and inconsistent
with petitioners’ allegations in the pleadings, particularly as to the date of the alleged
closure of operation; hence, they cannot be used to support private respondent’s
dismissal. The NLRC also affirmed the monetary awards because petitioners failed to prove
the payment of benefits claimed by private respondent.
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of
Appeals, which the latter dismissed. The decretal portion of the decision reads as follows:
WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact
and in law, is hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed
decision of the National Labor Relations Commission AFFIRMED, with costs to petitioners.
SO ORDERED.13
The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal
of the private respondent. The appellate court held that the petitioners failed to prove by
clear and convincing evidence their compliance with the requirements for valid
retrenchment. It cited the findings of the NLRC on the belated submission of the financial
statements during appeal that could not be given sufficient weight, and that the
petitioners’ late submission of notice of closure is indicative of their bad faith.
Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.
Hence, the present petition alleging that the:
A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE
DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) IS NECESSARY IN CASE OF
TEMPORARY SUSPENSION OF BUSINESS;
 B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT IS
ENTITLED TO BACKWAGES DESPITE THE FACT THAT PRIVATE RESPONDENT WAS
NOT DISMISSED FROM SERVICE AT THE TIME THE COMPLAINT WAS FILED;
C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE
BURDEN OF PROVING THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES;
D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT FAILED
TO COMPLY WITH THE ONE-MONTH PERIOD, THE LOWER COURT (sic) ERRED IN
AWARDING BACKWAGES AND/OR SEPARATION PAY TO PRIVATE RESPONDENT
EVEN FOR PERIOD AFTER PETITIONERS FILED A NOTICE OF ACTUAL CLOSURE OF
THE COMPANY BEFORE THE LABOR DEPARTMENT.14
The relevant issues for our resolution are: (a) whether or not private respondent was
illegally dismissed from employment due to closure of petitioners’ business, and (b)
whether or not private respondent is entitled to separation pay, backwages and other
monetary awards.
On the first issue, the petitioners claim that the Court of Appeals erroneously concluded
that they are liable for illegal dismissal because of non-compliance of the procedural and
substantive requirements of terminating employment due to retrenchment and cessation
of business. They argued that there was no closure but only suspension of operation in
good faith in March 1998, when private respondent claimed to have been illegally
dismissed, due to the decline in sales and heavy losses incurred in its business arising from
the 1997 Asian financial crisis. Petitioners assert that under Article 286 of the Labor Code, a
bona fide suspension of the operation of a business for a period not exceeding six (6)
months shall not terminate employment and no notice to an employee is required.
However, petitioners relate that JAT was compelled to permanently close its operation
eight (8) months later or on November 1998, when the hope of recovery became nil but
only after sending notices to all its workers and DOLE. Thus, petitioners argue that it cannot
be held liable for illegal dismissal in March 1998 since there was no termination of
employment during suspension of operations and a notice to employee is not required,
unlike in the case of permanent closure of business operation.
We need not belabor the issue of notice requirement for a suspension of operation of
business under Article 28615 of the Labor Code. This matter is not pertinent to, much less
determinative of, the disposition of this case. Suffice it to state that there is no termination
of employment during the period of suspension, thus the procedural requirement for
terminating an employee does not come into play yet. Rather, the issue demanding a
sharpened focus here concerns the validity of dismissal resulting from the closure of JAT.
A brief discussion on the difference between retrenchment and closure of business as
grounds for terminating an employee is necessary. While the Court of Appeals defined the
issue to be the validity of dismissal due to alleged closure of business, it cited jurisprudence
relating to retrenchment to support its resolution and conclusion. While the two are often
used interchangeably and are interrelated, they are actually two separate and independent
authorized causes for termination of employment. Termination of an employment may be
predicated on one without need of resorting to the other.
Closure of business, on one hand, is the reversal of fortune of the employer whereby there
is a complete cessation of business operations and/or an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of business as an authorized cause
for termination of employment aims to prevent further financial drain upon an employer
who cannot pay anymore his employees since business has already stopped. On the other
hand, retrenchment is reduction of personnel usually due to poor financial returns so as to
cut down on costs of operations in terms of salaries and wages to prevent bankruptcy of
the company. It is sometimes also referred to as down-sizing. Retrenchment is an
authorized cause for termination of employment which the law accords an employer who
is not making good in its operations in order to cut back on expenses for salaries and wages
by laying off some employees. The purpose of retrenchment is to save a financially ailing
business establishment from eventually collapsing.16
In the present case, we find the issues and contentions more centered on closure of
business operation rather than retrenchment. Closure or cessation of operation of the
establishment is an authorized cause for terminating an employee under Article 283 of the
Labor Code, to wit:
ART. 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. … In case
of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six (6) months shall
be considered one (1) whole year.
However, the burden of proving that such closure is bona fide falls upon the employer.17 In
the present case, JAT justifies its closure of business due to heavy losses caused by
declining sales. It belatedly submitted its 1997 Income Statement18 and Comparative
Statement of Income and Capital for 1997 and 199819 to the NLRC to prove that JAT
suffered losses starting 1997. However, as noted earlier, these were not given much
evidentiary weight by the NLRC as well as the Court of Appeals, to wit:
The financial statements submitted by the respondents on appeal are questionable for the
following reasons: (1) the figures in Annexes "D-2" and "E" of the appeal memorandum
(which both refer to 1997) do not tally; (2) they (the respondents) allegedly closed on
March 1, 1998. Yet, their 1998 financial statement (Annex "E") indicates operations up to
and ending December 31, 1998. In view of the foregoing, the above-mentioned financial
statements do not justify the complainant’s dismissal. …20
The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent
reason to set it aside. While business reverses or losses are recognized by law as an
authorized cause for terminating employment, it is an essential requirement that alleged
losses in business operations must be proven convincingly. Otherwise, said ground for
termination would be susceptible to abuse by scheming employers, who might be merely
feigning business losses or reverses in their business ventures in order to ease out
employees.21 In this case, the financial statements were not only belatedly submitted but
were also bereft of necessary details on the extent of the alleged losses incurred, if any.
The income statements only indicated a decline in sales in 1998 as compared to 1997.
These fell short of the stringent requirement of the law that the employer prove
sufficiently and convincingly its allegation of substantial losses. While the comparative
income statement shows a net loss of ₱207,091 in 1998, the income statement of 1997 still
shows JAT posting a net income of ₱19,361. Both statements need interpretation as to
their impact on the company’s termination of certain personnel as well as business closure.
Having concluded that private respondent was not validly dismissed resulting from closure
of business operations due to substantial losses, we now proceed to determine whether or
not private respondent was validly dismissed on the ground of closure or cessation of
operations for reasons other than substantial business losses.
A careful examination of Article 283 of the Labor Code shows that closure or cessation of
business operation as a valid and authorized ground of terminating employment is not
limited to those resulting from business losses or reverses. Said provision in fact provides
for the payment of separation pay to employees terminated because of closure of business
not due to losses, thus implying that termination of employees other than closure of
business due to losses may be valid.
Hence, in one case,22 we emphasized that:
…Art. 283 governs the grant of separation benefits "in case of closures or cessation of
operation" of business establishments "NOT due to serious business losses or financial
reverses x x x." Where, however, the closure was due to business losses–as in the instant
case, in which the aggregate losses amounted to over ₱20 billion–the Labor Code does not
impose any obligation upon the employer to pay separation benefits, for obvious reasons.
There is no need to belabor this point. Even the public respondents, in their Comment filed
by the Solicitor General, impliedly concede this point.
In another case,23 we held more emphatically that:
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his
business operations or undertaking even if he is not suffering from serious business losses
or financial reverses, as long as he pays his employees their termination pay in the amount
corresponding to their length of service. It would, indeed, be stretching the intent and
spirit of the law if we were to unjustly interfere in management’s prerogative to close or
cease its business operations just because said business operation or undertaking is not
suffering from any loss.
In the present case, while petitioners did not sufficiently establish substantial losses to
justify closure of the business, its income statement shows declining sales in 1998,
prompting the petitioners to suspend its business operations sometime in March 1998,
eventually leading to its permanent closure in December 1998. Apparently, the petitioners
saw the declining sales figures and the unsustainable business environment with no hope
of recovery during the period of suspension as indicative of bleak business prospects,
justifying a permanent closure of operation to save its business from further collapse. On
this score, we agree that undue interference with an employer’s judgment in the conduct
of his business is uncalled for. Even as the law is solicitous of the welfare of employees, it
must also protect the right of an employer to exercise what is clearly a management
prerogatives. As long as the company’s exercise of the same is in good faith to advance its
interest and not for the purpose of defeating or circumventing the rights of employees
under the law or a valid agreement such exercise will be upheld.24
In the event, under Article 283 of the Labor Code, three requirements are necessary for a
valid cessation of business operations, namely: (a) service of a written notice to the
employees and to the DOLE at least one (1) month before the intended date thereof; (b)
the cessation of business must be bona fide in character; and (c) payment to the
employees of termination pay amounting to at least one-half (1/2) month pay for every
year of service, or one (1) month pay, whichever is higher.25
The closure of business operation by petitioners, in our view, is not tainted with bad faith
or other circumstance that arouses undue suspicion of malicious intent. The decision to
permanently close business operations was arrived at after a suspension of operation for
several months precipitated by a slowdown in sales without any prospects of improving.
There were no indications that an impending strike or any labor-related union activities
precipitated the sudden closure of business. Further, contrary to the findings of the Labor
Arbiter, petitioners had notified private respondent26 and all other workers through written
letters dated November 25, 1998 of its decision to permanently close its business and had
submitted a termination report to the DOLE.27 Generally, review of labor cases elevated to
this Court on a petition for review on certiorari is confined merely to questions of law. But
in certain cases, we are constrained to analyze or weigh the evidence again if the findings
of fact of the labor tribunals and the appellate court are in conflict, or not supported by
evidence on record or the judgment is based on a misapprehension of facts.28
In this case, we are persuaded that the closure of JAT’s business is not unjustified.1âwphi1
Further we hold that private respondent was validly terminated, because the closure of
business operations is justified.
Nevertheless in this case, we must stress that the closure of business operation is allowed
under the Labor Code, provided separation pay be paid to the terminated employee. It is
settled that in case of closure or cessation of operation of a business establishment not
due to serious business losses or financial reverses, the employees are always given
separation benefits.29 The amount of separation pay must be computed from the time
private respondent commenced employment with petitioners until the time the latter
ceased operations.30 1âwphi1
Considering that private respondent was not illegally dismissed, however, no backwages
need to be awarded. Backwages in general are granted on grounds of equity for earnings
which a worker or employee has lost due to illegal dismissal.31 It is well settled that
backwages may be granted only when there is a finding of illegal dismissal.32
The other monetary awards to private respondent are undisputed by petitioners and
unrefuted by any contrary evidence. These awards, namely legal holiday pay, service
incentive leave pay and 13th month pay, should be maintained.
WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of Appeals in CA-G.R. SP No.
60337 are AFFIRMED with the MODIFICATION that the award of ₱66,924.00 as backwages is deleted. The award
of separation pay amounting to ₱10,296.00 and the other monetary awards, namely salary differentials in the
amount of ₱1,066.00, legal holiday pay in the amount of ₱1,850.00, service incentive leave pay in the amount of
₱925.00 and 13th month pay in the amount of ₱4,910, or a total of ₱29,047.00 are maintained. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 202961, February 04, 2015
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO
MATUNDAN, NORA MENDOZA, ET AL., Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION, SOLID MILLS, INC., AND/OR PHILIP ANG, Respondents.
DECISION
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the employee’s
return of its properties.
Petitioners are respondent Solid Mills, Inc.’s (Solid Mills) employees.1 They are
represented by the National Federation of Labor Unions (NAFLU), their collective
bargaining agent.2
As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI
Village, a property owned by Solid Mills.3 According to Solid Mills, this was “[o]ut of
liberality and for the convenience of its employees . . . [and] on the condition that the
employees . . . would vacate the premises anytime the Company deems fit.”4
In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills
would cease its operations due to serious business losses.5 NAFLU recognized Solid Mills’
closure due to serious business losses in the memorandum of agreement dated September
1, 2003.6 The memorandum of agreement provided for Solid Mills’ grant of separation pay
less accountabilities, accrued sick leave benefits, vacation leave benefits, and 13th month
pay to the employees.7 Pertinent portions of the agreement provide:
WHEREAS, the COMPANY has incurred substantial financial losses and is currently
experiencing further severe financial losses;
WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its
operations on October 10, 2003;
WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will be
dismissed from employment effective October 10, 2003;
In view thereof, the parties agree as follows:
 1. That UNION acknowledges that the COMPANY is experiencing severe financial
losses and as a consequence of which, management is constrained to cease the
company’s operations.
2. The UNION acknowledges that under Article 283 of the Labor Code, separation
pay is granted to employees who are dismissed due to closures or cessation of
operations NOT DUE to serious business losses.
3. The UNION acknowledges that in view of the serious business losses the Company
has been experiencing as seen in their audited financial statements, employees
ARE NOT granted separation benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant
financial assistance less accountabilities to members of the Union based on length
of service to be computed as follows: (Italics in this paragraph supplied)
Number of days - 12.625 for every year of service
5. In view of the above, the members of the UNION will receive such financial
assistance on an equal monthly installments basis based on the following
schedule:
First Check due on January 5, 2004 and every 5th of the month thereafter until
December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the Union members are
entitled to, specifically those arising from sick and vacation leave benefits and
13th month pay, less accountabilities based on the following schedule:
One Time Cash Payment to be distributed anywhere from. . . .
....
7. The foregoing agreement is entered into with full knowledge by the parties of
their rights under the law and they hereby bind themselves not to conduct any
concerted action of whatsoever kind, otherwise the grant of financial assistance
as discussed above will be withheld.8 (Emphasis in the original)
Solid Mills filed its Department of Labor and Employment termination report on September
2, 2003.9
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate
SMI Village.10
Petitioners were no longer allowed to report for work by October 10, 2003.11 They were
required to sign a memorandum of agreement with release and quitclaim before their
vacation and sick leave benefits, 13th month pay, and separation pay would be released.12
Employees who signed the memorandum of agreement were considered to have agreed to
vacate SMI Village, and to the demolition of the constructed houses inside as condition for
the release of their termination benefits and separation pay.13 Petitioners refused to sign
the documents and demanded to be paid their benefits and separation pay.14
Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of
separation pay, accrued sick and vacation leaves, and 13th month pay.15 They argued that
their accrued benefits and separation pay should not be withheld because their payment is
based on company policy and practice.16 Moreover, the 13th month pay is based on law,
specifically, Presidential Decree No. 851.17 Their possession of Solid Mills property is not an
accountability that is subject to clearance procedures.18 They had already turned over to
Solid Mills their uniforms and equipment when Solid Mills ceased operations.19
On the other hand, Solid Mills argued that petitioners’ complaint was premature because
they had not vacated its property.20
The Labor Arbiter ruled in favor of petitioners.21 According to the Labor Arbiter, Solid Mills
illegally withheld petitioners’ benefits and separation pay. 22 Petitioners’ right to the
payment of their benefits and separation pay was vested by law and contract.23 The
memorandum of agreement dated September 1, 2003 stated no condition to the effect
that petitioners must vacate Solid Mills’ property before their benefits could be given to
them.24 Petitioners’ possession should not be construed as petitioners’ “accountabilities”
that must be cleared first before the release of benefits.25 Their possession “is not by
virtue of any employer-employee relationship.”26 It is a civil issue, which is outside the
jurisdiction of the Labor Arbiter.27
The dispositive portion of the Labor Arbiter’s decision reads:
WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID
MILLS, INC. and/or PHILIP ANG (President), in solido to pay the remaining 21 complainants:
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO
DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS,
RENATO ESTOLANO, REX S. DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO
MENDOZA, ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA MAHILOM,
MARILOU LINGA, RENATO LINGA their separation pay of 12.625 days’ pay per year of
service, pro-rated 13th month pay for 2003 and accrued vacation and sick leaves, plus 12%
interest p.a. from date of filing of the lead case/judicial demand on 12/08/03 until actual
payment and/or finality;
2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received
on 12/19/03 her accrued 13th month pay for 2003, accrued VL/SL total amount of
P15,435.16, likewise, complainant Jerry L. Sesma as he already received his accrued 13th
month pay for 2003, SL/VL in the total amount of P10,974.97, shall be paid only their
separation pay of 12.625 days’ pay per year of service but also with 12% interest p.a. from
date of filing of the lead case/judicial demand on 12/08/03 until actual payment and/or
finality, which computation as of date, amount to as shown in the attached computation
sheet.
3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie
Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and
Purificacion Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement,
whereas, that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA
PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE, for lack of interest
and/or failure to prosecute.
The Computation and Examination unit is directed to cause the computation of the award
in Pars. 2 and 3 above.28 (Emphasis in the original)
29
Solid Mills appealed to the National Labor Relations Commission. It prayed for, among
others, the dismissal of the complaints against it and the reversal of the Labor Arbiter’s
decision.30
The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter’s
dispositive portion, but reversed paragraphs 1 and 2. Thus:
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is
AFFIRMED in so far as par. 3 thereof is concerned but modified in that paragraphs 1 and 2
thereof are REVERSED and SET ASIDE. Accordingly, the following complainants, namely:
Emir Milan, Ramon Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora
Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S. Dimaf[e]lix, Maura Milan,
Jessica Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias and Jerry L. Sesma’s
monetary claims in the form of separation pay, accrued 13th month pay for 2003, accrued
vacation and sick leave pays are held in abeyance pending compliance of their
accountabilities to respondent company by turning over the subject lots they respectively
occupy at SMI Village Sucat Muntinlupa City, Metro Manila to herein respondent
company.31
The National Labor Relations Commission noted that complainants Marilou Linga, Renato
Linga, Ismael Mata, and Carlito Damian were already paid their respective separation pays
and benefits.32 Meanwhile, Teodora Mahilom already retired long before Solid Mills’
closure.33 She was already given her retirement benefits.34
The National Labor Relations Commission ruled that because of petitioners’ failure to
vacate Solid Mills’ property, Solid Mills was justified in withholding their benefits and
separation pay.35 Solid Mills granted the petitioners the privilege to occupy its property on
account of petitioners’ employment.36 It had the prerogative to terminate such privilege.37
The termination of Solid Mills and petitioners’ employer-employee relationship made it
incumbent upon petitioners to turn over the property to Solid Mills. 38
Petitioners filed a motion for partial reconsideration on October 18, 2010,39 but this was
denied in the November 30, 2010 resolution.40
Petitioners, thus, filed a petition for certiorari41 before the Court of Appeals to assail the
National Labor Relations Commission decision of August 31, 2010 and resolution of
November 30, 2010.42
On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners’
petition,43 thus:
WHEREFORE, the petition is hereby ordered DISMISSED.44
The Court of Appeals ruled that Solid Mills’ act of allowing its employees to make
temporary dwellings in its property was a liberality on its part. It may be revoked any time
at its discretion.45 As a consequence of Solid Mills’ closure and the resulting termination of
petitioners, the employer-employee relationship between them ceased to exist. There was
no more reason for them to stay in Solid Mills’ property.46 Moreover, the memorandum of
agreement between Solid Mills and the union representing petitioners provided that Solid
Mills’ payment of employees’ benefits should be “less accountabilities.” 47
On petitioners’ claim that there was no evidence that Teodora Mahilom already received
her retirement pay, the Court of Appeals ruled that her complaint filed before the Labor
Arbiter did not include a claim for retirement pay. The issue was also raised for the first
time on appeal, which is not allowed.48 In any case, she already retired before Solid Mills
ceased its operations.49
The Court of Appeals agreed with the National Labor Relations Commission’s deletion of
interest since it found that Solid Mills’ act of withholding payment of benefits and
separation pay was proper. Petitioners’ terminal benefits and pay were withheld because
of petitioners’ failure to vacate Solid Mills’ property.50
Finally, the Court of Appeals noted that Carlito Damian already received his separation pay
and benefits.51 Hence, he should no longer be awarded these claims.52
In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners’
motion for reconsideration.53
Petitioners raise in this petition the following errors:
I respondent Solid Mills’ property is illegal.60 The regular courts have jurisdiction over this
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT RULED THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE
HELD IN ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI
VILLAGE, SUCAT, MUNTINLUPA CITY.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT UPHELD THE RULING OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM
IMPOSED BY THE HONORABLE LABOR ARBITER HERNANDEZ ON THE AMOUNT DUE FROM
THE DATE OF FILING OF THE LEAD CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL
ACTUAL PAYMENT AND/OR FINALITY.
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT UPHELD THE RULING OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM
FOR PAYMENT OF RETIREMENT BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE
RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS MONETARY BENEFITS
FROM RESPONDENT SOLID MILLS.54
Petitioners argue that respondent Solid Mills and NAFLU’s memorandum of agreement has
no provision stating that benefits shall be paid only upon return of the possession of
respondent Solid Mills’ property.55 It only provides that the benefits shall be “less
accountabilities,” which should not be interpreted to include such possession.56 The fact
that majority of NAFLU’s members were not occupants of respondent Solid Mills’ property
is evidence that possession of the property was not contemplated in the agreement. 57
“Accountabilities” should be interpreted to refer only to accountabilities that were
incurred by petitioners while they were performing their duties as employees at the
worksite.58 Moreover, applicable laws, company practice, or policies do not provide that
13th month pay, and sick and vacation leave pay benefits, may be withheld pending
satisfaction of liabilities by the employee.59
Petitioners also point out that the National Labor Relations Commission and the Court of
Appeals have no jurisdiction to declare that petitioners’ act of withholding possession of
issue.61 It is independent from the issue of payment of petitioners’ monetary benefits.62
For these reasons, and because, according to petitioners, the amount of monetary award is
no longer in question, petitioners are entitled to 12% interest per annum.63
Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their
claims. They insist that Teodora Mahilom did not receive her retirement benefits and that
Carlito Damian did not receive his separation benefits.64
Respondents Solid Mills and Philip Ang, in their joint comment, argue that petitioners’
failure to turn over respondent Solid Mills’ property “constituted an unsatisfied
accountability” for which reason “petitioners’ benefits could rightfully be withheld.” 65 The
term “accountability” should be given its natural and ordinary meaning. 66 Thus, it should
be interpreted as “a state of being liable or responsible,” or “obligation.”67 Petitioners’
differentiation between accountabilities incurred while performing jobs at the worksite and
accountabilities incurred outside the worksite is baseless because the agreement with
NAFLU merely stated “accountabilities,” without qualification.68
On the removal of the award of 12% interest per annum, respondents argue that such
removal was proper since respondent Solid Mills was justified in withholding the monetary
claims.69
Respondents argue that Teodora Mahilom had no more cause of action for retirement
benefits claim.70 She had already retired more than a decade before Solid Mills’ closure.
She also already received her retirement benefits in 1991.71 Teodora Mahilom’s claim was
also not included in the complaint filed before the Labor Arbiter. It was improper to raise
this claim for the first time on appeal. In any case, Teodora Mahilom’s claim was asserted
long after the three-year prescriptive period provided in Article 291 of the Labor Code. 72
Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to
receive monetary benefits again, which he, admittedly, already received from Solid Mills.73
I employees separated from respondent Solid Mills is a question arising from the employer-
The National Labor Relations
Commission may preliminarily
determine issues related to rights
arising from an employer-employee
relationship
The National Labor Relations Commission has jurisdiction to determine, preliminarily, the
parties’ rights over a property, when it is necessary to determine an issue related to rights
or claims arising from an employer-employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the
National Labor Relations Commission, in its appellate jurisdiction, may determine issues
involving claims arising from employer-employee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. – (1) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence of stenographic
notes, the following cases involving workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00), regardless of whether accompanied
with a claim for reinstatement.
(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters. (Emphasis supplied)
Petitioners’ claim that they have the right to the immediate release of their benefits as
employee relationship between the parties.
Claims arising from an employer-employee relationship are not limited to claims by an
employee. Employers may also have claims against the employee, which arise from the
same relationship.
In Bañez v. Valdevilla,74 this court ruled that Article 217 of the Labor Code also applies to
employers’ claim for damages, which arises from or is connected with the labor issue.
Thus:
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees, we hold that by the designating
clause “arising from the employer-employee relations” Article 217 should apply with equal
force to the claim of an employer for actual damages against its dismissed employee,
where the basis for the claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counterclaim in the illegal dismissal case.75
Bañez was cited in Domondon v. National Labor Relations Commission.76 One of the issues
in Domondon is whether the Labor Arbiter has jurisdiction to decide an issue on the
transfer of ownership of a vehicle assigned to the employee. It was argued that only
regular courts have jurisdiction to decide the issue.
This court ruled that since the transfer of ownership of the vehicle to the employee was
connected to his separation from the employer and arose from the employer-employee
relationship of the parties, the employer’s claim fell within the Labor Arbiter’s
jurisdiction.78
As a general rule, therefore, a claim only needs to be sufficiently connected to the labor
issue raised and must arise from an employer-employee relationship for the labor tribunals
to have jurisdiction.
In this case, respondent Solid Mills claims that its properties are in petitioners’ possession
by virtue of their status as its employees. Respondent Solid Mills allowed petitioners to use
its property as an act of liberality. Put in other words, it would not have allowed
petitioners to use its property had they not been its employees. The return of its
properties in petitioners’ possession by virtue of their status as employees is an issue that
must be resolved to determine whether benefits can be released immediately. The issue
raised by the employer is, therefore, connected to petitioners’ claim for benefits and is
sufficiently intertwined with the parties’ employer-employee relationship. Thus, it is
properly within the labor tribunals’ jurisdiction.
II
Institution of clearance procedures
has legal bases
Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. Clearance procedures are
instituted to ensure that the properties, real or personal, belonging to the employer but
are in the possession of the separated employee, are returned to the employer before the
employee’s departure.
As a general rule, employers are prohibited from withholding wages from employees. The
Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to
give up any part of his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the worker’s consent.
The Labor Code also prohibits the elimination or diminution of benefits. Thus:
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.
However, our law supports the employers’ institution of clearance procedures before the
release of wages. As an exception to the general rule that wages may not be withheld and
benefits may not be diminished, the Labor Code provides:
Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except:
1. In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on the
insurance;
2. For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned;
and
3. In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor and Employment. (Emphasis supplied)
The Civil Code provides that the employer is authorized to withhold wages for debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
employer.
“Debt” in this case refers to any obligation due from the employee to the employer. It
includes any accountability that the employee may have to the employer. There is no
reason to limit its scope to uniforms and equipment, as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union representing petitioners,
agreed that the release of petitioners’ benefits shall be “less accountabilities.”
“Accountability,” in its ordinary sense, means obligation or debt. The ordinary meaning of
the term “accountability” does not limit the definition of accountability to those incurred in
the worksite. As long as the debt or obligation was incurred by virtue of the employer-
employee relationship, generally, it shall be included in the employee’s accountabilities
that are subject to clearance procedures.
It may be true that not all employees enjoyed the privilege of staying in respondent Solid
Mills’ property. However, this alone does not imply that this privilege when enjoyed was
not a result of the employer-employee relationship. Those who did avail of the privilege
were employees of respondent Solid Mills. Petitioners’ possession should, therefore, be
included in the term “accountability.”
Accountabilities of employees are personal. They need not be uniform among all
employees in order to be included in accountabilities incurred by virtue of an employer-
employee relationship.
Petitioners do not categorically deny respondent Solid Mills’ ownership of the property,
and they do not claim superior right to it. What can be gathered from the findings of the
Labor Arbiter, National Labor Relations Commission, and the Court of Appeals is that
respondent Solid Mills allowed the use of its property for the benefit of petitioners as its
employees. Petitioners were merely allowed to possess and use it out of respondent Solid
Mills’ liberality. The employer may, therefore, demand the property at will.79
The return of the property’s possession became an obligation or liability on the part of the
employees when the employer-employee relationship ceased. Thus, respondent Solid
Mills has the right to withhold petitioners’ wages and benefits because of this existing debt
or liability. In Solas v. Power and Telephone Supply Phils., Inc., et al., this court recognized
this right of the employer when it ruled that the employee in that case was not
constructively dismissed.80 Thus:
There was valid reason for respondents’ withholding of petitioner’s salary for the month of
February 2000. Petitioner does not deny that he is indebted to his employer in the amount
of around P95,000.00. Respondents explained that petitioner’s salary for the period of
February 1-15, 2000 was applied as partial payment for his debt and for withholding taxes
on his income; while for the period of February 15-28, 2000, petitioner was already on
absence without leave, hence, was not entitled to any pay.81
The law does not sanction a situation where employees who do not even assert any claim
over the employer’s property are allowed to take all the benefits out of their employment
while they simultaneously withhold possession of their employer’s property for no rightful
reason.
Withholding of payment by the employer does not mean that the employer may renege on
its obligation to pay employees their wages, termination payments, and due benefits. The
employees’ benefits are also not being reduced. It is only subjected to the condition that
the employees return properties properly belonging to the employer. This is only
consistent with the equitable principle that “no one shall be unjustly enriched or benefited
at the expense of another.”82chanroblesvirtuallawlibrary
For these reasons, we cannot hold that petitioners are entitled to interest of their withheld
separation benefits. These benefits were properly withheld by respondent Solid Mills
because of their refusal to return its property.
III
Mahilom and Damian are not
entitled to the benefits claimed
Teodora Mahilom is not entitled to separation benefits.
Both the National Labor Relations Commission and the Court of Appeals found that
Teodora Mahilom already retired long before respondent Solid Mills’ closure. They found
that she already received her retirement benefits. We have no reason to disturb this
finding. This court is not a trier of facts. Findings of the National Labor Relations
Commission, especially when affirmed by the Court of Appeals, are binding upon this
court.83
Moreover, Teodora Mahilom’s claim for retirement benefits was not included in her
complaint filed before the Labor Arbiter. Hence, it may not be raised in the appeal.
Similarly, the National Labor Relations Commission and the Court of Appeals found that
Carlito Damian already received his terminal benefits. Hence, he may no longer claim
terminal benefits.
The fact that respondent Solid Mills has not yet demolished Carlito Damian’s house in SMI
Village is not evidence that he did not receive his benefits. Both the National Labor
Relations Commission and the Court of Appeals found that he executed an affidavit stating
that he already received the benefits.
Absent any showing that the National Labor Relations Commission and the Court of
Appeals misconstrued these facts, we will not reverse these findings.
Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical
power of those with capital when they are left to negotiate with their workers without the
standards and protection of law. In cases such as these, the collective bargaining unit of
workers are able to get more benefits and in exchange, the owners are able to continue
with the program of cutting their losses or wind down their operations due to serious
business losses. The company in this case did all that was required by law.
The preferential treatment given by our law to labor, however, is not a license for abuse. 84
It is not a signal to commit acts of unfairness that will unreasonably infringe on the
property rights of the company. Both labor and employer have social utility, and the law is
not so biased that it does not find a middle ground to give each their due.
Clearly, in this case, it is for the workers to return their housing in exchange for the release
of their benefits. This is what they agreed upon. It is what is fair in the premises.
WHEREFORE, the petition is DENIED. The Court of Appeals’ decision is AFFIRMED.
Carpio, (Chairperson), Velasco, Jr.* Del Castillo, and Mendoza, JJ., concur.
G.R. No. 173849 September 28, 2007
PIER 8 ARRASTRE & STEVEDORING SERVICES, INC. and/ or ELIODORO C. CRUZ, Petitioners,
vs.
JEFF B. BOCLOT, Respondent.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure,
petitioners pray that this Court annul and set aside the (a) Decision 1 dated 18 November
2005 of the Court of Appeals in CA-G.R. SP No. 88929 affirming the twin Resolutions2 dated
29 October 20043 and 29 December 20044 of the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 038683-04; and (b) Resolution dated 21 July 2006 of the
appellate court in the same case, denying petitioners’ Motion for Reconsideration of the
aforementioned Decision.
The factual antecedents of the present petition are as follows:
Petitioner Pier 8 Arrastre and Stevedoring Services, Inc. (PASSI) is a domestic corporation
engaged in the business of providing arrastre and stevedoring services5 at Pier 8 in the
Manila North Harbor. PASSI has been rendering arrastre and stevedoring services at the
port area since 1974 and employs stevedores who assist in the loading and unloading of
cargoes to and from the vessels. Petitioner Eliodoro C. Cruz is its Vice-President and
General Manager.
Respondent Jeff B. Boclot was hired by PASSI to perform the functions of a stevedore
starting 20 September 1999.
The facts show that respondent rendered actual services to PASSI during the following
periods:
Period Duration
September - December 1999 (4 months) 21 days
January - April 2000 (4 months) 20 days
March - December 2001 (10 months) 85 days
January - December 2002 (12 months) 70.5 days
January – June 2003 (6 months) 32 days
Total 36 months 228.5 days6
On 15 April 2000, the Philippine Ports Authority (PPA) seized the facilities and took over the
operations of PASSI through its Special Takeover Unit, absorbing PASSI workers as well as
their relievers. By virtue of a Decision dated 9 January 2001 of the Court of Appeals,
petitioners were able to regain control of their arrastre and stevedoring operations at Pier
8 on 12 March 2001.7
On 9 May 2003, respondent filed a Complaint with the Labor Arbiter of the NLRC, claiming
regularization; payment of service incentive leave and 13th month pays; moral, exemplary
and actual damages; and attorney’s fees. Respondent alleged that he was hired by PASSI in
October 1999 and was issued company ID No. 304,8 a PPA Pass and SSS documents. In fact,
respondent contended that he became a regular employee by April 2000, since it was his
sixth continuous month in service in PASSI’s regular course of business. He argued on the
basis of Articles 2809 and 28110 of the Labor Code. He maintains that under paragraph 2 of
Article 280, he should be deemed a regular employee having rendered at least one year of
service with the company.
According to respondent, he remained a casual employee from the time he was first hired
to perform the services of a stevedore. Thus, respondent claimed he was denied the rights
and privileges of a regular employee, including those granted under the Collective
Bargaining Agreement (CBA) such as wage increase; medical, dental and hospitalization
benefits; vacation and sick leaves; uniforms, Christmas gifts, productivity bonus, accident
insurance, special separation pays, and others.11
Respondent relied on Article XXV of the company’s existing CBA, effective 4 March 1998 to
3 March 2003, which states the following:
The Company agrees to convert to regular status all incumbent probationary or casual
employees and workers in the Company who have served the Company for an
accumulated service term of employment of not less than six (6) months from his original
date of hiring
The probationary period for all future workers or employees shall be the following:
 a. All skilled workers such as crane operator, mechanic, carpenter, winchman,
signalman and checkers shall become regular after three (3) months continuous
employment;
b. All semi-skilled personnel shall become regular after four (4) months of
continuous employment;
c. All non-skilled personnel shall be regular after six (6) months continuous
employment.12
In opposition thereto, petitioners alleged that respondent was hired as a mere "reliever"
stevedore and could thus not become a regular employee.
On 24 November 2003, NLRC Labor Arbiter Felipe P. Pati ruled for petitioners and
dismissed respondent’s complaint. In finding no factual or legal basis for the regularization
of respondent, the Labor Arbiter came to the conclusion that respondent was "nothing
more than an extra worker who is called upon to work at the pier in the absence of regular
stevedores at a certain shift."13 He deemed that Articles 280 and 281 of the Labor Code
were inapplicable, on the contention that the aforementioned articles speak of
probationary employees and casual employees while respondent, as a reliever, is neither a
probationary employee nor a casual employee. Neither was respondent qualified to avail
himself of Service Incentive Leave benefits, even assuming he was a regular employee,
because the number of days of service he had rendered reached a total of 228.5 days only
-- short of 365 days, the one-year requirement to qualify for this benefit. Finally,
respondent’s prayer for the grant of attorney’s fees, and for moral and exemplary
damages, was also denied.
Respondent appealed the Labor Arbiter’s dismissal of his complaint to the NLRC.
Thereafter, the NLRC issued a Resolution on 29 October 2004 modifying the Labor Arbiter’s
Decision, ruling:
WHEREFORE, premises considered, complainant’s appeal is partly GRANTED. The Labor
Arbiter’s assailed Decision in the above-entitled case is hereby MODIFIED. Complainant is
hereby declared a regular employee of Respondents. The dismissal of Complainant’s claim
for benefits under the CBA and other monetary claims are AFFIRMED for lack of jurisdiction
and lack of merit, respectively.14 (Italics ours.)
The NLRC gave credence to respondent’s allegations that the Labor Arbiter committed
grave abuse of discretion in dismissing respondent’s claim for regularization. The NLRC
ruled that petitioners’ failure, without reasonable explanation, to present proof of
absences of "regular" stevedores leads to the conclusion that the stevedores, termed by
petitioners as "relievers," work on rotation basis, just like the "regular" stevedores. The
NLRC predicated its findings that respondent is a regular employee of petitioners on the
reasonable connection between the activity performed by the employee in relation to the
usual business or trade of the employer. According to the NLRC, although respondent
rendered an average of 6.34 days of work a month, the activities performed were usually
necessary and desirable in the business of petitioners.
Petitioners filed a Motion for Reconsideration of the foregoing NLRC Resolution dated 29
October 2004 but this was subsequently denied in another NLRC Resolution issued on 29
December 2004.
Upon a denial of their motion for reconsideration by the NLRC, petitioners elevated their
case to the Court of Appeals via a Petition for Certiorari with prayer for the issuance of a
Temporary Restraining Order (TRO) and/or writ of preliminary injunction.
On 18 November 2005, the Court of Appeals dismissed the Petition for Certiorari and
affirmed the Resolutions of the NLRC finding respondent to be a regular employee. The
Court of Appeals grounded its Decision on this Court’s previous rulings that what
determines regularity or casualness is not the employment contract, written or otherwise,
but the nature of the job. Citing De Leon v. National Labor Relations Commission, 15 which
enumerated the standards for determining regular employment, the Court of Appeals
ruled that even assuming that respondent was able to render services for only 228.5 days
in a period of 36 months, the fact remains that his services were continuously utilized by
petitioners in their business. Where the job is usually necessary or desirable to the main
business of the employer, then the employment is regular.16 The pertinent portions of the
assailed Decision of the Court of Appeals are herein reproduced:
Applying the above-mentioned principles, private respondent’s task of loading and
unloading cargoes to and from the vessels is undoubtedly necessary and desirable to the
business of petitioners’ arrastre and stevedoring services. Equally unavailing is the
petitioners’ contention that being a reliever or an extra worker, private respondent cannot
be deemed as a regular employee. This cannot be accorded with merit as the same does
not change the nature of the latter’s employment. Whether private respondent was hired
only in the absence of regular stevedores, as petitioners maintain, let it be emphasized that
the determination of whether the employment is casual or regular does not depend on the
will or word of the employer, and the procedure of hiring and manner of paying, but on the
nature of the activities performed by an employee, and to some extent, the length of
performance, and its continued existence. Petitioners’ admission that it has been an
industry practice to hire relievers whenever the need arises to ensure that operations at
the pier continue for 24 hours only proves that private respondent’s services are necessary
or desirable in its usual business, otherwise, private respondent should not have been at
the employ of petitioners for a period [of] 36 months. Even assuming that private
respondent was able to render only 228.5 days out of 36 months, the undisputed fact
remains that private respondent’s services was continuously utilized by petitioners in the
operation of its business. Whether one’s employment is regular is not determined by the
number of the hours one works, but by the nature of the work and by the length of time
one has been in that particular job. To uphold petitioners’ argument would preclude and
deprive workers, like private respondent herein, to acquire regular status favorably
mandated by the Labor Code.
xxxx
WHEREFORE, the instant petition is DISMISSED for lack of merit and the assailed
resolutions of public respondent National Labor Relations Commission dated October 29,
2004 and December 29, 2004 are hereby AFFIRMED.17
On 14 December 2005, petitioners filed a Motion for Reconsideration, which was denied
by the Court of Appeals in a Resolution dated 21 July 2006.
Hence, through this Petition for Review on Certiorari, petitioners assail the Decision of the
Court of Appeals, raising the sole argument that:
THE COURT OF APPEALS ERRED IN RULING THAT PRIVATE RESPONDENT JEFF BOCLOT IS A
REGULAR EMPLOYEE OF PETITIONER PIER 8 ARRASTRE & STEVEDORING SERVICES, INC.
BECAUSE HE PERFORMED TASKS WHICH ARE USUALLY NECESSARY AND DESIRABLE TO THE
MAIN BUSINESS OF PETITIONER CORPORATION
Evidently, the only issue subject to the resolution of this Court is whether or not
respondent has attained regular status as PASSI’s employee.
In the instant petition, petitioners are vehemently denying that respondent has become
PASSI’s regular employee. Petitioners insist that respondent was hired as a mere "reliever"
stevedore and, thus, could not become a regular stevedore. Petitioners presented a list of
the days when respondent’s services as stevedore were engaged, to support its claim that
respondent is a reliever. Petitioners aver that the employment of the stevedores is
governed by a system of rotation. Based on this system of rotation, the work available to
reliever stevedores is dependent on the actual stevedoring and arrastre requirements at a
current given time. Petitioners posit that respondent, as a reliever stevedore, is a mere
extra worker whose work is dependent on the absence of regular stevedores during any
given shift. During "rotation proper," as petitioners term it, all regular employees are first
called and given work before any reliever is assigned. Petitioners assert that while the
regular stevedores work an average of 4 days a week (or 16 days a month), respondent
performed services for a total of 228.5 days (or only for an average of 6.34 days a month)
from September 1999 to June 2003. In defense of the Court of Appeals’ ruling grounded on
Articles 280 and 281 of the Labor Code, petitioners maintain that the foregoing provisions
are inapplicable on the postulation that respondent is neither a probationary nor a casual
employee. For the same reasons, petitioners argue that Article XXV of the CBA cannot be
used to support respondent’s contention that he is a regular employee since the CBA
provision he invokes refers to "all incumbent probationary or casual employees and
workers in the company" and not to respondent who is neither a casual nor a probationary
employee.
After a deliberate study of Labor Law provisions and jurisprudence, and in light of the
particular circumstances of this case, this Court has arrived at the same conclusion as those
of the NLRC and the Court of Appeals that respondent is a regular employee, but on a
different basis.
Under the 1987 Philippine Constitution, the State affords full protection to labor, local and
overseas, organized and unorganized; and the promotion of full employment and equality
of employment opportunities for all. The State affirms labor as a primary social economic
force and guarantees that it shall protect the rights of workers and promote their
welfare.18
The Labor Code, which implements the foregoing Constitutional mandate, draws a fine line
between regular and casual employees to protect the interests of labor.19 "Its language
evidently manifests the intent to safeguard the tenurial interest of the worker who may be
denied the rights and benefits due a regular employee by virtue of lopsided agreements
with the economically powerful employer who can maneuver to keep an employee on a
casual status for as long as convenient."20 Thus, the standards for determining whether an
employee is a regular employee or a casual or project employee have been delineated in
Article 280 of the Labor Code, to wit:
Article 280. Regular and Casual Employment. - The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while
such actually exist.
Under the foregoing provision, a regular employee is (1) one who is either engaged to
perform activities that are necessary or desirable in the usual trade or business of the
employer except for project21 or seasonal employees; or (2) a casual employee who has
rendered at least one year of service, whether continuous or broken, with respect to the
activity in which he is employed.22 Additionally, Article 281 of the Labor Code further
considers a regular employee as one who is allowed to work after a probationary period.
Based on the aforementioned, although performing activities that are necessary or
desirable in the usual trade or business of the employer, an employee such as a project or
seasonal employee is not necessarily a regular employee. The situation of respondent is
similar to that of a project or seasonal employee, albeit on a daily basis.
Under the second paragraph of the same provision, all other employees who do not fall
under the definition of the preceding paragraph are casual employees. However, the
second paragraph also provides that it deems as regular employees those casual
employees who have rendered at least one year of service regardless of the fact that such
service may be continuous or broken.
De Leon v. National Labor Relations Commission23 succinctly explains the delineation of the
foregoing employee classification, to wit:
The primary standard, therefore, of determining a regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the
usual business or trade of the employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of the employer. The connection can
be determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability of that activity to the business.
Hence, the employment is also considered regular, but only with respect to such activity
and while such activity exists. (Emphasis supplied.)
PASSI is engaged in providing stevedoring and arrastre services in the port area in Manila.
Stevedoring, dock and arrastre operations include, but are not limited to, the opening and
closing of a vessel’s hatches; discharging of cargoes from ship to truck or dock, lighters and
barges, and vice-versa; movement of cargoes inside vessels, warehouses, terminals and
docks; and other related work. In line with this, petitioners hire stevedores who assist in
the loading and unloading of cargoes to and from the vessels.
Petitioners concede that whenever respondent worked as a reliever stevedore due to the
absence of a regular stevedore, he performed tasks that are usually necessary and
desirable to their business. Petitioners, however, contend that this in itself does not make
him a regular stevedore, postulating that the hiring of respondent as a reliever is akin to a
situation in which a worker goes on vacation leave, sick leave, maternity leave or paternity
leave; and the employer is constrained to hire another worker from outside the
establishment to ensure the smooth flow of its operations.
Based on the circumstances of the instant case, this Court agrees. It takes judicial notice 24
that it is an industry practice in port services to hire "reliever" stevedores in order to
ensure smooth-flowing 24-hour stevedoring and arrastre operations in the port area. No
doubt, serving as a stevedore, respondent performs tasks necessary or desirable to the
usual business of petitioners. However, it should be deemed part of the nature of his work
that he can only work as a stevedore in the absence of the employee regularly employed
for the very same function. Bearing in mind that respondent performed services from
September 1999 until June 2003 for a period of only 228.5 days in 36 months, or roughly
an average of 6.34 days a month; while a regular stevedore working for petitioners, on the
other hand, renders service for an average of 16 days a month, demonstrates that
respondent’s employment is subject to the availability of work, depending on the absences
of the regular stevedores. Moreover, respondent does not contest that he was well aware
that he would only be given work when there are absent or unavailable employees.
Respondent also does not allege, nor is there any showing, that he was disallowed or
prevented from offering his services to other cargo handlers in the other piers at the North
Harbor other than petitioners. As aforestated, the situation of respondent is akin to that of
a seasonal or project or term employee, albeit on a daily basis.
Anent petitioners’ contention that respondent is neither a probationary nor a casual
employee, this Court again refers to Article 280 of the Labor Code.
The second paragraph thereof stipulates in unequivocal terms that all other employees
who do not fall under the definitions in the first paragraph of regular, project and seasonal
employees, are deemed casual employees.25 Not qualifying under any of the kinds of
employees covered by the first paragraph of Article 280 of the Labor Code, then
respondent is a casual employee under the second paragraph of the same provision.
The same provision, however, provides that a casual employee can be considered as
regular employee if said casual employee has rendered at least one year of service
regardless of the fact that such service may be continuous or broken. Section 3, Rule V, (a) All skilled workers such as crane operator, mechanic, carpenter, winchman,
Book II of the Implementing Rules and Regulations of the Labor Code clearly defines the signalman and checkers shall become regular after three (3) months continuous
term "at least one year of service" to mean service within 12 months, whether continuous employment;
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 (b) All semi-skilled personnel shall become regular after four (4) months of
matter of practice or policy, or that provided in the employment contract, is less than 12 continuous employment;
months, in which case said period shall be considered one year.26 If the employee has been
performing the job for at least one year, even if the performance is not continuous or (c) All non-skilled personnel shall be regular after six (6) months continuous
merely intermittent, the law deems the repeated and continuing need for its performance employment.33 (Italics ours.)
as sufficient evidence of the necessity, if not indispensability, of that activity to the
business of the employer.27 Applying the foregoing, respondent, who has performed actual
Petitioners were crucified on this argument raised by respondent. The union which
stevedoring services for petitioners only for an accumulated period of 228.5 days does not
negotiated the existing CBA is the sole and exclusive bargaining representative of all the
fall under the classification of a casual turned regular employee after rendering at least one
stevedores, dock workers, gang bosses, rank and file employees working at Pier 8, and its
year of service, whether continuous or intermittent.28
offices. The NLRC ruled that respondent’s reliance on the CBA to show that he has become
a regular employee is misplaced for the reason that the CBA applies only to regular workers
Both the Constitution and the Labor Code mandate the protection of labor. Hence, as a of the company.34 Respondent assents that he is not a member of the union, as he was not
matter of judicial policy, this Court has, in a number of instances, leaned backwards to recognized by PASSI as its regular employee, but this Court notes that PASSI adopts a
protect labor and the working class against the machinations and incursions of their more union-shop agreement, culling from Article II of the CBA which stipulates:
financially entrenched employers.29 Where from the circumstances it is apparent that
periods have been imposed to preclude acquisition of tenurial security by an employee,
The Union and the Company (PASSI) hereby agree to adopt the "Union Shop" as a
such imposition should be struck down or disregarded as contrary to public policy and
condition of employment to the position (sic) covered by this Agreement.35
morals.30 However, we take this occasion to emphasize that the law, while protecting the
rights of the employees, authorizes neither the oppression nor the destruction of the
Under a union-shop agreement, although nonmembers may be hired, an employee is
employer. When the law tilts the scale of justice in favor of labor, the scale should never be
required to become a union member after a certain period, in order to retain employment.
so tilted if the result would be an injustice to the employer.31 Thus, this Court cannot be
This requirement applies to present and future employees. 36 The same article of the CBA
compelled to declare respondent as a regular employee when by the nature of
stipulates that employment in PASSI cannot be obtained without prior membership in the
respondent’s work as a reliever stevedore and his accumulated length of service of only
union.1âwphi1
eight months do not qualify him to be declared as such under the provisions of the Labor
Code alone.32
Apropos, applying the foregoing provisions of the CBA, respondent should be considered a
regular employee after six months of accumulated service. It is clearly stipulated therein
NONETHELESS, this Court still finds respondent to be a regular employee on the basis of
that petitioners shall agree to convert to regular status all incumbent probationary or
pertinent provisions under the CBA between PASSI and its Workers’ union, which was
casual employees and workers in PASSI who have served PASSI for an accumulated service
effective from 4 March 1998 to 3 March 2003:
term of employment of not less than six months from the original date of hiring. Having
rendered 228.5 days, or eight months of service to petitioners since 1999, then respondent
The Company agrees to convert to regular status all incumbent probationary or casual
is entitled to regularization by virtue of the said CBA provisions.
employees and workers in the Company who have served the Company for an
accumulated service term of employment of not less than six (6) months from his original
In light of the foregoing, petitioners must accord respondent the status of a regular
date of hiring.
employee.
The probationary period for all future workers or employees shall be the following:
Additionally, respondent is not yet entitled to avail himself of service incentive leave
benefits for his failure to render at least one year of service. As to the 13th month pay,
petitioners have shown that respondent has been paid the same. Respondent is also not
entitled to moral and exemplary damages and attorney’s fees for the reason that an
employer may only be held liable for damages if the attendant facts show that it was
oppressive to labor or done in a manner contrary to morals, good customs and public
policy. None of the aforementioned circumstances are present. Neither was there any
appeal raised by respondent pertaining to the non-award of the foregoing claims.
WHEREFORE, in view of the foregoing, the instant Petition is DENIED and the Decision of
the Court of Appeals dated 18 November 2005 and its Resolution dated 21 January 2006,
in CA-G.R. SP No. 88929 are AFFIRMED in the manner herein discussed. Costs against
petitioners.
SO ORDERED.
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is an
independent contractor rather than a regular employee with or without a fixed term. That
a person has a disease does not per se entitle the employer to terminate his or her
services. Termination is the last resort. At the very least, a competent public health
authority must certify that the disease cannot be cured within six ( 6) months, even with
appropriate treatment.
We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc.,
seeking the reversal of the Court of Appeals’ Decision2 dated June 25, 2012, affirming with
modification the decision3 of the National Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc. ("Fuji")
asa news correspondent/producer4 "tasked to report Philippine news to Fuji through its
Manila Bureau field office."5 Arlene’s employment contract initially provided for a term of
one (1) year but was successively renewed on a yearly basis with salary adjustment upon
every renewal.6 Sometime in January 2009, Arlenewas diagnosed with lung cancer.7 She
informed Fuji about her condition. In turn, the Chief of News Agency of Fuji, Yoshiki Aoki,
informed Arlene "that the company will have a problem renewing her contract" 8 since it
would be difficult for her to perform her job.9 She "insisted that she was still fit to work as
certified by her attending physician."10
After several verbal and written communications,11 Arlene and Fuji signed a non-renewal
contract on May 5, 2009 where it was stipulated that her contract would no longer be
renewed after its expiration on May 31, 2009. The contract also provided that the parties
release each other from liabilities and responsibilities under the employment contract. 12
In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total
amount of US$18,050.00 representing her monthly salary from March 2009 to May 2009,
year-end bonus, mid-year bonus, and separation pay."13 However, Arlene affixed her
signature on the nonrenewal contract with the initials "U.P." for "under protest." 14
On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a
complaint for illegal dismissal and attorney’s fees with the National Capital Region
Arbitration Branch of the National Labor Relations Commission. She alleged that she was
forced to sign the nonrenewal contract when Fuji came to know of her illness and that Fuji
withheld her salaries and other benefits for March and April 2009 when she refused to
sign.15
Arlene claimed that she was left with no other recourse but to sign the non-renewal
contract, and it was only upon signing that she was given her salaries and bonuses, in
addition to separation pay equivalent to four (4) years.16
In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed
Arlene’s complaint.18 Citing Sonza v. ABS-CBN19 and applying the four-fold test, the Labor
Arbiter held that Arlene was not Fuji’s employee but an independent contractor.20
Arlene appealed before the National Labor Relations Commission. In its decision dated
March 5, 2010, the National Labor Relations Commission reversed the Labor Arbiter’s
decision.21 It held that Arlene was a regular employee with respect to the activities for
which she was employed since she continuously rendered services that were
deemednecessary and desirable to Fuji’s business.22 The National Labor Relations
Commission ordered Fuji to pay Arlene backwages, computed from the date of her illegal
dismissal.23 The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant
appeal. The Decision of the Labor Arbiter dated 19 September 2009 is hereby REVERSED
and SET ASIDE, and a new one is issued ordering respondents-appellees to pay
complainant-appellant backwages computed from the date of her illegal dismissal until
finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for reconsideration.25 Both motions were denied by
the National Labor Relations Commission for lack of merit in the resolution dated April 26,
2010.26 From the decision of the National Labor Relations Commission, both parties filed
separate petitions for certiorari27 before the Court of Appeals. The Court of Appeals
consolidated the petitions and considered the following issues for resolution:
1) Whether or not Espirituis a regular employee or a fixed-term contractual
employee;
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espirituis entitled to damages and attorney’s fees.28
In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate Arlene
to her position as News Producer without loss of seniority rights, and pay her
backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and
vacation leave with pay until reinstated, moral damages, exemplary damages,
attorney’sfees, and legal interest of 12% per annum of the total monetary
awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki
is DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision
dated March 5, 2010 of the National Labor Relations Commission, 6th Division in NLRC NCR
Case No. 05-06811-09 and its subsequent Resolution dated April 26, 2010 are hereby
AFFIRMED with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her
position as News Producer without loss of seniority rights and privileges and to pay her the
following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009
(the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal,
until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year from
the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year
from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal,
until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from
date of dismissal, until reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary awards herein stated;
and
10. Legal interest of twelve percent (12%) per annum of the total monetary
awards computed from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above
monetary awards consistent with the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held that Arlene was a regular employee
because she was engaged to perform work that was necessary or desirable in the business
of Fuji,31 and the successive renewals of her fixed-term contract resulted in regular
employment.32
According to the Court of Appeals, Sonzadoes not apply in order to establish that Arlene
was an independent contractor because she was not contracted on account of any peculiar
ability, special talent, or skill.33 The fact that everything used by Arlene in her work was
owned by Fuji negated the idea of job contracting.34
The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to
comply with the requirements of substantive and procedural due process necessary for her
dismissal since she was a regular employee.35
The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily
and that the contract was a mere subterfuge by Fuji to secure its position that it was her
choice not to renew her contract. She was left with no choice since Fuji was decided on
severing her employment.36
Fuji filed a motion for reconsideration that was denied in the resolution37 dated December
7, 2012 for failure to raise new matters.38
Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in
affirming with modification the National Labor Relations Commission’s decision, holding
that Arlene was a regular employee and that she was illegally dismissed. Fuji also
questioned the award of monetary claims, benefits, and damages.39
Fuji points out that Arlene was hired as a stringer, and it informed her that she would
remain one.40 She was hired as an independent contractor as defined in Sonza.41 Fuji had
no control over her work.42 The employment contracts were executed and renewed
annually upon Arlene’s insistence to which Fuji relented because she had skills that
distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal terms when
they negotiated and entered into the employment contracts.44 There was no illegal
dismissal because she freely agreed not to renew her fixed-term contract as evidenced by
her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment since "such employment
terminated upon expiration of her contract."46 Finally, Fuji had dealt with Arlene in good
faith, thus, she should not have been awarded damages.47
Fuji alleges that it did not need a permanent reporter since the news reported by Arlene
could easily be secured from other entities or from the internet. 48 Fuji "never controlled
the manner by which she performed her functions."49 It was Arlene who insisted that Fuji
execute yearly fixed-term contracts so that she could negotiate for annual increases in her
pay.50
Fuji points out that Arlene reported for work for only five (5) days in February 2009, three
(3) days in March 2009, and one (1) day in April 2009.51 Despite the provision in her
employment contract that sick leaves in excess of 30 days shall not be paid, Fuji paid Arlene
her entire salary for the months of March, April, and May; four(4) months of separation
pay; and a bonus for two and a half months for a total of US$18,050.00. 52 Despite having
received the amount of US$18,050.00, Arlene still filed a case for illegal dismissal.53
Fuji further argues that the circumstances would show that Arlene was not illegally
dismissed. The decision tonot renew her contract was mutually agreed upon by the parties
as indicated in Arlene’s e-mail54 dated March 11, 2009 where she consented to the non-
renewal of her contract but refused to sign anything.55 Aoki informed Arlene in an e-mail56
dated March 12, 2009 that she did not need to sign a resignation letter and that Fuji would
pay Arlene’s salary and bonus until May 2009 as well as separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal
agreement that she agreed to sign this time.58 This attached version contained a provision
that Fuji shall re-hire her if she was still interested to work for Fuji.59 For Fuji, Arlene’s e-
mail showed that she had the power to bargain.60
Fuji then posits that the Court of Appeals erred when it held that the elements of an
employer-employee relationship are present, particularly that of control;61 that Arlene’s
separation from employment upon the expiration of her contract constitutes illegal
dismissal;62 that Arlene is entitled to reinstatement; 63 and that Fuji is liable to Arlene for
damages and attorney’s fees.64
This petition for review on certiorari under Rule 45 was filed on February 8, 2013.65 On
February 27, 2013, Arlene filed a manifestation66 stating that this court may not take
jurisdiction over the case since Fuji failed to authorize Corazon E. Acerden to sign the
verification.67 Fuji filed a comment on the manifestation68 on March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive issues for
resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden, the
signatory of the verification and certification of non forum shopping of the
petition, had no authority to sign the verification and certification on behalf of
Fuji;
 II. Whether the Court of Appeals correctly determined that no grave abuse of A pleading required to be verifiedwhich containsa verification based on "information and
discretion was committed by the National Labor Relations Commission when it belief," or upon "knowledge, information and belief," or lacks a proper verification, shall be
ruled that Arlene was a regular employee, not an independent contractor, and treated as an unsigned pleading.
that she was illegally dismissed; and
SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify
III. Whether the Court of Appeals properly modified the National Labor Relations under oath in the complaint orother initiatory pleading asserting a claim for relief or in a
Commission’s decision by awarding reinstatement, damages, and attorney’s fees. sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim involving the same issues in any
The petition should be dismissed. court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action or claim, a
I complete statement of the present status thereof; and (c) if he should thereafter learn that
the same or similar action or claim has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
Validity of the verification and certification against forum shopping
pleading has been filed.
In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to sign
Failure to comply with the foregoing requirements shall not be curable by mere
the verification and certification of non-forum shopping because Mr. Shuji Yano was
amendment of the complaint or other initiatory pleading but shall be cause for the
empowered under the secretary’s certificate to delegate his authority to sign the necessary
dismissal of the case without prejudice, unless otherwise provided, upon motion and after
pleadings, including the verification and certification against forum shopping.69
hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt ofcourt, without prejudice to the
On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr. Jin
corresponding administrative and criminalactions. If the acts of the party or his counsel
Eto in the secretary’s certificate is only for the petition for certiorari before the Court of
clearly constitute willful and deliberate forum shopping, the same shall be ground for
Appeals.70 Fuji did not attach any board resolution authorizing Corazon orany other person
summary dismissal with prejudice and shall constitute direct contempt, as well as a cause
tofile a petition for review on certiorari with this court.71 Shuji Yano and Jin Eto could not for administrative sanctions.
re-delegate the power thatwas delegated to them.72 In addition, the special power of
attorney executed by Shuji Yano in favor of Corazon indicated that she was empowered to
Section 4(e) of Rule 4574 requires that petitions for review should "contain a sworn
sign on behalf of Shuji Yano, and not on behalf of Fuji.73
certification against forum shopping as provided in the last paragraph of section 2, Rule
42." Section 5 of the same rule provides that failure to comply with any requirement in
The Rules of Court requires the
Section 4 is sufficient ground to dismiss the petition.
submission of verification and
certification against forum shopping
Effects of non-compliance
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of
Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and
verification, while Section 5 of the same rule provides the requirement of certification
stated that:
against forum shopping. These sections state:

[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such

SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule,
requirement is simply a condition affecting the form of pleading, the non-compliance of
pleadings need not be under oath, verified or accompanied by affidavit.
which does not necessarily render the pleading fatally defective. Verification is simply
intended to secure an assurance that the allegations in the pleading are true and correct
A pleading is verified by an affidavit that the affiant has read the pleading and that the
and not the product of the imagination or a matter of speculation, and that the pleading is
allegations therein are true and correct of his knowledge and belief.
filed in good faith. The court may order the correction of the pleading if the verification is
lacking or act on the pleading although it is not verified, if the attending circumstances are
such that strict compliance with the rules may be dispensed with inorder that the ends of
justice may thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated its
effect from non-compliance with the requirement of certification against forum shopping:
On the other hand, the lack of certification against forum shopping is generally not curable
by the submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997
Rules of Civil Procedure provides that the failure of the petitioner tosubmit the required
documents that should accompany the petition, including the certification against forum
shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to
certifications against forum shopping signed by a person on behalf of a corporation which
are unaccompanied by proof that said signatory is authorized to file a petition on behalf of
the corporation.78 (Emphasis supplied) Effects of substantial compliance with the
requirement of verification and certification against forum shopping
Although the general rule is that failure to attach a verification and certification against
forum shopping isa ground for dismissal, there are cases where this court allowed
substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification
one day after filing his electoral protest.80 This court considered the subsequent filing as
substantial compliance since the purpose of filing the certification is to curtail forum
shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the verification and
certification against forum shopping but failed to attach the board resolution indicating her
authority to sign.83 In a motion for reconsideration, LDP Marketing attached the secretary’s
certificate quoting the board resolution that authorized Dela Peña.84 Citing Shipside, this
court deemed the belated submission as substantial compliance since LDP Marketing
complied with the requirement; what it failed to do was to attach proof of Dela Peña’s
authority to sign.85 Havtor Management Phils., Inc. v. National Labor Relations
Commission86 and General Milling Corporation v. National Labor Relations Commission87
involved petitions that were dismissed for failure to attach any document showing that the
signatory on the verification and certification against forum-shopping was authorized.88 In
both cases, the secretary’s certificate was attached to the motion for reconsideration.89
This court considered the subsequent submission of proof indicating authority to sign as
substantial compliance.90 Altres v. Empleo91 summarized the rules on verification and
certification against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements . . . respecting non-compliance with the requirement on,
or submission of defective, verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on
or submission of defective verification, and noncompliance with the requirement
on or submission of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed with in order that the
ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in the petition have been made in
good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule on the
ground of "substantial compliance" or presence of "special circumstances or
compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as parties
to the case. Under reasonable or justifiable circumstances, however, as when all
the plaintiffs or petitioners share a common interest and invoke a common cause
of action or defense, the signature of only one of them inthe certification against
forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-
pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the
party-pleader is unable to sign, he must execute a Special Power of Attorney
designating his counsel of record to sign on his behalf.92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of
directors or duly authorized officers and agents. Thus, the physical act of signing the
verification and certification against forum shopping can only be done by natural persons
duly authorized either by the corporate by-laws or a board resolution.93
In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s certificate,94
authorizing Shuji Yano and Jin Eto to represent and sign for and on behalf of Fuji.95 The
secretary’s certificate was duly authenticated96 by Sulpicio Confiado, Consul-General of the
Philippines in Japan. Likewise attached to the petition is the special power of attorney
executed by Shuji Yano, authorizing Corazon to sign on his behalf.97 The verification and
certification against forum shopping was signed by Corazon.98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review
should be dismissed because Corazon was not duly authorized to sign the verification and
certification against forum shopping.
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly
authorized to sign. On the basis of the secretary’s certificate, Shuji Yano was empowered to
delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals,
against Philippines’ National Labor Relations Commission ("NLRC") and Arlene S.
Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-06811-
00 and entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki",
and participate in any other subsequent proceeding that may necessarily arise
therefrom, including but not limited to the filing of appeals in the appropriate
venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to
verify and execute the certification against nonforum shopping which may be
necessary or required to be attached to any pleading to [sic] submitted to the
Court of Appeals; and the authority to so verify and certify for the Corporation in
favor of the said persons shall subsist and remain effective until the termination of
the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to
represent and appear on behalf the [sic] Corporation in all stages of the [sic] this
case and in any other proceeding that may necessarily arise thereform [sic], and
to act in the Corporation’s name, place and stead to determine, propose, agree,
decide, do, and perform any and all of the following:
1. The possibility of amicable settlement or of submission to alternative
mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and
documents; and
5. Such other matters as may aid in the prompt disposition of the
action.99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden
and Mr. Moises A. Rollera as his attorneys-in-fact.100 The special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba,
Minato-Ku, Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic]
(evidenced by the attached Secretary’s Certificate) one of the respondents in NLRC-NCR
Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki
Aoki", and subsequently docketed before the Court of Appeals asC.A. G.R. S.P. No. 114867
(Consolidated with SP No. 114889) do hereby make, constitute and appoint Ms. Ma.
Corazon E. Acerden and Mr. Moises A. Rolleraas my true and lawful attorneys-infact for me
and my name, place and stead to act and represent me in the above-mentioned case, with
special power to make admission/s and stipulations and/or to make and submit as well as
to accept and approve compromise proposals upon such terms and conditions and under
such covenants as my attorney-in-fact may deem fit, and to engage the services of Villa
Judan and Cruz Law Officesas the legal counsel to represent the Company in the Supreme
Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver
such papers ordocuments as may be necessary in furtherance of the power thus granted,
particularly to sign and execute the verification and certification of non-forum shopping
needed to be filed.101 (Emphasis in the original)
In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano could further
delegate his authority because the board resolution empowered him to "act in the
Corporation’s name, place and stead to determine, propose, agree, decided [sic], do and
perform any and all of the following: . . . such other matters as may aid in the prompt
disposition of the action."103 To clarify, Fuji attached a verification and certification against
forum shopping, but Arlene questions Corazon’s authority to sign. Arlene argues that the
secretary’s certificate empowered Shuji Yano to file a petition for certiorari before the
Court of Appeals, and not a petition for review before this court, and that since Shuji
Yano’s authority was delegated to him, he could not further delegate such power.
Moreover, Corazon was representing Shuji Yano in his personal capacity, and not in his
capacity as representative of Fuji.
A review of the board resolution quoted in the secretary’s certificate shows that Fuji shall
"file a Petition for Certiorari with the Court of Appeals"104 and "participate in any other
subsequent proceeding that may necessarily arise therefrom, including but not limited to
the filing of appeals in the appropriate venue,"105 and that Shuji Yano and Jin Eto are
authorized to represent Fuji "in any other proceeding that may necessarily arise thereform
[sic]."106 As pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to "act in the
Corporation’s name, place and stead to determine, propose, agree, decide, do, and
perform anyand all of the following: . . . 5. Such other matters as may aid in the prompt
disposition of the action."107
Considering that the subsequent proceeding that may arise from the petition for certiorari
with the Court of Appeals is the filing of a petition for review with this court, Fuji
substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892
of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from
doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent. All acts of the
substitute appointed against the prohibition of the principal shall be void.
The secretary’s certificate does not state that Shuji Yano is prohibited from appointing a
substitute. In fact, heis empowered to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a
corporation can sign the verification and certification against forum shopping without a
board resolution. In Cagayan Valley Drug Corporation v. CIR,108 it was held that:
In sum, we have held that the following officials or employees of the company can sign the
verification and certification without need of a board resolution: (1) the Chairperson of the
Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting
General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases109 do not provide a complete listing of authorized signatories to the
verification and certification required by the rules, the determination of the sufficiency of
the authority was done on a case to case basis. The rationale applied in the foregoing cases
is to justify the authority of corporate officers or representatives of the corporation to sign
the verification or certificate against forum shopping, being ‘in a position to verify the
truthfulness and correctness of the allegations in the petition.’110
Corazon’s affidavit111 states that she is the "office manager and resident interpreter of the
Manila Bureau of Fuji Television Network, Inc."112 and that she has "held the position for
the last twenty-three years."113
As the office manager for 23 years,Corazon can be considered as having knowledge of all
matters in Fuji’s Manila Bureau Office and is in a position to verify "the truthfulness and the
correctness of the allegations in the Petition." 114
Thus, Fuji substantially complied with the requirements of verification and certification
against forum shopping.
Before resolving the substantive issues in this case, this court will discuss the procedural
parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of the
National Labor Relations Commission. It merely states that "[t]he decision of the
Commission shall be final and executory after ten (10) calendar days from receipt thereof
by the parties." Being final, it is no longer appealable. However, the finality of the National
Labor Relations Commission’s decisions does not mean that there is no more recourse for
the parties.
In St. Martin Funeral Home v. National Labor Relations Commission, 116 this court cited
several cases117 and rejected the notion that this court had no jurisdiction to review
decisions of the National Labor Relations Commission. It stated that this court had the
power to review the acts of the National Labor Relations Commission to see if it kept within
its jurisdiction in deciding cases and alsoas a form of check and balance.118 This court then
clarified that judicial review of National Labor Relations Commission decisions shall be by
way of a petition for certiorari under Rule 65. Citing the doctrine of hierarchy of courts, it
further ruled that such petitions shall be filed before the Court of Appeals. From the Court
of Appeals, an aggrieved party may file a petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is limited to
grave abuse of discretion. As an original action, it cannot be considered as a continuation
of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal
where the issue is limited to questions of law. In labor cases, a Rule 45 petition is limited
toreviewing whether the Court of Appeals correctly determined the presence or absence
of grave abuse of discretion and deciding other jurisdictional errors of the National Labor
Relations Commission.119
In Odango v. National Labor Relations Commission,120 this court explained that a petition
for certiorari is an extraordinary remedy that is "available only and restrictively in truly
exceptional cases"121 and that its sole office "is the correction of errors of jurisdiction
including commission of grave abuse of discretion amounting to lack or excess of
jurisdiction."122 A petition for certiorari does not include a review of findings of fact since
the findings of the National Labor Relations Commission are accorded finality.123 In cases
where the aggrieved party assails the National Labor Relations Commission’s findings, he or
she must be able to show that the Commission "acted capriciously and whimsically or in
total disregard of evidence material to the controversy."124
When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by
way of a petition for review under Rule 45, only questions of law may be decided upon. As
held in Meralco Industrial v. National Labor Relations Commission:125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court ina
petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual findings complained of are
completely devoid of support from the evidence on record, or the assailed judgment is
based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial
agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the
parties and binding on this Court.126
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the
parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we
discussed the particular parameters of a Rule 45 appeal from the CA’s Rule 65 decision on a
labor case, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast
with the review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule
45 limits us to the review of questions of law raised against the assailed CA decision. In
ruling for legal correctness, we have to view the CA decision in the same context that the
petition for certiorari it ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, not on the basis of whether the
NLRC decision on the merits of the case was correct. In other words, we have to be keenly
aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.129 (Emphasis in the original)
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v. Aicaraz 130 discussed
that in petitions for review under Rule 45, "the Court simply determines whether the legal
correctness of the CA’s finding that the NLRC ruling . . . had basis in fact and in Iaw."131 In
this kind of petition, the proper question to be raised is, "Did the CA correctly determine
whether the NLRC committed grave abuse of discretion in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then
no grave abuse of discretion exists and the CA should so declare and, accordingly, dismiss
the petition. If grave abuse of discretion exists, then the CA must grant the petition and
nullify the NLRC ruling, entering at the same time the ruling that isjustified under the
evidence and the governing law, rules and jurisprudence. In our Rule 45 review, this Court
must denythe petition if it finds that the CA correctly acted.133 (Emphasis in the original)
These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services to Fuji. However, Fuji alleges
that Arlene was an independent contractor, while Arlene alleges that she was a regular
employee. To resolve this issue, we ascertain whether an employer-employee relationship
existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of an employer-
employee relationship. Under the four-fold test, the "control test" is the most important.134
As to how the elements in the four-fold test are proven, this court has discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted. Identification
cards, cash vouchers, social security registration, appointment letters or employment
contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee
status.135
If the facts of this case vis-à-vis the four-fold test show that an employer-employee
relationship existed, we then determine the status of Arlene’s employment, i.e., whether
she was a regular employee. Relative to this, we shall analyze Arlene’s fixed-term contract
and determine whether it supports her argument that she was a regular employee, or the
argument of Fuji that she was an independent contractor. We shall scrutinize whether the
nature of Arlene’s work was necessary and desirable to Fuji’s business or whether Fuji only
needed the output of her work. If the circumstances show that Arlene’s work was
necessary and desirable to Fuji, then she is presumed to be a regular employee. The
burden of proving that she was an independent contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial evidence.136 "Substantial
evidence" has been defined as "such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion."137
If Arlene was a regular employee, we then determine whether she was illegally dismissed.
In complaints for illegal dismissal, the burden of proof is on the employee to prove the fact
of dismissal.138 Once the employee establishes the fact of dismissal, supported by
substantial evidence, the burden of proof shifts tothe employer to show that there was a
just or authorized cause for the dismissal and that due process was observed.139
IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission’s finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and relying
on the following facts: (1) she was hired because of her skills; (2) her salary was
US$1,900.00, which is higher than the normal rate; (3) she had the power to bargain with
her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forcedto sign the non-renewal agreement,
considering that she sent an email with another version of the non-renewal agreement.140
Further, she is not entitled tomoral damages and attorney’s fees because she acted in bad
faith when she filed a labor complaint against Fuji after receiving US$18,050.00
representing her salary and other benefits.141 Arlene argues that she was a regular
employee because Fuji had control and supervision over her work. The news events that
she covered were all based on the instructions of Fuji.142 She maintains that the successive
renewal of her employment contracts for four (4) years indicates that her work was
necessary and desirable.143 In addition, Fuji’s payment of separation pay equivalent to one
(1) month’s pay per year of service indicates that she was a regular employee. 144 To further
support her argument that she was not an independent contractor, she states that Fuji
owns the laptop computer and mini-camera that she used for work.145 Arlene also argues
that Sonza is not applicable because she was a plain reporter for Fuji, unlike Jay Sonza who
was a news anchor, talk show host, and who enjoyed a celebrity status.146 On her illness,
Arlene points outthat it was not a ground for her dismissal because her attending physician
certified that she was fit to work.147
Arlene admits that she signed the non-renewal agreement with quitclaim, not because she
agreed to itsterms, but because she was not in a position to reject the non-renewal
agreement. Further, she badly needed the salary withheld for her sustenance and
medication.148 She posits that her acceptance of separation pay does not bar filing of a
complaint for illegal dismissal.149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment.The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph; Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which heis employed and his employment shall continue while
such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It further
classifies regular employees into two kinds: (1) those "engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the employer"; and (2)
casual employees who have "rendered at least one year of service, whether such service is
continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was
recognized in Brent School, Inc. v. Zamora150 where this court discussed that:
Logically, the decisive determinant in the term employment should not be the activities
that the employee is called upon to perform, but the day certain agreed upon by the
parties for the commencement and termination of their employment relationship, a day
certainbeing understood to be "that which must necessarily come, although it may not be
known when."151 (Emphasis in the original)
This court further discussed that there are employment contracts where "a fixed term is an
essential and natural appurtenance"152 such as overseas employment contracts and
officers in educational institutions.153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term contracts laid down
in Brentin the following manner:
Cognizant of the possibility of abuse in the utilization of fixed term employment contracts,
we emphasized in Brentthat where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down as contrary to public policy or morals. We thus laid down indications
or criteria under which "term employment" cannot be said to be in circumvention of the
law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only in
a few special cases wherein the employer and employee are on more or less in equal
footing in entering into the contract. The reason for this is evident: whena prospective
employee, on account of special skills or market forces, is in a position to make demands
upon the prospective employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties’ freedom of contract are thus required
for the protection of the employee.155 (Citations omitted)
For as long as the guidelines laid down in Brentare satisfied, this court will recognize the
validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm employment of
petitioners because from the time they were hired, they were informed that their
engagement was for a specific period. This court stated that:
[s]imply put, petitioners were notregular employees. While their employment as mixers,
packers and machine operators was necessary and desirable in the usual business
ofrespondent company, they were employed temporarily only, during periods when there
was heightened demand for production. Consequently, there could have been no illegal
dismissal when their services were terminated on expiration of their contracts. There was
even no need for notice of termination because they knew exactly when their contracts
would end. Contracts of employment for a fixed period terminate on their own at the end
of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the
practice of some scrupulous employers who try to circumvent the law protecting workers
from the capricious termination of employment.157 (Citation omitted)
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of
employment. Caparoso and Quindipan were hired as delivery men for three (3) months. At
the end of the third month, they were hired on a monthly basis. In total, they were hired
for five (5) months. They filed a complaint for illegal dismissal.159 This court ruled that there
was no evidence indicating that they were pressured into signing the fixed-term contracts.
There was likewise no proof that their employer was engaged in hiring workers for five (5)
months onlyto prevent regularization. In the absence of these facts, the fixed-term
contracts were upheld as valid.160 On the other hand, an independent contractor is defined
as:
. . . one who carries on a distinct and independent business and undertakes to perform the
job, work, or service on its own account and under one’s own responsibility according to
one’s own manner and method, free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof.161
In view of the "distinct and independent business" of independent contractors, no
employer-employee relationship exists between independent contractors and their
principals. Independent contractors are recognized under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the former’s work, the employees of the contractor
and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting-out of labor to protect the rights of workers established under this
Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does
not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer.
In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the
latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and
Employment, a contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor
the performance or completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or service is to be performed
or completed within oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job
contracting and subcontracting arrangements among the principal, contractor, and
employees of the contractor. There is no employer-employee relationship between the
contractor and principal who engages the contractor’s services, but there is an employer-
employee relationship between the contractor and workers hired to accomplish the work
for the principal.162
Jurisprudence has recognized another kind of independent contractor: individuals with
unique skills and talents that set them apart from ordinary employees. There is no trilateral
relationship in this case because the independent contractor himself or herself performs
the work for the principal. In other words, the relationship is bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine
Daily Inquirer. This court ruled that she was an independent contractor because of her
"talent, skill, experience, and her unique viewpoint as a feminist advocate." 164 In addition,
the Philippine Daily Inquirer did not have the power of control over Orozco, and she
worked at her own pleasure.165
Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This court
ruled that "petitioners performed their functions as masiadorand sentenciador free from
the direction and control of respondents"169 and that the masiador and sentenciador
"relied mainly on their ‘expertise that is characteristic of the cockfight gambling.’" 170
Hence, no employer-employee relationship existed.
Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court
ruled that "a referee is an independent contractor, whose special skills and independent
judgment are required specifically for such position and cannot possibly be controlled by
the hiring party."172
In these cases, the workers were found to be independent contractors because of their
unique skills and talents and the lack of control over the means and methods in the
performance of their work.
In other words, there are different kinds of independent contractors: those engaged in
legitimate job contracting and those who have unique skills and talents that set them apart
from ordinary employees.
Since no employer-employee relationship exists between independent contractors and
their principals, their contracts are governed by the Civil Code provisions on contracts and
other applicable laws.173
A contract is defined as "a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service." 174 Parties
are free to stipulate on terms and conditions in contracts as long as these "are not contrary
to law, morals, good customs, public order, or public policy."175 This presupposes that the
parties to a contract are on equal footing. Theycan bargain on terms and conditions until
they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher level of
regulation because they are impressed with public interest. Article XIII, Section 3 of the
1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for
all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the
right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil
Code states:
ART. 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
In contracts of employment, the employer and the employee are not on equal footing.
Thus, it is subject to regulatory review by the labor tribunals and courts of law. The law
serves to equalize the unequal. The labor force is a special class that is constitutionally
protected because of the inequality between capital and labor.176 This presupposes that
the labor force is weak. However, the level of protection to labor should vary from case to
case; otherwise, the state might appear to be too paternalistic in affording protection to
labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in Brent applies in cases where
it appears that the employer and employee are on equal footing.177 This recognizes the fact
that not all workers are weak. To reiterate the discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective employee, on account of special skills or
market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations
on the parties’ freedom of contract are thus required for the protection of the
employee.178
The level of protection to labor mustbe determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said to be on
equal footing witha grocery bagger with a high school diploma. Employees who qualify for
jobs requiring special qualifications such as "[having] a Master’s degree" or "[having]
passed the licensure exam" are different from employees who qualify for jobs that require
"[being a] high school graduate; withpleasing personality." In these situations, it is clear
that those with special qualifications can bargain with the employer on equal footing. Thus,
the level of protection afforded to these employees should be different.
Fuji’s argument that Arlene was an independent contractor under a fixed-term contract is
contradictory. Employees under fixed-term contracts cannot be independent contractors
because in fixed-term contracts, an employer-employee relationship exists. The test in this
kind of contract is not the necessity and desirability of the employee’s activities, "but the
day certain agreed upon by the parties for the commencement and termination of the
employment relationship."179 For regular employees, the necessity and desirability of their
work in the usual course of the employer’s business are the determining factors. On the
other hand, independent contractors do not have employer-employee relationships with
their principals. Hence, before the status of employment can be determined, the existence
of an employer-employee relationship must be established.
The four-fold test180 can be used in determining whether an employeremployee
relationship exists. The elements of the four-fold test are the following: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power of control, which is the most important element. 181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor
Relations Commission:182
The power to control refers to the existence of the power and not necessarily to the actual
exercise thereof, nor is it essential for the employer to actually supervise the performance
of duties of the employee. It is enough that the employer has the right to wield that
power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of "power of control" and
stated the following:
Logically, the line should be drawn between rules that merely serve as guidelines towards
the achievement of the mutually desired result without dictating the means or methods to
be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the second, which address both
the result and the means used to achieve it. . . .184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the "power of control"
was defined as "[the] right to control not only the end to be achieved but also the means to
be used in reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of
Appeals187 in determining whether Arlene was an independent contractor or a regular
employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases
involved newscasters and anchors. However, Sonza was held to be an independent
contractor, while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status not
possessed by ordinary employees."188 His work was for radio and television programs.189
On the other hand, Dumpit-Murillo was hired by ABC as a newscaster and co-anchor.190
Sonza’s talent fee amounted to ₱317,000.00 per month, which this court found to be a
substantial amount that indicatedhe was an independent contractor rather than a regular
employee.191 Meanwhile, Dumpit-Murillo’s monthly salary was ₱28,000.00, a very low
amount compared to what Sonza received.192
Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of
contract. There was no indication that he could be terminated based on just or authorized
causes under the Labor Code. In addition, ABS-CBN continued to pay his talent fee under
their agreement, even though his programs were no longer broadcasted. 193 Dumpit-Murillo
was found to have beenillegally dismissed by her employer when they did not renew her
contract on her fourth year with ABC.194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how
he appeared on television, or how he sounded on radio.195 All that Sonza needed was his
talent.196 Further, "ABS-CBN could not terminate or discipline SONZA even if the means and
methods of performance of his work . . . did not meet ABS-CBN’s approval."197 In Dumpit-
Murillo, the duties and responsibilities enumerated in her contract was a clear indication
that ABC had control over her work.198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and
affirmed the ruling of the National Labor Relations Commission finding that Arlene was a
regular employee. Arlene was hired by Fuji as a news producer, but there was no showing
that she was hired because of unique skills that would distinguish her from ordinary
employees. Neither was there any showing that she had a celebrity status. Her monthly
salary amounting to US$1,900.00 appears tobe a substantial sum, especially if compared to
her salary whenshe was still connected with GMA.199 Indeed, wages may indicate whether
oneis an independent contractor. Wages may also indicate that an employee is able to
bargain with the employer for better pay. However, wages should not be the conclusive
factor in determining whether one is an employee or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional
employment contract.200 Her contract also indicated that Fuji had control over her work
because she was required to work for eight (8) hours from Monday to Friday, although on
flexible time.201 Sonza was not required to work for eight (8) hours, while Dumpit-Murillo
had to be in ABC to do both on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to report.202
Even the mode of transportation in carrying out her functions was controlled by Fuji.
Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of
work, the train, bus, or public transport shall be used for the trip. If the Employee uses the
private car during the work and there is an accident the Employer shall not be responsible
for the damage, which may be caused to the Employee.203
Thus, the Court of Appeals did not err when it upheld the findings of the National Labor
Relations Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and
Arlene, the next questions for resolution are the following: Did the Court of Appeals
correctly affirm the National Labor Relations Commission that Arlene had become a regular
employee? Was the nature of Arlene’s work necessary and desirable for Fuji’s usual course
of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable connection
between the employee’s activities and the usual business of the employer. Article 280
provides that the nature of work must be "necessary or desirable in the usual business or
trade of the employer" as the test for determining regular employment. As stated in ABS-
CBN Broadcasting Corporation v. Nazareno:204
In determining whether an employment should be considered regular or non-regular, the
applicable test is the reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the employer. The standard,
supplied by the law itself, is whether the work undertaken is necessary or desirable in the
usual business or trade of the employer, a fact that can be assessed by looking into the
nature of the services rendered and its relation to the general scheme under which the
business or trade is pursued in the usual course. It is distinguished from a specific
undertaking that is divorced from the normal activities required incarrying on the particular
business or trade.205
However, there may be a situation where an employee’s work is necessary but is not
always desirable inthe usual course of business of the employer. In this situation, there is
no regular employment.
In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de Guzman
was hired to repair furnaces at San Miguel Corporation’s Manila glass plant. He had a
separate contract for every furnace that he repaired. He filed a complaint for illegal
dismissal three (3) years after the end of his last contract.207 In ruling that de Guzman did
not attain the status of a regular employee, this court explained:
Note that the plant where private respondent was employed for only seven months is
engaged in the manufacture of glass, an integral component of the packaging and
manufacturing business of petitioner. The process of manufacturing glass requires a
furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said activity is not regularly
performed. Said furnaces are to be repaired or overhauled only in case of need and after
being used continuously for a varying period of five (5) to ten (10) years. In 1990, one of
the furnaces of petitioner required repair and upgrading. This was an undertaking distinct
and separate from petitioner's business of manufacturing glass. For this purpose, petitioner
must hire workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the regular
business of the corporation. For petitioner is not engaged in the business of repairing
furnaces. Although the activity was necessary to enable petitioner to continue
manufacturing glass, the necessity therefor arose only when a particular furnace reached
the end of its life or operating cycle. Or, as in the second undertaking, when a particular
furnace required an emergency repair. In other words, the undertakings where private
respondent was hired primarily as helper/bricklayer have specified goals and purposes
which are fulfilled once the designated work was completed. Moreover, such undertakings
were also identifiably separate and distinct from the usual, ordinary or regular business
operations of petitioner, which is glass manufacturing. These undertakings, the duration
and scope of which had been determined and made known to private respondent at the
time of his employment, clearly indicated the nature of his employment as a project
employee.208
Fuji is engaged in the business of broadcasting,209 including news programming.210 It is
based in Japan211 and has overseas offices to cover international news.212
Based on the record, Fuji’s Manila Bureau Office is a small unit213 and has a few
employees.214 As such, Arlene had to do all activities related to news gathering. Although
Fuji insists that Arlene was a stringer, it alleges that her designation was "News
Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the
field planning and gathering information. . . ."216 Arlene’s tasks included "[m]onitoring and
[g]etting [n]ews [s]tories, [r]eporting interviewing subjects in front of a video camera,"217
"the timely submission of news and current events reports pertaining to the Philippines[,]
and traveling [sic] to [Fuji’s] regional office in Thailand."218 She also had to report for work
in Fuji’s office in Manila from Mondays to Fridays, eight (8) hours per day.219 She had no
equipment and had to use the facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations Commission that
the successive renewals of Arlene’s contract indicated the necessity and desirability of her
work in the usual course of Fuji’s business. Because of this, Arlene had become a regular
employee with the right to security of tenure.220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau.
She was hired for the primary purpose of news gathering and reporting to the television
network’s headquarters. Espiritu was not contracted on account of any peculiar ability or
special talent and skill that she may possess which the network desires to make use of.
Parenthetically, ifit were true that Espiritu is an independent contractor, as claimed by Fuji,
the factthat everything that she uses to perform her job is owned by the company
including the laptop computer and mini camera discounts the idea of job contracting. 221
Moreover, the Court of Appeals explained that Fuji’s argument that no employer-employee
relationship existed in view of the fixed-term contract does not persuade because fixed-
term contracts of employment are strictly construed.222 Further, the pieces of equipment
Arlene used were all owned by Fuji, showing that she was a regular employee and not an
independent contractor.223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts
that were successively renewed for four (4) years.224 This court held that "[t]his repeated
engagement under contract of hire is indicative of the necessity and desirability of the
petitioner’s work in private respondent ABC’s business." 225
With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of
Appeals cited Philips Semiconductors, Inc. v. Fadriquela226 and held that where an
employee’s contract "had been continuously extended or renewed to the same position,
with the same duties and remained in the employ without any interruption," 227 then such
employee is a regular employee. The continuous renewal is a scheme to prevent
regularization. On this basis, the Court of Appeals ruled in favor of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.:228
The employment status of a person is defined and prescribed by law and not by what the
parties say it should be. Equally important to consider is that a contract of employment is
impressed with public interest such that labor contracts must yield to the common good.
Thus, provisions of applicable statutes are deemed written into the contract, and the
parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.229 (Citations omitted)
Arlene’s contract indicating a fixed term did not automatically mean that she could never
be a regular employee. This is precisely what Article 280 seeks to avoid. The ruling in Brent
remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law does
not preclude the possibility that a regular employee may opt to have a fixed-term contract
for valid reasons. This was recognized in Brent: For as long as it was the employee who
requested, or bargained, that the contract have a "definite date of termination," or that
the fixed-term contract be freely entered into by the employer and the employee, then the
validity of the fixed-term contract will be upheld.230
V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed,
in view of the non-renewal contract voluntarily executed by the parties. Fuji also argues
that Arlene’s contract merely expired; hence, she was not illegally dismissed. 231
Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji
withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and that she
voluntarily agreed not to renew the same. Even a cursory perusal of the subject Non-
Renewal Contract readily shows that the same was signed by Espiritu under protest. What
is apparent is that the Non-Renewal Contract was crafted merely as a subterfuge to secure
Fuji’s position that it was Espiritu’s choice not to renew her contract. 232
As a regular employee, Arlene was entitled to security of tenure and could be dismissed
only for just or authorized causes and after the observance of due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987
Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and states the
following:
Art. 279. Security of tenure.In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause of when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there are
just orauthorized causes and only after compliance with procedural and substantive due
process is conducted.
Even probationary employees are entitled to the right to security of tenure. This was
explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.: 233
Within the limited legal six-month probationary period, probationary employees are still
entitled to security of tenure. It is expressly provided in the afore-quoted Article 281 that a
probationary employee may be terminated only on two grounds: (a) for just cause, or (b)
when he fails to qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his engagement.234 (Citation
omitted)
The expiration of Arlene’s contract does not negate the finding of illegal dismissal by Fuji.
The manner by which Fuji informed Arlene that her contract would no longer be renewed
is tantamount to constructive dismissal. To make matters worse, Arlene was asked to sign a
letter of resignation prepared by Fuji.235 The existence of a fixed-term contract should not
mean that there can be no illegal dismissal. Due process must still be observed in the pre-
termination of fixed-term contracts of employment.
In addition, the Court of Appeals and the National Labor Relations Commission found that
Arlene was dismissed because of her health condition. In the non-renewal agreement
executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from
continuing to effectively perform her functions under the said Contract such as the timely
submission of news and current events reports pertaining to the Philippines and travelling
[sic] to the FIRST PARTY’s regional office in Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of his
co-employees: Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (1/2) month salary for every year of service, whichever is
greater, a fraction of at least six (6) months being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a disease and
his continued employment is prohibited by law or prejudicial to his healthor to the health
of his coemployees, the employer shall not terminate his employment unless there is a
certification by a competent public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of six (6) months even with proper
medical treatment. If the disease or ailment can be cured within the period, the employer
shall not terminate the employee but shall ask the employee to take a leave. The employer
shall reinstate such employee to his former position immediately upon the restoration of
his normal health.
For dismissal under Article 284 to bevalid, two requirements must be complied with: (1)
the employee’s disease cannot be cured within six (6) months and his "continued
employment is prohibited by law or prejudicial to his health as well as to the health of his
co-employees"; and (2) certification issued by a competent public health authority that
even with proper medical treatment, the disease cannot be cured within six (6) months.237
The burden of proving compliance with these requisites is on the employer.238
Noncompliance leads to the conclusion that the dismissal was illegal.239
There is no evidence showing that Arlene was accorded due process. After informing her
employer of her lung cancer, she was not given the chance to present medical certificates.
Fuji immediately concluded that Arlene could no longer perform her duties because of
chemotherapy. It did not ask her how her condition would affect her work. Neither did it
suggest for her to take a leave, even though she was entitled to sick leaves. Worse, it did
not present any certificate from a competent public health authority. What Fuji did was to
inform her thather contract would no longer be renewed, and when she did not agree, her
salary was withheld. Thus, the Court of Appeals correctly upheld the finding of the National
Labor Relations Commission that for failure of Fuji to comply with due process, Arlene was
illegally dismissed.240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees
The National Labor Relations Commission awarded separation pay in lieu of reinstatement,
on the ground that the filing of the complaint for illegal dismissal may have seriously
strained relations between the parties. Backwages were also awarded, to be computed
from date of dismissal until the finality of the National Labor Relations Commission’s
decision. However, only backwages were included in the dispositive portion because the
National Labor Relations Commission recognized that Arlene had received separation pay
in the amount of US$7,600.00. The Court of Appeals affirmed the National Labor Relations
Commission’s decision but modified it by awarding moral and exemplary damages and
attorney’s fees, and all other benefits Arlene was entitled to under her contract with Fuji.
The Court of Appeals also ordered reinstatement, reasoning that the grounds when
separation pay was awarded in lieu of reinstatement were not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
(Emphasis supplied)
The Court of Appeals’ modification of the National Labor Relations Commission’s decision
was proper because the law itself provides that illegally dismissed employees are entitled
to reinstatement, backwages including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of
separation pay in lieu of reinstatement, reasoning "that the filing of the instant suit may
have seriously abraded the relationship of the parties so as to render reinstatement
impractical."242 The Court of Appeals reversed this and ordered reinstatement on the
ground that separation pay in lieu of reinstatement is allowed only in several instances
such as (1) when the employer has ceased operations; (2) when the employee’s position is
no longer available; (3) strained relations; and (4) a substantial period has lapsed from date
of filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to
reinstatement as a matter of right. . . .
To protect labor’s security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed employee of
his right to reinstatement. Every labor dispute almost always results in "strained relations"
and the phrase cannot be given an overarching interpretation, otherwise, an unjustly
dismissed employee can never be reinstated.245 (Citations omitted)
The Court of Appeals reasoned that strained relations are a question of fact that must be
supported by evidence.246 No evidence was presented by Fuji to prove that reinstatement
was no longer feasible. Fuji did not allege that it ceased operations or that Arlene’s position
was no longer available. Nothing in the records shows that Arlene’s reinstatement would
cause an atmosphere of antagonism in the workplace. Arlene filed her complaint in 2009.
Five (5) years are not yet a substantial period247 to bar reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled to the award of damages
and attorney’s fees because the non-renewal agreement contained a quitclaim, which
Arlene signed. Quitclaims in labor cases do not bar illegally dismissed employees from filing
labor complaints and money claim. As explained by Arlene, she signed the non-renewal
agreement out of necessity. In Land and Housing Development Corporation v. Esquillo,248
this court explained: We have heretofore explained that the reason why quitclaims are
commonly frowned upon as contrary to public policy, and why they are held to be
ineffective to bar claims for the full measure of the workers’ legal rights, is the fact that the
employer and the employee obviously do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get holdof money. Because, out of
a job, he had to face the harsh necessities of life. He thus found himself in no position to
resist money proffered. His, then, is a case of adherence, not of choice.249
With regard to the Court of Appeals’ award of moral and exemplary damages and
attorney’s fees, this court has recognized in several cases that moral damages are awarded
"when the dismissal is attended by bad faith or fraud or constitutes an act oppressive to
labor, or is done in a manner contrary to good morals, good customs or public policy."250
On the other hand, exemplary damages may be awarded when the dismissal was effected
"in a wanton, oppressive or malevolent manner."251
The Court of Appeals and National Labor Relations Commission found that after Arlene had
informed Fuji of her cancer, she was informed that there would be problems in renewing
her contract on account of her condition. This information caused Arlene mental anguish,
serious anxiety, and wounded feelings that can be gleaned from the tenor of her email
dated March 11, 2009. A portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak,
you suddenly came to deliver to me the NEWS that you will no longer renew my
contract.1awp++i1 I knew this will come but I never thought that you will be so ‘heartless’
and insensitive to deliver that news just a month after I informed you that I am sick. I was
asking for patience and understanding and your response was not to RENEW my
contract.252
Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an
oppressive approach withher salary and other benefits being withheld until May 5, 2009,
when she had no other choice but to sign the non-renewal contract. Thus, there was legal
basis for the Court of Appeals to modify the National Labor Relations Commission’s
decision.
However, Arlene receivedher salary for May 2009.253 Considering that the date of her
illegal dismissal was May 5, 2009,254 this amount may be subtracted from the total
monetary award. With regard to the award of attorney’s fees, Article 111 of the Labor
Code states that "[i]n cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages recovered."
Likewise, this court has recognized that "in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney’s fees is legallyand morally justifiable." 255 Due to her illegal dismissal,
Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the
rate of 12% per annum.256 In view of this court’s ruling in Nacar v. Gallery Frames,257 the
legal interest shall be reducd to a rate of 6% per annum from July 1, 2013 until full
satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25,
2012 is AFFIRMED with the modification that backwages shall be computed from June
2009. Legal interest shall be computed at the rate of 6% per annum of the total monetary
award from date of finality of this decision until full satisfaction.
SO ORDERED.
G.R. No. 176419 November 27, 2013 1) Manning of Technical Operations Center:

GMA NETWORK, INC., Petitioner, (a) Responsible for the airing of local commercials; and
vs.
CARLOS P. PABRIGA, GEOFFREY F. ARIAS, KIRBY N. CAMPO, ARNOLD L. LAGAHIT, and (b) Logging/monitoring of national commercials (satellite)
ARMANDO A. CATUBIG, Respondents.
2) Acting as Transmitter/VTR men:
DECISION
(a) Prepare tapes for local airing;
LEONARDO-DE CASTRO, J.:
(b) Actual airing of commercials;
This is a Petition for Review on Certiorari filed by petitioner GMA Network Inc. assailing the
Decision1 of the Court of Appeals dated September 8, 2006 and the subsequent (c) Plugging of station promo;
Resolution2 dated January 22 2007 denying reconsideration in CA-G.R. SP No. 73652.
(d) Logging of transmitter reading; and
The Court of Appeals summarized the facts of the case as follows:
(e) In case of power failure, start up generator set to resume program;
On July 19 1999 due to the miserable working conditions private respondents were forced
to file a complaint against petitioner before the National Labor Relations Commission
3) Acting as Maintenance staff;
Regional Arbitration Branch No. VII Cebu City assailing their respective employment
circumstances as follows:
(a) Checking of equipment;

NAME DATE HIRED POSITION (b) Warming up of generator;

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

Carlos Pabriga 2 May 1997 Television Technicians

4) Acting as Cameramen
Geoffrey Arias 2 May 1997 Television Technicians
On 4 August 1999, petitioner received a notice of hearing of the complaint. The following
day, petitioner’s Engineering Manager, Roy Villacastin, confronted the private respondents
Kirby Campo 1 Dec. 1993 Television Technicians
about the said complaint.

Arnold Laganit 11 Feb. 1996 Television Technicians On 9 August 1999, private respondents were summoned to the office of petitioner’s Area
Manager, Mrs. Susan Aliño, and they were made to explain why they filed the complaint.
The next day, private respondents were barred from entering and reporting for work
Armand Catubig 2 March 1997 Television Technicians without any notice stating the reasons therefor.

On 13 August 1999, private respondents, through their counsel, wrote a letter to Mrs.
Private respondents were engaged by petitioner to perform the following activities, to wit: Susan Aliño requesting that they be recalled back to work.
On 23 August 1999, a reply letter from Mr. Bienvenido Bustria, petitioner’s head of
Personnel and Labor Relations Division, admitted the non-payment of benefits but did not
mention the request of private respondents to be allowed to return to work.
On 15 September 1999, private respondents sent another letter to Mr. Bustria reiterating
their request to work but the same was totally ignored. On 8 October 1999, private
respondents filed an amended complaint raising the following additional issues: 1) Unfair
Labor Practice; 2) Illegal dismissal; and 3) Damages and Attorney’s fees.
On 23 September 1999, a mandatory conference was set to amicably settle the dispute
between the parties, however, the same proved to be futile. As a result, both of them were
directed to file their respective position papers.
On 10 November 1999, private respondents filed their position paper and on 2 March
2000, they received a copy of petitioner’s position paper. The following day, the Labor
Arbiter issued an order considering the case submitted for decision.3
In his Decision dated August 24, 2000, the Labor Arbiter dismissed the complaint of
respondents for illegal dismissal and unfair labor practice, but held petitioner liable for
13th month pay. The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered dismissing
the complaints for illegal dismissal and unfair labor practice.
Respondents are, however, directed to pay the following complainants their proportionate
13th month pay, to wit:
1. Kirby Campo P 7,716.04
2. Arnold Lagahit 7,925.98
3. Armand Catubig 4,233.68
4. Carlos Pabriga 4,388.19
5. Geoffrey Arias 4,562.01
₱28,826.14
10% Attorney’s fees 2,882.61
GRAND TOTAL ₱31,708.75
All other claims are, hereby, dismissed for failure to substantiate the same.4
Respondents appealed to the National Labor Relations Commission (NLRC). The NLRC
reversed the Decision of the Labor Arbiter, and held thus:
WHEREFORE, we make the following findings:
a) All complainants are regular employees with respect to the particular activity to which
they were assigned, until it ceased to exist. As such, they are entitled to payment of
separation pay computed at one (1) month salary for every year of service;
b) They are not entitled to overtime pay and holiday pay; and
c) They are entitled to 13th month pay, night shift differential and service incentive leave
pay.
For purposes of accurate computation, the entire records are REMANDED to the Regional
Arbitration Branch of origin which is hereby directed to require from respondent the
production of additional documents where necessary.
Respondent is also assessed the attorney’s fees of ten percent (10%) of all the above
awards.5
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari. On
September 8, 2006, the appellate court rendered its Decision denying the petition for lack
of merit.
Petitioner filed the present Petition for Review on Certiorari, based on the following
grounds:
 I.
THE COURT OF APPEALS GRAVELY ERRED FINDING RESPONDENTS ARE REGULAR
EMPLOYEES OF THE PETITIONER AND ARE NOT PROJECT EMPLOYEES.
II.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING SEPARATION PAY TO
RESPONDENTS ABSENT A FINDING THAT RESPONDENTS WERE ILLEGALLY
DISMISSED.
III.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING NIGHT SHIFT
DIFFERENTIAL PAY CONSIDERING THE ABSENCE OF EVIDENCE WHICH WOULD
ENTITLE THEM TO SUCH AN AWARD.
IV.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING ATTORNEY’S FEES TO
RESPONDENTS.6
The parties having extensively elaborated on their positions in their respective
memoranda, we proceed to dispose of the issues raised.
Five Classifications of Employment
At the outset, we should note that the nature of the employment is determined by law,
regardless of any contract expressing otherwise. The supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is to bring to life the
policy enshrined in the Constitution to afford full protection to labor. Labor contracts,
being imbued with public interest, are placed on a higher plane than ordinary contracts
and are subject to the police power of the State.7
Respondents claim that they are regular employees of petitioner GMA Network, Inc. The
latter, on the other hand, interchangeably characterize respondents’ employment as
project and fixed period/fixed term employment. There is thus the need to clarify the
foregoing terms.
The terms regular employment and project employment are taken from Article 280 of the
Labor Code, which also speaks of casual and seasonal employment:
ARTICLE 280. Regular and casual employment. – The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while
such activity actually exist.
A fifth classification, that of a fixed term employment, is not expressly mentioned in the
Labor Code. Nevertheless, this Court ruled in Brent School, Inc. v. Zamora,8 that such a
contract, which specifies that employment will last only for a definite period, is not per se
illegal or against public policy.
Whether respondents are regular or project employees
Pursuant to the above-quoted Article 280 of the Labor Code, employees performing
activities which are usually necessary or desirable in the employer’s usual business or trade
can either be regular, project or seasonal employees, while, as a general rule, those
performing activities not usually necessary or desirable in the employer’s usual business or
trade are casual employees. The reason for this distinction may not be readily
comprehensible to those who have not carefully studied these provisions: only employers
who constantly need the specified tasks to be performed can be justifiably charged to
uphold the constitutionally protected security of tenure of the corresponding workers. The
consequence of the distinction is found in Article 279 of the Labor Code, which provides:
ARTICLE 279. Security of tenure. – In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
On the other hand, the activities of project employees may or may not be usually necessary
or desirable in the usual business or trade of the employer, as we have discussed in ALU-
TUCP v. National Labor Relations Commission,9 and recently reiterated in Leyte Geothermal
Power Progressive Employees Union-ALU-TUCP v. Philippine National Oil Company-Energy
Development Corporation.10 In said cases, we clarified the term "project" in the test for
determining whether an employee is a regular or project employee:
It is evidently important to become clear about the meaning and scope of the term
"project" in the present context. The "project" for the carrying out of which "project
employees" are hired would ordinarily have some relationship to the usual business of the
employer. Exceptionally, the "project" undertaking might not have an ordinary or normal
relationship to the usual business of the employer. In this latter case, the determination of
the scope and parameters of the "project" becomes fairly easy. It is unusual (but still
conceivable) for a company to undertake a project which has absolutely no relationship to
the usual business of the company; thus, for instance, it would be an unusual steel-making
company which would undertake the breeding and production of fish or the cultivation of
vegetables. From the viewpoint, however, of the legal characterization problem here
presented to the Court, there should be no difficulty in designating the employees who are
retained or hired for the purpose of undertaking fish culture or the production of
vegetables as "project employees," as distinguished from ordinary or "regular employees,"
so long as the duration and scope of the project were determined or specified at the time
of engagement of the "project employees." For, as is evident from the provisions of Article
280 of the Labor Code, quoted earlier, the principal test for determining whether particular
employees are properly characterized as "project employees" as distinguished from
"regular employees," is whether or not the "project employees" were assigned to carry out
a "specific project or undertaking," the duration (and scope) of which were specified at the
time the employees were engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the
other of at least two (2) distinguishable types of activities. Firstly, a project could refer to a
particular job or undertaking that is within the regular or usual business of the employer
company, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at determined or
determinable times. The typical example of this first type of project is a particular
construction job or project of a construction company. A construction company ordinarily
carries out two or more [distinct] identifiable construction projects: e.g., a twenty-five-
storey hotel in Makati; a residential condominium building in Baguio City; and a domestic
air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known
to the employees at the time of employment, are properly treated as "project employees,"
and their services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not
within the regular business of the corporation. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations of the
employer. The job or undertaking also begins and ends at determined or determinable
times. x x x.11 (Emphases supplied, citation omitted.)
Thus, in order to safeguard the rights of workers against the arbitrary use of the word
"project" to prevent employees from attaining the status of regular employees, employers
claiming that their workers are project employees should not only prove that the duration
and scope of the employment was specified at the time they were engaged, but also that
there was indeed a project. As discussed above, the project could either be (1) a particular
job or undertaking that is within the regular or usual business of the employer company,
but which is distinct and separate, and identifiable as such, from the other undertakings of
the company; or (2) a particular job or undertaking that is not within the regular business
of the corporation. As it was with regard to the distinction between a regular and casual
employee, the purpose of this requirement is to delineate whether or not the employer is
in constant need of the services of the specified employee. If the particular job or
undertaking is within the regular or usual business of the employer company and it is not
identifiably distinct or separate from the other undertakings of the company, there is
clearly a constant necessity for the performance of the task in question, and therefore said
job or undertaking should not be considered a project.
Brief examples of what may or may not be considered identifiably distinct from the
business of the employer are in order. In Philippine Long Distance Telephone Company v.
Ylagan,12 this Court held that accounting duties were not shown as distinct, separate and
identifiable from the usual undertakings of therein petitioner PLDT. Although essentially a
telephone company, PLDT maintains its own accounting department to which respondent
was assigned. This was one of the reasons why the Court held that respondent in said case
was not a project employee. On the other hand, in San Miguel Corporation v. National
Labor Relations Commission,13 respondent was hired to repair furnaces, which are needed
by San Miguel Corporation to manufacture glass, an integral component of its packaging
and manufacturing business. The Court, finding that respondent is a project employee,
explained that San Miguel Corporation is not engaged in the business of repairing furnaces.
Although the activity was necessary to enable petitioner to continue manufacturing glass,
the necessity for such repairs arose only when a particular furnace reached the end of its
life or operating cycle. Respondent therein was therefore considered a project employee.
In the case at bar, as discussed in the statement of facts, respondents were assigned to the Petitioner’s allegation that respondents were merely substitutes or what they call pinch-
following tasks: hitters (which means that they were employed to take the place of regular employees of
petitioner who were absent or on leave) does not change the fact that their jobs cannot be
1) Manning of Technical Operations Center: considered projects within the purview of the law. Every industry, even public offices, has
to deal with securing substitutes for employees who are absent or on leave. Such tasks,
(a) Responsible for the airing of local commercials; and whether performed by the usual employee or by a substitute, cannot be considered
separate and distinct from the other undertakings of the company. While it is
management’s prerogative to device a method to deal with this issue, such prerogative is
(b) Logging/monitoring of national commercials (satellite)
not absolute and is limited to systems wherein employees are not ingeniously and
methodically deprived of their constitutionally protected right to security of tenure. We are
2) Acting as Transmitter/VTR men:
not convinced that a big corporation such as petitioner cannot device a system wherein a
sufficient number of technicians can be hired with a regular status who can take over when
(a) Prepare tapes for local airing; their colleagues are absent or on leave, especially when it appears from the records that
petitioner hires so-called pinch-hitters regularly every month.
(b) Actual airing of commercials;
In affirming the Decision of the NLRC, the Court of Appeals furthermore noted that if
(c) Plugging of station promo; respondents were indeed project employees, petitioner should have reported the
completion of its projects and the dismissal of respondents in its finished projects:
(d) Logging of transmitter reading; and
There is another reason why we should rule in favor of private respondents. Nowhere in
(e) In case of power failure, start up generator set to resume program; the records is there any showing that petitioner reported the completion of its projects
and the dismissal of private respondents in its finished projects to the nearest Public
3) Acting as Maintenance staff; Employment Office as per Policy Instruction No. 2015 of the Department of Labor and
Employment [DOLE]. Jurisprudence abounds with the consistent rule that the failure of an
(a) Checking of equipment; employer to report to the nearest Public Employment Office the termination of its workers’
services everytime a project or a phase thereof is completed indicates that said workers
are not project employees.
(b) Warming up of generator;

(c) Filling of oil, fuel, and water in radiator; and
4) Acting as Cameramen14
These jobs and undertakings are clearly within the regular or usual business of the
employer company and are not identifiably distinct or separate from the other
undertakings of the company. There is no denying that the manning of the operations
center to air commercials, acting as transmitter/VTR men, maintaining the equipment, and
acting as cameramen are not undertakings separate or distinct from the business of a
broadcasting company.
In the extant case, petitioner should have filed as many reports of termination as there
were projects actually finished if private respondents were indeed project employees,
considering that the latter were hired and again rehired from 1996 up to 1999. Its failure to
submit reports of termination cannot but sufficiently convince us further that private
respondents are truly regular employees. Important to note is the fact that private
respondents had rendered more than one (1) year of service at the time of their dismissal
which overturns petitioner’s allegations that private respondents were hired for a specific
or fixed undertaking for a limited period of time.16 (Citations omitted.)
We are not unaware of the decisions of the Court in Philippine Long Distance Telephone
Company v. Ylagan17 and ABS-CBN Broadcasting Corporation v. Nazareno18 which held that
the employer’s failure to report the termination of employees upon project completion to
the DOLE Regional Office having jurisdiction over the workplace within the period
prescribed militates against the employer’s claim of project employment, even outside the
construction industry. We have also previously stated in another case that the Court should
not allow circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, thereby allowing the prevention of
acquisition of tenurial security by project employees who have already gained the status of
regular employees by the employer’s conduct.19
While it may not be proper to revisit such past pronouncements in this case, we
nonetheless find that petitioner’s theory of project employment fails the principal test of
demonstrating that the alleged project employee was assigned to carry out a specific
project or undertaking, the duration and scope of which were specified at the time the
employee is engaged for the project.20
The Court of Appeals also ruled that even if it is assumed that respondents are project
employees, they would nevertheless have attained regular employment status because of
their continuous rehiring:
Be that as it may, a project employee may also attain the status of a regular employee if
there is a continuous rehiring of project employees after the stoppage of a project; and the
activities performed are usual [and] customary to the business or trade of the employer.
The Supreme Court ruled that a project employee or a member of a work pool may acquire
the status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a
project; and
2) The tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.
The circumstances set forth by law and the jurisprudence is present in this case. In fine,
even if private respondents are to be considered as project employees, they attained
regular employment status, just the same.21 (Citation omitted.)
Anent this issue of attainment of regular status due to continuous rehiring, petitioner
advert to the fixed period allegedly designated in employment contracts and reflected in
vouchers. Petitioner cites our pronouncements in Brent, St. Theresa’s School of Novaliches
Foundation v. National Labor Relations Commission,22 and Fabela v. San Miguel
Corporation,23 and argues that respondents were fully aware and freely entered into
agreements to undertake a particular activity for a specific length of time. 24 Petitioner
apparently confuses project employment from fixed term employment. The discussions
cited by petitioner in Brent, St. Theresa’s and Fabela all refer to fixed term employment,
which is subject to a different set of requirements.
Whether the requisites of a valid fixed term employment are met
As stated above, petitioner interchangeably characterizes respondents’ service as project
and fixed term employment. These types of employment, however, are not the same.
While the former requires a project as restrictively defined above, the duration of a fixed-
term employment agreed upon by the parties may be any day certain, which is understood
to be "that which must necessarily come although it may not be known when." 25 The
decisive determinant in fixed-term employment is not the activity that the employee is
called upon to perform but the day certain agreed upon by the parties for the
commencement and termination of the employment relationship.26
Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts,
we emphasized in Brent that where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down as contrary to public policy or morals. 27 We thus laid down
indications or criteria under which "term employment" cannot be said to be in
circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by
the parties without any force, duress, or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each
other on more or less equal terms with no moral dominance exercised by the
former or the latter.28 (Citation omitted.)
These indications, which must be read together, make the Brent doctrine applicable only in
a few special cases wherein the employer and employee are on more or less in equal
footing in entering into the contract. The reason for this is evident: when a prospective
employee, on account of special skills or market forces, is in a position to make demands
upon the prospective employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties’ freedom of contract are thus required
for the protection of the employee. These indications were applied in Pure Foods
Corporation v. National Labor Relations Commission,29 where we discussed the patent
inequality between the employer and employees therein:
[I]t could not be supposed that private respondents and all other so-called "casual"
workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month
employment contract. Cannery workers are never on equal terms with their employers.
Almost always, they agree to any terms of an employment contract just to get employed
considering that it is difficult to find work given their ordinary qualifications. Their freedom
to contract is empty and hollow because theirs is the freedom to starve if they refuse to
work as casual or contractual workers. Indeed, to the unemployed, security of tenure has
no value. It could not then be said that petitioner and private respondents "dealt with each
other on more or less equal terms with no moral dominance whatever being exercised by
the former over the latter.
To recall, it is doctrinally entrenched that in illegal dismissal cases, the employer has the
burden of proving with clear, accurate, consistent, and convincing evidence that the
dismissal was valid.30 It is therefore the employer which must satisfactorily show that it was
not in a dominant position of advantage in dealing with its prospective employee. Thus, in
Philips Semiconductors (Phils.), Inc. v. Fadriquela,31 this Court rejected the employer’s
insistence on the application of the Brent doctrine when the sole justification of the fixed
terms is to respond to temporary albeit frequent need of such workers:
We reject the petitioner’s submission that it resorted to hiring employees for fixed terms
to augment or supplement its regular employment "for the duration of peak loads" during
short-term surges to respond to cyclical demands; hence, it may hire and retire workers on
fixed terms, ad infinitum, depending upon the needs of its customers, domestic and
international. Under the petitioner's submission, any worker hired by it for fixed terms of
months or years can never attain regular employment status. x x x.
Similarly, in the case at bar, we find it unjustifiable to allow petitioner to hire and rehire
workers on fixed terms, ad infinitum, depending upon its needs, never attaining regular
employment status. To recall, respondents were repeatedly rehired in several fixed term
contracts from 1996 to 1999. To prove the alleged contracts, petitioner presented cash
disbursement vouchers signed by respondents, stating that they were merely hired as
pinch-hitters. It is apparent that respondents were in no position to refuse to sign these
vouchers, as such refusal would entail not getting paid for their services. Plainly,
respondents as "pinch-hitters" cannot be considered to be in equal footing as petitioner
corporation in the negotiation of their employment contract.
In sum, we affirm the findings of the NLRC and the Court of Appeals that respondents are
regular employees of petitioner.1âwphi1 As regular employees, they are entitled to
security of tenure and therefore their services may be terminated only for just or
authorized causes. Since petitioner failed to prove any just or authorized cause for their
termination, we are constrained to affirm the findings of the NLRC and the Court of
Appeals that they were illegally dismissed.
Separation Pay, Night Shift Differential and Attorney’s Fees
Petitioner admits that respondents were not given separation pay and night shift
differential. Petitioner, however, claims that respondents were not illegally dismissed and
were therefore not entitled to separation pay. As regards night shift differential, petitioner
claims that its admission in its August 23, 1999 letter as to the nonpayment thereof is
qualified by its allegation that respondents are not entitled thereto. Petitioner points out
that respondents failed to specify the period when such benefits are due, and did not
present additional evidence before the NLRC and the Court of Appeals.32
In light, however, of our ruling that respondents were illegally dismissed, we affirm the
findings of the NLRC and the Court of Appeals that respondents are entitled to separation
pay in lieu of reinstatement. We quote with approval the discussion of the Court of
Appeals:
However, since petitioner refused to accept private respondents back to work,
reinstatement is no longer practicable. Allowing private respondents to return to their
work might only subject them to further embarrassment, humiliation, or even harassment.
Thus, in lieu of reinstatement, the grant of separation pay equivalent to one (1) month pay
for every year of service is proper which public respondent actually did. Where the
relationship between private respondents and petitioner has been severely strained by
reason of their respective imputations of accusations against each other, to order
reinstatement would no longer serve any purpose. In such situation, payment of separation
pay instead of reinstatement is in order.33 (Citations omitted.)
As regards night shift differential, the Labor Code provides that every employee shall be
paid not less than ten percent (10%) of his regular wage for each hour of work performed
between ten o’clock in the evening and six o’clock in the morning.34 As employees of
petitioner, respondents are entitled to the payment of this benefit in accordance with the
number of hours they worked from 10:00 p.m. to 6:00 a.m., if any. In the Decision of the
NLRC affirmed by the Court of Appeals, the records were remanded to the Regional
Arbitration Branch of origin for the computation of the night shift differential and the
separation pay. The Regional Arbitration Branch of origin was likewise directed to require
herein petitioner to produce additional documents where necessary. Therefore, while we
are affirming that respondents are entitled to night shift differential in accordance with the
number of hours they worked from 10:00 p.m. to 6:00 a.m., it is the Regional Arbitration
Branch of origin which should determine the computation thereof for each of the G.R. No. 98107 August 18, 1997
respondents, and award no night shift differential to those of them who never worked
from 10:00 p.m. to 6:00 a.m. BENJAMIN C. JUCO, petitioner,
vs.
It is also worthwhile to note that in the NLRC Decision, it was herein petitioner GMA NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING CORPORATION,
Network, Inc. (respondent therein) which was tasked to produce additional documents respondents.
necessary for the computation of the night shift differential. This is in accordance with our
ruling in Dansart Security Force & Allied Services Company v. Bagoy, 35 where we held that it
is entirely within the employer's power to present such employment records that should
necessarily be in their possession, and that failure to present such evidence must be taken HERMOSISIMA, JR., J.:
against them.
This is a petition for certiorari to set aside the Decision of the National Labor Relations
Petitioner, however, is correct that the award of attorney's fees is contrary to Commission (NLRC) dated March 14, 1991, which reversed the Decision dated May 21,
jurisprudence. In De las Santos v. Jebsen Maritime Inc.,36 we held: 1990 of Labor Arbiter Manuel R Caday, on the ground of lack of jurisdiction.

Likewise legally correct is the deletion of the award of attorney's fees, the NLRC having Petitioner Benjamin C. Juco was hired as a project engineer of respondent National
failed to explain petitioner's entitlement thereto. As a matter of sound policy, an award of Housing Corporation (NHC) from November 16, 1970 to May 14, 1975. On May 14, 1975,
attorney's fees remains the exception rather than the rule. It must be stressed, as aptly he was separated from the service for having been implicated in a crime of theft and/or
observed by the appellate court, that it is necessary for the trial court, the NLRC in this malversation of public funds.
case, to make express findings of facts and law that would bring the case within the
exception. In fine, the factual, legal or equitable justification for the award must be set
On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with
forth in the text of the decision. The matter of attorney's fees cannot be touched once and
the Department of Labor.
only in the fallo of the decision, else, the award should be thrown out for being speculative
and conjectural. In the absence of a stipulation, attorney's fees are ordinarily not
On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on
recoverable; otherwise a premium shall be placed on the right to litigate. They are not
the ground that the NLRC had no jurisdiction over the case. 1
awarded every time a party wins a suit. (Citations omitted.)

Petitioner then elevated the case to the NLRC which rendered a decision on December 28,
In the case at bar, the factual basis for the award of attorney's fees was not discussed in
1982, reversing the decision of the Labor Arbiter. 2
the text of NLRC Decision. We are therefore constrained to delete the same.

Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and
WHEREFORE the Decision of the Court of Appeals dated September 8, 2006 and the
on January 17, 1985, we rendered a decision, the dispositive portion thereof reads as
subsequent Resolution denying reconsideration dated January 22, 2007 in CA-G.R. SP No.
follows:
73652, are hereby AFFIRMED with the MODIFICATION that the award of attorney's fees in
the affirmed Decision of the National Labor Relations Commission is hereby DELETED.
WHEREFORE, the petition is hereby GRANTED. The questioned decision
of the respondent National Labor Relations Commission is SET ASIDE. The
SO ORDERED.
decision of the Labor Arbiter dismissing the case before it for lack of
jurisdiction is REINSTATED. 3

On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for illegal
dismissal, with preliminary mandatory injunction. 4
On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the
ground that the Civil Service Commission has no jurisdiction over the case. 5
On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint
for lack of jurisdiction. It ratiocinated that:
The Board finds the comment and/or motion to dismiss meritorious. It
was not disputed that NHC is a government corporation without an
original charter but organized/created under the Corporation Code.
Article IX, Section 2 (1) of the 1987 Constitution provides:
The civil service embraces all branches, subdivisions,
instrumentalities and agencies of the Government,
including government owned and controlled
corporations with original charters. (emphasis
supplied)
From the aforequoted constitutional provision, it is clear that respondent
NHC is not within the scope of the civil service and is therefore beyond
the jurisdiction of this Board. Moreover, it is pertinent to state that the
1987 Constitution was ratified and became effective on February 2,
1987.
WHEREFORE, for lack of jurisdiction, the instant complaint is hereby
dismissed.6
On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal
with preliminary mandatory injunction against respondent NHC. 7
On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that
petitioner was illegally dismissed from his employment by respondent as there was
evidence in the record that the criminal case against him was purely fabricated, prompting
the trial court to dismiss the charges against him. Hence, he concluded that the dismissal
was illegal as it was devoid of basis, legal or factual.
He further ruled that the complaint is not barred by prescription considering that the
period from which to reckon the reglementary period of four years should be from the
date of the receipt of the decision of the Civil Service Commission promulgated on April 11,
1989. He also ratiocinated that:
It appears . . . complainant filed the complaint for illegal dismissal with
the Civil Service Commission on January 6, 1989 and the same was
dismissed on April 11, 1989 after which on April 28, 1989, this case was
filed by the complainant. Prior to that, this case was ruled upon by the
Supreme Court on January 17, 1985 which enjoined the complainant to
go to the Civil Service Commission which in fact, complainant did. Under
the circumstances, there is merit on the contention that the running of
the reglementary period of four (4) years was suspended with the filing
of the complaint with the said Commission. Verily, it was not the fault of
the respondent for failing to file the complaint as alleged by the
respondent but due to, in the words of the complainant, a "legal knot"
that has to be untangled. 8
Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:
Premises considered, judgment is hereby rendered declaring the
dismissal of the complainant as illegal and ordering the respondent to
immediately reinstate him to his former position without loss of seniority
rights with full back wages inclusive of allowance and to his other
benefits or equivalent computed from the time it is withheld from him
when he was dismissed on March 27, 1977, until actually reinstated. 9
On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991,
the NLRC promulgated a decision which reversed the decision of Labor Arbiter Manuel R.
Caday on the ground of lack of jurisdiction. 10
The primordial issue that confronts us is whether or not public respondent committed
grave abuse of discretion in holding that petitioner is not governed by the Labor Code.
Under the laws then in force, employees of government-owned and/or controlled
corporations were governed by the Civil Service Law and not by the Labor Code. Hence,
Article 277 of the Labor Code (PD 442) then provided:
The terms and conditions of employment of all government employees,
including employees of government-owned and controlled corporations
shall be governed by the Civil Service Law, rules and regulations . . . .
The 1973 Constitution, Article II-B, Section 1(1), on the other hand
provided:
 The Civil Service embraces every branch, agency, subdivision and
instrumentality of the government, including government-owned or
controlled corporations.
Although we had earlier ruled in National Housing Corporation v.
Juco, 11 that employees of government-owned and/or controlled corporations, whether
created by special law or formed as subsidiaries under the general Corporation Law, are
governed by the Civil Service Law and not by the Labor Code, this ruling has been
supplanted by the 1987 Constitution. Thus, the said Constitution now provides:
The civil service embraces all branches, subdivisions, instrumentalities,
and agencies of the Government, including government owned or
controlled corporations with original charter. (Article IX-B, Section 2[1])
In National Service Corporation (NASECO) v. National Labor Relations Commission, 12 we
had the occasion to apply the present Constitution in deciding whether or not the
employees of NASECO are covered by the Civil Service Law or the Labor Code
notwithstanding that the case arose at the time when the 1973 Constitution was still in
effect. We ruled that the NLRC has jurisdiction over the employees of NASECO on the
ground that it is the 1987 Constitution that governs because it is the Constitution in place
at the time of the decision. Furthermore, we ruled that the new phrase "with original
charter" means that government-owned and controlled corporations refer to corporations
chartered by special law as distinguished from corporations organized under the
Corporation Code. Thus, NASECO which had been organized under the general
incorporation statute and a subsidiary of the National Investment Development
Corporation, which in turn was a subsidiary of the Philippine National Bank, is exluded from
the purview of the Civil Service Commission.
observation is reiterated in the recent case of Trade Union of the Philippines and Allied
Services (TUPAS) v. National Housing
Corporation, 14 where we held that the NHA is now within the jurisdiction of the
Department of Labor and Employment, it being a government-owned and/or controlled
corporation without an original charter. Furthermore, we also held that the workers or
employees of the NHC (now NHA) undoubtedly have the right to form unions or
employee's organization and that there is no impediment to the holding of a certification
election among them as they are covered by the Labor Code.
Thus, the NLRC erred in dismissing petitioner's complaint for lack of jurisdiction because
the rule now is that the Civil Service now covers only government-owned or controlled
corporations with original charters. 15 Having been incorporated under the Corporation
Law, its relations with its personnel are governed by the Labor Code and come under the
jurisdiction of the National Labor Relations Commission.
One final point. Petitioners have been tossed from one forum to another for a simple illegal
dismissal case. It is but apt that we put an end to his dilemna in the interest of justice.
WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is
hereby REVERSED and the Decision of the Labor Arbiter dated May 21, 1990 is
REINSTATED.
SO ORDERED.
G.R. No. 141707 May 7, 2002

We see no cogent reason to depart from the ruling in the aforesaid case.
CAYO G. GAMOGAMO, petitioner,
vs.
In the case at bench, the National Housing Corporation is a government owned corporation PNOC SHIPPING AND TRANSPORT CORP., respondent.
organized in 1959 in accordance with Executive Order No. 399, otherwise known as the
Uniform Charter of Government Corporation, dated January 1, 1959. Its shares of stock are
DAVIDE, JR., C.J.:
and have been one hundred percent (100%) owned by the Government from its
incorporation under Act 1459, the former corporation law. The government entities that
The pivotal issue raised in the petition in this case is whether, for the purpose of computing
own its shares of stock are the Government Service Insurance System, the Social Security
an employee’s retirement pay, prior service rendered in a government agency can be
System, the Development Bank of the Philippines, the National Investment and
tacked in and added to the creditable service later acquired in a government-owned and
Development Corporation and the People's Homesite and Housing Corporation. 13
controlled corporation without original charter.
Considering the fact that the NHA had been incorporated under Act 1459, the former
corporation law, it is but correct to say that it is a government-owned or controlled
corporation whose employees are subject to the provisions of the Labor Code. This
On 23 January 1963, Petitioner Cayo F. Gamogamo was first employed with the
Department of Health (DOH) as Dental Aide. On 22 February 1967, he was promoted to the
position of Dentist 1. He remained employed at the DOH for fourteen years until he
resigned on 2 November 1977.1
On 9 November 1977, petitioner was hired as company dentist by Luzon Stevedoring
Corporation (LUSTEVECO), a private domestic corporation.2 Subsequently, respondent
PNOC Shipping and Transport Corporation (hereafter Respondent) acquired and took over
the shipping business of LUSTEVECO, and on 1 August 1979, petitioner was among those
who opted to be absorbed by the Respondent.3 Thus, he continued to work as company
dentist. In a letter dated 1 August 1979, Respondent assumed without interruption
petitioner’s service credits with LUSTEVECO,4 but it did not make reference to nor assumed
petitioner’s service credits with the DOH.
On 10 June 1993, then President Fidel V. Ramos issued a memorandum5 approving the
privatization of PNOC subsidiaries, including Respondent, pursuant to the provisions of
Section III(B) of the Guidelines and Regulations to implement Executive Order No. 37. 6
Accordingly, Respondent implemented a Manpower Reduction Program to govern
employees whose respective positions have been classified as redundant as a result of
Respondent’s decrease in operations and the downsizing of the organization due to lay-up
and sale of its vessels pursuant to its direction towards privatization.7 Under this program,
retrenched employees shall receive a two-month pay for every year of service.
Sometime in 1995, petitioner requested to be included in the next retrenchment schedule.
However, his request was turned down for the following reasons:8
1. As a company dentist he was holding a permanent position;
2. He was already due for mandatory retirement in April 1995 under his
retirement plan (first day of the month following his 60th birthday which was on 7
March 1995).
Eventually, petitioner retired after serving the Respondent and LUSTEVECO for 17 years
and 4 months upon reaching his 60th birthday, on 1 April 1995. He received a retirement
pay of P512,524.15,9 which is equivalent to one month pay for every year of service and
other benefits.
On 30 August 1995, Admiral Carlito Y. Cunanan, Repondent’s president, died of Dengue
Fever and was forthwith replaced by Dr. Nemesio E. Prudente who assumed office in
December 1995. The new president implemented significant cost-saving measures. In
1996, after petitioner’s retirement, the cases of Dr. Rogelio T. Buena (company doctor) and
Mrs. Luz C. Reyes (telephone operator), who were holding permanent/non-redundant
positions but were willing to be retrenched under the program were brought to the
attention of the new president who ordered that a study on the cost-effect of the
retrenchment of these employees be conducted. After a thorough study, Respondent’s
Board of Directors recommended the approval of the retrenchment. These two employees
were retrenched and paid a 2-month separation pay for every year of service under
Respondent’s Manpower Reduction Program.10
In view of the action taken by Respondent in the retrenchment of Dr. Buena and Mrs.
Reyes, petitioner filed a complaint at the National Labor Relations Commission (NLRC) for
the full payment of his retirement benefits. Petitioner argued that his service with the DOH
should have been included in the computation of his years of service. Hence, with an
accumulated service of 32 years he should have been paid a two-month pay for every year
of service per the retirement plan and thus should have received at least P1,833,920.00.
The Labor Arbiter dismissed petitioner’s complaint. 11 On appeal, however, the NLRC
reversed the decision of the Labor Arbiter. In its decision12 of 28 November 1997, the NLRC
ruled:
WHEREFORE, the Decision of the Labor Arbiter dated May 30, 1997 is hereby SET
ASIDE and another judgment is hereby rendered to wit:
(1) the government service of the complainant with the Department of
Health numbering fourteen (14) years is hereby considered creditable
service for purposes of computing his retirement benefits;
(2) crediting his fourteen (14) years service with the Department of
Health, together with his nearly eighteen (18) years of service with the
respondent, complainant therefore has almost thirty-two (32) years
service upon which his retirement benefits would be computed or based
on;
(3) complainant is entitled to the full payment of his retirement benefits
pursuant to the respondent’s Retirement Law or the retrenchment
program (Manpower Reduction Program). In any case, he is entitled to
two (2) months retirement/separation pay for every year of service.
(4) all other claims are DISMISSED.
 SO ORDERED.
Respondent filed a motion for reconsideration but it was denied.13
Unsatisfied with the reversal, Respondent filed with the Court of Appeals a special civil
action for certiorari which was docketed as CA-G.R. SP No. 51152. In its decision14 of 8
November 1999, the Court of Appeals set aside the NLRC judgment and decreed:
WHEREFORE, the petition is hereby GIVEN DUE COURSE and the writ prayed for
GRANTED. Consequently, the Decision and Resolution of the National Labor
Relations Commission (Second Division) dated November 28, 1997 and May 15,
1998, respectively, are hereby SET ASIDE AND NULLIFIED, without prejudice to
private respondent Cayo F. Gamo-gamo’s recovery of whatever benefits he may
have been entitled to receive by reason of his fourteen (14) years of service with
the Department of Health.
No pronouncement as to costs.
His motion for reconsideration having been denied by the Court of Appeals, 15 petitioner
filed with us the petition in the case at bar. Petitioner contends that: (1) his years of service
with the DOH must be considered as creditable service for the purpose of computing his
retirement pay; and (2) he was discriminated against in the application of the Manpower
Reduction Program.16
Petitioner maintains that his government service with the DOH should be recognized and
tacked in to his length of service with Respondent because LUSTEVECO, which was later
bought by Respondent, and Respondent itself, were government-owned and controlled
corporations and were, therefore, under the Civil Service Law. Prior to the separation of
Respondent from the Civil Service by virtue of the 1987 Constitution, petitioner’s length of
service was considered continuous. The effectivity of the 1987 Constitution did not
interrupt his continuity of service. He claims that he is supported by the opinion of 18 May
1993 of the Civil Service Commission in the case of Petron Corporation, where the
Commission allegedly opined:
… that all government services rendered by employees of the Petron prior to 1987
Constitution are considered creditable services for purposes of computation of
retirement benefits. This must necessarily be so considering that in the event that
Petron would consider only those services of an employee with Petron when it
was excluded from the civil service coverage (that is after the 1987 Constitution),
it would render nugatory his government agencies prior to his transfer to Petron.
Hence, Petron or any other PNOC subsidiary has to include in its retirement
scheme or in its Collective Bargaining Agreement a provision of the inclusion of
the other government services of its employees rendered outside Petron,
otherwise, it would be prejudicial to the interest of the retireable employee
concerned.
Petitioner asserts that with the tacking in of his 14 years of service with the DOH to his 17
years and 4 months service with LUSTEVECO and Respondent, he had 31 years and 4
months creditable service as basis for the computation of his retirement benefits. Thus,
pursuant to Respondent’s Manpower Reduction Program, he should have been paid two
months pay for every year of his 31 years of service.
Petitioner likewise asserts that the principle of tacking is anchored on Republic Act No.
7699.17
Petitioner concludes that there was discrimination when his application for coverage under
the Manpower Reduction Program was disapproved. His application was denied because
he was holding a permanent position and that he was due for retirement. However,
Respondent granted the application of Dr. Rogelio Buena, who was likewise holding a
permanent position and was also about to retire. Petitioner was only given one-month pay
for every year of service under the regular retirement plan while Dr. Buena was given a 2-
month pay for every year of service under the Manpower Reduction Program.
In its Comment to the petition, Respondent maintains that although it is a government-
owned and controlled corporation, it has no original charter. Hence, it is not within the
coverage of the Civil Service Law. It cites the decision in PNOC-EDC v. Leogardo,18 wherein
we held that only corporations created by special charters are subject to the provisions of
the Civil Service Law. Those without original charters are covered by the Labor Code.
Respondent also asserts that R.A. No. 7699 is not applicable. Under this law an employee
who has worked in both the private and public sectors and has been covered by both the
Government Service Insurance System (GSIS) and the Social Security System (SSS), shall
have his creditable services or contributions in both Systems credited to his service or
contribution record in each of the Systems, which shall be summed up for purposes of old
age, disability, survivorship and other benefits in case the covered member does not
qualify for such benefits in either or both Systems without the totalization.
Respondent further contends that petitioner was not discriminated upon when his
application under the Manpower Reduction Program was denied. At the time of his
retirement in 1995, redundancy was the main consideration for qualification for the
Manpower Reduction Program. Petitioner was not qualified. However in 1996, in order to
solve the company’s business reversals, the new president, Dr. Nemesio Prudente, found it
necessary to implement cost-saving strategies, among which was the retrenchment of
willing employees. Thus, the applications for retrenchment of Dr. Buena and Mrs. Reyes
were approved. Respondent had the prerogative to amend its policies to meet the
contingencies of the business for self-preservation.
We rule in the negative the issue of whether petitioner’s service with the DOH should be
included in the computation of his retirement benefits.
Respondent’s Retirement scheme19 pertinently provides:
ARTICLE IV
RETIREMENT BENEFITS
SEC 4.1. Normal Retirement Date/Eligibility. -- The normal retirement date of an
employee shall be the first day of the month next following the employee’s
sixtieth (60th) birthday. To be eligible for the retirement benefit described under
Sec. 4.2, the employee must have rendered at least ten (10) years of continuous
service with the Company. In case the retiring employee has rendered less than
ten (10) years of service with the Company, he shall be entitled to one (1) month’s
final monthly basic salary (12/12) for every year of service.
SEC. 4.2. Normal Retirement Benefit. -- The retirement benefit shall be payable in
lump sum upon retirement which shall be determined on the basis of the retiree’s
final monthly basic salary (14/12) as follows:
(a) One (1) month’s pay for every year of service for those who have
completed at least twenty (20) years of continuous service with the
Company.
(b) One and one-half (1 1/2) months’ pay for every year of service for
those who have completed twenty-one (21) to thirty (30) continuous
years of service with the Company.
(c) Two (2) months’ pay for every year of service for those who have
completed at least thirty-one (31) years of service with the Company.
It is clear therefrom that the creditable service referred to in the Retirement Plan is the
retiree’s continuous years of service with Respondent.
Retirement results from a voluntary agreement between the employer and the employee
whereby the latter after reaching a certain age agrees to sever his employment with the
former.20
Since the retirement pay solely comes from Respondent’s funds, it is but natural that
Respondent shall disregard petitioner’s length of service in another company for the
computation of his retirement benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979. Ordinarily, his
creditable service shall be reckoned from such date. However, since Respondent took over
the shipping business of LUSTEVECO and agreed to assume without interruption all the
service credits of petitioner with LUSTEVECO,21 petitioner’s creditable service must start
from 9 November 1977 when he started working with LUSTEVECO22 until his day of
retirement on 1 April 1995. Thus, petitioner’s creditable service is 17.3333 years.
We cannot uphold petitioner’s contention that his fourteen years of service with the DOH
should be considered because his last two employers were government-owned and
controlled corporations, and fall under the Civil Service Law. Article IX(B), Section 2
paragraph 1 of the 1987 Constitution states --
Sec. 2. (1) The civil service embraces all branches, subdivisions, instrumentalities,
and agencies of the Government, including government-owned or controlled
corporations with original charters.
It is not at all disputed that while Respondent and LUSTEVECO are government-owned and
controlled corporations, they have no original charters; hence they are not under the Civil
Service Law. In Philippine National Oil Company-Energy Development Corporation v.
National Labor Relations Commission,23 we ruled:
xxx "Thus under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service Law
are [sic] the manner of its creation, such that government corporations created by
special charter(s) are subject to its provisions while those incorporated under the
General Corporation Law are not within its coverage."
Consequently, Respondent was not bound by the opinion of the Civil Service Commission
of 18 May 1993.
Petitioner’s contention that the principle of tacking of creditable service is mandated by
Republic Act No. 7699 is baseless. Section 3 of Republic Act No. 7699 reads:
 SEC 3. Provisions of any general or special law or rules and regulations to the
contrary notwithstanding, a covered worker who transfer(s) employment from
one sector to another or is employed in both sectors, shall have his creditable
services or contributions in both systems credited to his service or contribution
record in each of the Systems and shall be totalized for purposes of old-age,
disability, survivorship, and other benefits in case the covered employee does not
qualify for such benefits in either or both Systems without totalization: Provided,
however, That overlapping periods of membership shall be credited only once for
purposes of totalization (underscoring, ours).
Obviously, totalization of service credits is only resorted to when the retiree does not
qualify for benefits in either or both of the Systems. Here, petitioner is qualified to receive
benefits granted by the Government Security Insurance System (GSIS), if such right has not
yet been exercised. The pertinent provisions of law are:
SEC. 12 Old Age Pension. -- (a) xxx
(b) A member who has rendered at least three years but less than fifteen years of
service at the time of separation shall, upon reaching sixty years of age or upon
separation after age sixty, receive a cash payment equivalent to one hundred
percent of his average monthly compensation for every year of service with an
employer (Presidential Decree No, 1146, as amended, otherwise known as the
Government Service Insurance Act of 1977).
SEC. 4. All contributions paid by such member personally, and those that were
paid by his employers to both Systems shall be considered in the processing of
benefits which he can claim from either or both Systems: Provided, however, That
the amount of benefits to be paid by one System shall be in proportion to the
number of contributions actually remitted to that System (Republic Act No. 7699).
In any case, petitioner’s fourteen years of service with the DOH may not remain
uncompensated because it may be recognized by the GSIS pursuant to the aforequoted
Section 12, as may be determined by the GSIS. Since petitioner may be entitled to some
benefits from the GSIS, he cannot avail of the benefits under R.A. No. 7699.
It may also be pointed out that upon his receipt of the amount of P512,524.15 from
Respondent as retirement benefit pursuant to its retirement scheme, petitioner signed and
delivered to Respondent a Release and Undertaking wherein he waives all actions, causes
of actions, debts, dues, monies and accounts in connection with his employment with
Respondent.24 This quitclaim releases Respondent from any other obligation in favor of
petitioner. While quitclaims executed by employees are commonly frowned upon as
contrary to public policy and are ineffective to bar claims for the full measure of the
employees’ legal rights, there are legitimate waivers that represent a voluntary and
reasonable settlement of laborers’ claims which should be respected by the courts as the
law between the parties.25 Settled is the rule that not all quitclaims are per se invalid or
against public policy, except (1) where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person; and (2) where the terms of settlement are
unconscionable on their face.26 We discern nothing from the record that would suggest
that petitioner was coerced, intimidated or deceived into signing the Release and
Undertaking. Neither are we convinced that the consideration for the quitclaim is
unconscionable because it is actually the full amount of the retirement benefit provided for
in the company’s retirement plan.
In light of the foregoing, we need not discuss any further the issue of whether petitioner
was discriminated by Respondent in the implementation of the Manpower Reduction
Program. In any event, that issue is factual and petitioner has failed to demonstrate that,
indeed, he was discriminated upon.
WHEREFORE, no reversible error on the part of the Respondent Court of Appeals having
been shown, the petition in this case is DENIED and the appealed decision in CA-G.R. SP No.
51152 is hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
G.R. No. 158539 January 15, 2009
INDUSTRIAL & TRANSPORT EQUIPMENT,INC.and/or RAYMOND JARINA, Petitioners,
vs.
TOMAS TUGADE and CRESENCIO TUGADE, Respondents.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to
annul and set aside the Decision of the Court of Appeals dated March 14, 2003 which
affirmed the decision of the National Labor Relations Commission (NLRC) finding
petitioners liable for illegal dismissal and ordering the payment of backwages and
separation pay to respondents, and the Resolution dated May 29, 2003 denying
petitioners’ motion for reconsideration.
As found by the Court of Appeals, the facts are as follows:
Petitioner is a corporation engaged in the business of motor vehicle repair. Private
respondents, Tomas Tugade and his brother Cresencio Tugade, were hired on November
14, 1978 and on May 11, 1984, respectively, by petitioner corporation. Tomas was
employed as a diesel mechanic, while Cresencio was the officer-in-charge at petitioner’s
shop on Visayas Avenue.
Private respondents’ dismissal stemmed from an incident which took place on March 22,
1998, when Mr. Faustino Cabel, one of the regular customers of petitioner, arrived at the
shop to have his vehicle repaired. On March 27, 1998, respondent Cresencio Tugade, after
making the necessary verifications regarding the payment of the service made by Mr.
Cabel, released the latter’s vehicle.
On March 28, 1998, Felix P. Broqueza, petitioner’s Personnel and Administration Manager
issued a memorandum against Engr. Fernando Fabros and respondents Tomas and
Cresencio Tugade, suspending them for ten (10) working days from March 30, 1998 to April
11, 1998 for disobedience, incompetence and gross negligence. The memorandum stated,
among others, that the three employees released the vehicle to Mr. Cabel, despite the
instructions made by the Company president not to release the same, unless and until he
made full settlement of his obligation which remained unpaid since 1996.
After the lapse of ten (10) days suspension or on April 12, 1998, the Tugades allegedly did
not report for work and were considered absent without leave. On April 13, 1998, another
memorandum was issued by Felix Broqueza directing him to make the necessary
explanation why he failed to report for work.
On April 16, 1996, however, the Tugades filed a complaint for illegal dismissal with prayer
forpayment of separation pay in lieu of reinstatement, backwages and damages against
petitioner.1
On September 28, 1998, Labor Arbiter Potenciano S. Cañezares rendered his Decision,
dismissing the complaint for lack of merit but awarding separation pay of P56,680, the
dispositive portion of which reads:
WHEREFORE, the above-captioned case is hereby DISMISSED for lack of merit.
However, We find it in conformity with labor justice, considering the long services of the
complainants, to award them separation pay equivalent to one-half month pay for every
year of service, which as computed by Patricia B. Pangilinan of the Commission’s NLRC NCR
Branch are the following:
Separation Pay (1/2)
11/14/78-09/30/98
P218 x 13 x 20 yrs. P56,680.00
============
SO ORDERED.
Both parties appealed the decision of the Labor Arbiter to the NLRC which rendered a
decision on July 30, 1999 that reversed the Labor Arbiter by ruling that respondents were
illegally dismissed and ordering payment of backwages and separation pay. The motion for
reconsideration filed by petitioners was also denied by the NLRC in a Resolution dated
September 20, 1999.
The Court of Appeals, as stated, affirmed the NLRC decision.
On July 8, 2003, petitioners filed the present petition for review on certiorari with prayer
for the issuance of a temporary restraining order and/or writ of preliminary injunction
assailing the Decision and Resolution of the Court of Appeals.
In a Resolution dated March 10, 2004, this Court issued a temporary restraining order
enjoining respondents from enforcing the assailed Decision and Resolution of the Court of
Appeals.
Petitioners contend that:
I
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT RESPONDENTS WERE
ILLEGALLY DISMISSED FROM EMPLOYMENT.
 II
THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE PAYMENT OF BACKWAGES
AND SEPARATION PAY TO RESPONDENTS.
Dismissal connotes a permanent severance or complete separation of the worker from the
service on the initiative of the employer regardless of the reasons therefor. 2 Based on the
foregoing, it can hardly be said that respondents were dismissed from employment rather
than merely temporarily suspended. Nowhere in the proceedings or pleadings filed before
the Labor Arbiter or the NLRC did respondents dispute that they were merely suspended
from March 30, 1998 to April 11, 1998. As shown by the contents of the memorandum
issued to respondents, they were not dismissed but merely suspended from employment:
xxx However, despite our President’s direct and clear instruction you released the vehicle
to Mr. Faustino Cabel without the necessary payment. This is a clear disobedience,
incompetence and gross negligence of your duty as Supervisor.
In view thereof, we regret to inform you that you are being suspended for ten (10) working
days without pay effective March 30 to April 11, 1998.
Repetition of the same offense will be dealt with accordingly in accordance with the labor
law. (Annex "2" to Annex "F" to Annex "C" hereof)
This piece of evidence clearly disproves the finding of the Court of Appeals that
respondents were terminated from employment supposedly based on a memorandum
prohibiting their entry into the company premises. A settled exception to the rule generally
sustaining the factual determination of the Court of Appeals is when it disregards a vital
evidence in reaching its finding. This obtains here.
There is also no dispute that petitioners instructed the respondents not to release the
vehicle of Mr. Faustino Cabel unless and until the latter has completely settled his
obligations with the company. However, despite the fact that Mr. Cabel failed to settle his
obligations and in clear defiance of the petitioners’ order, respondents released the car to
Mr. Cabel. Petitioners were clearly acting within their rights in suspending respondents.
In numerous cases, this Court has sustained the right of employers to exercise their
management prerogatives to discipline erring employees, thus:
However, petitioner loses sight off the fact that the right of an employer to regulate all
aspects of employment is well settled. This right, aptly called management prerogative,
gives employers the freedom to regulate, according to their discretion and best judgment,
all aspects of employment, including work assignment, working methods, processes to be
followed, working regulations, transfer of employees, work supervision, lay-off of workers
and the discipline, dismissal and recall of workers. In general, management has the
prerogative to discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations.3
Therefore, the complaint for illegal dismissal filed by respondents was premature, since
even after the expiration of their suspension period, they refused, despite due notice, to
report to work. In fact, in their Memorandum of Appeal, respondents admitted having
received petitioners’ return-to-work memorandum which, however, became futile because
they hastily filed the complaint for illegal dismissal.
Since there was no dismissal to speak of, there is no basis to award any backwages to
respondents. Under Article 279 of the Labor Code, an employee is entitled to
reinstatement and backwages only if he was illegally dismissed.
The decision of the Labor Arbiter is, therefore, sustained, finding that respondents
abandoned their positions by failing to return to work despite management directives to
do so, and awarding separation pay of P56,680 each to respondents.
Nevertheless, this Court agrees with the Court of Appeals that petitioners failed to follow
the requirements of notices after respondents abandoned their positions. Respondents are
therefore entitled to an additional award of P30,000 each in accordance with the doctrine
in the Agabon 4 case.
WHEREFORE, the Decision dated March 14, 2003 and the Resolution dated May 29, 2003
of the Court of Appeals are hereby MODIFIED. The decision of the National Labor Relations
Commission dated July 30, 1999 is REVERSED and the Decision of the Labor Arbiter dated
September 28, 1998 is REINSTATED with MODIFICATION, awarding separation pay to
respondents in the amount of P56,680 each plus P30,000 each in accordance with the
Agabon doctrine.
No costs.
SO ORDERED.
G.R. No. 195155
DIVINE WORD COLLEGE OF LAOAG, Petitioner,
vs.
SHIRLEY B. MINA, as heir-substitute of the late DELFIN A. MINA, Respondent.
DECISION
REYES, J.:
Assailed in this petition for review1 under Rule 45 of the Rules of Court is the Decision2
dated July 19, 2010 and Resolution3 dated January 13, 2011 of the Court of Appeals (CA) in
CA-G.R. SP No. 107749 declaring respondent Delfin A. Mina (Mina) to have been
constructively dismissed by petitioner Divine Word College of Laoag (DWCL) and awarding
him backwages, damages and attorney's fees.
Antecedent Facts
DWCL is a non-stock educational institution offering catholic education to the public. It is
run by the Society of Divine Word (SVD), a congregation of Catholic priests that maintains
several other member educational institutions throughout the country.4
On July 1, 1969, the Society of Divine Word Educational Association (DWEA) established a
Retirement Plan to provide retirement benefits for qualified employees of DWEA’s member
institutions, offices and congregations.5 The DWEA Retirement Plan6 contains a clause
about the portability of benefits, to wit:
When a member who resigns or is separated from employment from one Participating
Employer and who is employed by another Participating Employer, the member will carry
the credit he earned under his former Participating Employer to his new Employer and the
length of service in both will be taken into consideration in determining his total years of
continuous service on the following conditions:
a. The transfer is approved by both the Participating Employer whose service he is
leaving and the new Participating Employer;
b. The Retirement Board is notified of the transfer; and
c. The member is employed by another Participating Employer on the next
working day after his resignation.7
Mina was first employed in 1971 as a high school teacher, and later on a high school
principal, at the Academy of St. Joseph (ASJ), a school run by the SVD. On June 1, 1979, he
transferred to DWCL and was accorded a permanent status after a year of probationary
status.8 He was subsequently transferred in 2002 to DWCL’s college department as an
Associate Professor III. Thereafter, on June 1, 2003, Mina was assigned as the College
Laboratory Custodian of the School of Nursing and was divested of his teaching load,
effective June 1, 2003 until May 31, 2004, subject to automatic termination and without
need for any further notification.9 He was the only one among several teachers transferred
to the college department who was divested of teaching load.10
In early June 2004, Mina was offered early retirement by Professor Noreen dela Rosa,
Officer-in-Charge of DWCL’s School of Nursing. He initially declined the offer because of his
family’s dependence on him for support. He later received a Memorandum11 dated July 27,
2004 from the Office of the Dean enumerating specific acts of gross or habitual negligence,
insubordination, and reporting for work under the influence of alcohol. He answered the
allegations against him;12 sensing, however, that it was
pointless to continue employment with DWCL, he requested that his retirement date be
adjusted to September 2004 to enable him to avail of the 25-year benefits. He also
requested for the inclusion of his eight years of service in ASJ, to make his total years of
service to 33 years pursuant to the portability clause of the retirement plan, which was
denied by DWCL. Instead, he was paid ₱275,513.10 as retirement pay.13 It was made to
appear that his services were terminated by reason of redundancy to avoid any tax
implications. Mina was also made to sign a deed of waiver and quitclaim14 stating that he
no longer has any claim against DWCL with respect to any matter arising from his
employment in the school.15
On September 21, 2004, he filed a case for illegal dismissal and recovery of separation pay
and other monetary claims.16 Pending resolution of his case, Mina passed away on June 18,
2005.17
Ruling of the Labor Arbiter
On August 26, 2005, the Labor Arbiter (LA) rendered its Decision,18 ruling that the actuation
of DWCL is not constitutive of constructive dismissal. The LA ratiocinated, however, that
the computation of Mina’s retirement pay based on redundancy is illegal; hence, it was
modified, and the number of years he worked for ASJ was added to the years he worked
for DWCL thus making his creditable number of years of service to 33 years. According to
the LA, his length of service in both institutions will be taken into consideration in
determining his total years of continuous service since the DWEA Retirement Plan has a
provision on portability, which allows a member to carry the earned credit for his number
of years of service from his former participating employer to his new employer. Moreover, 4. [DWCL] must pay [Mina] 10% of the total award as attorney’s fees for his having
the LA held that there is no showing that Mina ceased to be a member of the plan when he been forced to litigate to protect his rights as an employee.
left the ASJ as there was not a day that he was separated from any school that is the
member of the plan. The LA’s computation of Mina’s retirement benefits is as follows: SO ORDERED.20

Monthly salary: P13,006.23 Both DWCL and Mina appealed to the National Labor Relations Commission (NLRC), with
DWCL mainly questioning the LA’s decision making Mina’s creditable years of service 33
Date hired: June 1971 years, and awarding moral and exemplary damages.21

Years in service: 33 years Ruling of the NLRC

Birth day: 24 December 1950 The NLRC ruled that Mina was constructively dismissed when he was appointed as College
Laboratory Custodian and divested of his teaching load without any justification.22 It also
ruled that Mina was not deemed to have waived all his claims against DWCL as quitclaims
cannot bar employees from demanding benefits to which they are legally entitled.23 The
NLRC, however, disregarded Mina’s eight years of service in ASJ in the computation of his
Monthly pay/26.22 x 22.2 x 33 years x 100% retirement pay because of his failure to show compliance with the portability provision. 24
The dispositive portion of the NLRC
P13,006.23/26.23 x 22.2 [x] 33 years x 100% = P363,400.29
Decision dated July 10, 2008 provided:
Less: Severance benefits received: = P275,513.10
WHEREFORE, We grant in partly [sic] the appeals of both [Mina] and [DWCL]. The decision
Deficiency = P 87,887.1919 dated August 26, 200[5] is hereby modified to delete the order adding the length of service
rendered by [Mina] to the [ASJ] in the computation of the latter’s retirement pay from the
former. Accordingly, [DWCL] is held liable to pay [Mina] full backwages and separation pay,
The LA disposed thus: in lieu of reinstatement and to his full compulsory retirement pay, less the amount already
received by him representing his optional retirement.
IN VIEW THEREOF, judgment is hereby rendered with the following dispositions:
SO ORDERED.25 (Emphasis ours)
1. Finding that [Mina] was underpaid in his retirement benefits pursuant to the
DWEA Retirement Plan. Consequently, [DWCL] must pay the deficiency in his DWCL sought reconsideration of the NLRC decision but it was denied in a Resolution26
retirement benefits in the amount of P87,887.19. dated November 28, 2008.

2. Finding that the respondents were harsh on him. Consequently, the DWCL must
be adjudged to pay him P50,000 as moral damages and P50,000 as exemplary
damages.
3. That his claims for additional separation pay for his future services are denied.
DWCL thus filed a petition for certiorari before the CA, seeking to reverse and set aside the
NLRC decision and resolution.27 DWCL primarily asserted that the NLRC committed grave
abuse of discretion in holding that Mina was constructively dismissed from work, in holding
DWCL liable for moral and exemplary damages, and in ordering the payment of separation
pay as well as retirement pay computed up to the age of 60.28

Ruling of the CA
On July 19, 2010, the CA rendered the assailed Decision, denying the petition but
modifying the award. It sustained the NLRC’s ruling that Mina was indeed constructively
dismissed from work. The CA also held that Mina is entitled to receive backwages, to be
computed from the time of hiring on June 1, 1979 until the time of his death on June 18,
2005, as he was constructively dismissed from work, as follows:
Monthly Salary Php 13, 006.23
x 26 (1 June 1979 - 18 June 2005)
Backwages Php 338,161.98 29
The dispositive portion of the CA decision provided:
WHEREFORE, the petition is DENIED, granting to [Mina] substituted by his heirs in addition
to the full retirement benefits at Php275,513.10, the following:
1. backwages in the amount of Php 338,161.98;
2. moral and exemplary damages at Php50,000.00; and
3. attorney’s fees at ten percent (10%) of the amount due herein.
SO ORDERED.30
DWCL’s motion for reconsideration was denied by the CA in its Resolution 31 dated January
13, 2011.
Hence, the present petition, anchored on the following grounds:
I.
The Honorable [CA] erred in upholding [NLRC’s] findings that [Mina] was constructively
dismissed.
II.
The Honorable [CA] erred in holding [DWCL] liable for moral and exemplary damages and
attorney’s fees.
III.
Even assuming, without admitting that [Mina] was constructively dismissed, the Honorable
[CA] erred in ordering the payment of his backwages "computed from the time of hiring, 1
June 1979 until the time of his death 18 June 2005."
IV.
Even assuming, without admitting, that [Mina] was constructively dismissed, the Honorable
[CA] has no legal basis in awarding him full retirement benefits since it invalidated Mina’s
retirement for which the retirement benefits were given to him.32
Ruling of the Court
In a petition for review on certiorari under Rule 45, only questions of law may be raised.
The raison d’être is that the Court is not a trier of facts.33 The rule, however, admits of
certain exceptions, such as when the factual findings of the LA differ from those of the
NLRC, as in the instant case, which opens the door to a review by this Court.34
The Constitution35 and the Labor Code36 mandate that employees be accorded security of
tenure. The right of employees to security of tenure, however, does not give the
employees vested rights to their positions to the extent of depriving management of its
prerogative to change their assignments or to transfer them.37 In cases of transfer of an
employee, the employer is charged with the burden of proving that its conduct and action
are for valid and legitimate grounds such as genuine business necessity and that the
transfer is not unreasonable, inconvenient or prejudicial to the employee.38 If the employer
cannot overcome this burden of proof, the employee’s transfer shall be tantamount to
unlawful constructive dismissal.39
Constructive dismissal is a dismissal in disguise.40 There is cessation of work in constructive
dismissal because ‘"continued employment is rendered impossible, unreasonable or
unlikely, as an offer involving a demotion in rank or a diminution in pay’ and other
benefits."41 To be considered as such, an act must be a display of utter discrimination or
insensibility on the part of the employer so intense that it becomes unbearable for the
employee to continue with his employment.42 The law recognizes and resolves this
situation in favor of employees in order to protect their rights and interests from the
coercive acts of the employer.43
In this case, Mina’s transfer clearly amounted to a constructive dismissal. For almost 22
years, he was a high school teacher enjoying a permanent status in DWCL’s high school
department. In 2002, he was appointed as an associate professor at the college
department but shortly thereafter, or on June 1, 2003, he was appointed as a college
laboratory custodian, which is a clear relegation from his previous position. Not only that.
He was also divested of his teaching load. His appointment even became contractual in
nature and was subject to automatic termination after one year "without any further
notification."44 Aside from this, Mina was the only one among the high school teachers
transferred to the college department who was divested of teaching load. More
importantly, DWCL failed to show any reason for Mina’s transfer and that it was not
unreasonable, inconvenient, or prejudicial to him.45
Also, the CA correctly ruled that Mina’s appointment as laboratory custodian was a
demotion. There is demotion when an employee occupying a highly technical position
requiring the use of one’s mental faculty is transferred to another position, where the
employee performed mere mechanical work – virtually a transfer from a position of dignity
to a servile or menial job. The assessment whether Mina’s transfer amounted to a
demotion must be done in relation to his previous position, that is, from an associate
college professor, he was made a keeper and inventory-taker of laboratory materials.
Clearly, Mina’s new duties as laboratory custodian were merely perfunctory and a far cry
from his previous teaching job, which involved the use of his mental faculties. And while
there was no proof adduced showing that his salaries and benefits were diminished, there
was clearly a demotion in rank. As was stated in Blue Dairy Corporation v. NLRC,46 "[i]t was
virtually a transfer from a position of dignity to a servile or menial job." 47
Given the finding of constructive dismissal, Mina, therefore, is entitled to reinstatement
without loss of seniority rights, and payment of backwages computed from the time
compensation was withheld up to the date of actual reinstatement. 48 The Court notes that
aside from full compulsory retirement pay, the NLRC awarded full backwages and
separation pay, in lieu of reinstatement.49 The CA, however, computed the amount to be
awarded as backwages from the time of Mina’s hiring on June 1, 1979 until the time of his
death on June 18, 2005, apparently interchanging backwages and separation pay.50 Aside
from this, the CA omitted to include a separate award of separation pay.
The Court has repeatedly stressed that the basis for the payment of backwages is different
from that of the award of separation pay. "The basis for computing separation pay is
usually the length of the employee’s past service, while that for backwages is the actual
period when the employee was unlawfully prevented from working."51 Thus, the Court
explained in Bani Rural Bank, Inc. v. De Guzman52 that:
[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee who is
dismissed without just cause and without due process is entitled to backwages and
reinstatement or payment of separation pay in lieu thereof:
xxxx
The normal consequences of respondents’ illegal dismissal, then, are reinstatement
without loss of seniority rights, and payment of backwages computed from the time
compensation was withheld up to the date of actual reinstatement. Where reinstatement is
no longer viable as an option, separation pay equivalent to one (1) month salary for every
year of service should be awarded as an alternative. The payment of separation pay is in
addition to payment of backwages.53 (Emphasis and underscoring deleted, and italics ours)
Thus, the computation of Mina’s backwages should be from the time he was constructively
dismissed on June 1, 2003.
Aside from the foregoing, the CA should have also awarded separation pay since
reinstatement is no longer viable due to Mina’s death in 2005. As stated before, the award
of separation pay is distinct from the award of backwages. The award of separation pay is
also distinct from the grant of retirement benefits. These benefits are not mutually
exclusive as "[r]etirement benefits are a form of reward for an employee’s loyalty and
service to an employer and are earned under existing laws, [Collective Bargaining
Agreements], employment contracts and company policies."54 Separation pay, on the other
hand, is that amount which an employee receives at the time of his severance from
employment, designed to provide the employee with the wherewithal during the period
that he is looking for another employment.55 In the computation of separation pay, the
Court stresses that it should not go beyond the date an employee was deemed to have been
actually separated from employment, or beyond the date when reinstatement was rendered
impossible.56 The period for the computation of separation pay Mina is entitled to shall
therefore begin to run from June 1, 1979, when he was transferred to DWCL from ASJ, until
his death on June 18, 2005, or for a period of 26 years.
The award of damages was also justified given the CA and NLRC’s finding that DWCL acted
in a manner wherein Mina was not treated with utmost good faith. The intention of the
school to erase him out of employment is too apparent.57 The Court upholds the CA’s
finding that when DWCL’s act of unceremoniously demoting and giving Mina contractual
employment for one year and citing him for numerous violations of school regulations
when he rejected the school’s offer to voluntarily retire is constitutive of bad faith.58
Lastly, the Court affirms the NLRC’s findings that the eight years of service rendered by
Mina in ASJ shall not be included in the computation of his retirement benefits.1âwphi1 No
adequate proof is shown that he has complied with the portability clause of the DWEA
Retirement Plan. The employee has the burden of proof to show compliance with the
requirements set forth in retirement plans, being in the nature of privileges granted to
employees. Failure to overcome the burden of proof would necessarily result in the
employee’s disqualification to receive the benefits.
WHEREFORE, the Decision dated July 19, 2010 and Resolution dated January 13, 2011 of
the Court of Appeals in CA-G.R. SP No. 107749 are MODIFIED in that, in addition to the
award of attorney’s fees, and moral and exemplary damages, petitioner Divine Word
College of Laoag is ORDERED to pay Shirley B. Mina, as heir-substitute of the late Delfin
Mina, the following:
(1) backwages, to be computed from June 1, 2003 until June 18, 2005, or
₱13,006.23 x 24 (months) = ₱312,149.52; and
(2) separation pay, to be computed from June 1, 1979 until June 18, 2005, or
₱13,006.23 x 26 (years) = ₱338,161.98.
The monetary awards granted shall earn legal interest at the rate of six percent (6%) per
annum from the date of the finality of this Decision until fully paid.
SO ORDERED.
G.R. No. 194649, August 10, 2016
SOLIMAN SECURITY SERVICES, INC. AND TERESITA L. SOLIMAN, Petitioners, v. IGMEDIO C.
SARMIENTO, JOSE JUN CADA AND ERVIN R. ROBIS, Respondents.
DECISION
PEREZ, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the
Decision2 dated 27 August 2010 and the Resolution3 dated 25 November 2010 of the Court
of Appeals in CA-G.R. SP No. 110905, which affirmed the 2 June 2009 Decision4 of the
National Labor Relations Commission (NLRC) declaring respondents Igmedio C. Sarmiento
(Sarmiento), Jose Jun Cada (Cada), and Ervin R. Robis (Robis) to have been illegally
dismissed from employment.
The Antecedent Facts
This case stemmed from a complaint filed by respondents against petitioners Soliman
Security Services, Inc. (the agency) and Teresita L. Soliman (Teresita) for illegal dismissal;
underpayment of salaries, overtime pay and premium pay for holiday and rest day;
damages; attorney's fees; illegal deduction and non-payment of ECOLA.
Respondents were hired as security guards by petitioner Soliman Security Services, Inc. and
were assigned to Interphil Laboratories, working seven (7) days a week for twelve (12)
straight hours daily. Respondents alleged that during their employment - from May 1997
until January 2007 for Robis and from May 2003 until January 2007 for Sarmiento and Cada
— they were paid only P275.00 a day for eight (8) hours of work or P325.00 for twelve (12)
hours of work but were not paid ECOLA, night shift differentials, holiday pay, as well as rest
day premiums. For cash bond and mutual aid contributions, the amounts of P400.00 and
P100.00, respectively, were deducted from their salaries per month. Respondents claimed
that they sought a discussion of the nonpayment of their benefits with petitioner Teresita
Soliman but the latter refused to take heed and told them to tender their resignations
instead. According to respondents, on 21 January 2007, they received an order relieving
them from their posts and since then, they were not given any assignments.
On the other hand, the agency's version of the story hinges on an alleged placement of the
respondents under a "floating status." The agency admitted relieving the respondents from
duty on 20 January 2007 but insists that the same was only done pursuant to its contract
with client Interphil Laboratories. To support this claim, petitioners presented a standing
contract5 with Astrazeneca Pharmaceuticals, Interphil's predecessor-in-interest. The
contract contained stipulations pertaining to the client's policy of replacing guards on duty
every six (6) months without repeat assignment. The agency further posits that respondent
guards were directed several times to report to the office for their new assignments but
they failed to comply with such directives.
A review of the records reveals the following timeline: (1) on 20 January 2007, the agency
sent respondents notices informing them that they were being relieved from their current
posts pursuant to a standing contract with Interphil Laboratories6 with directives for
respondents to report to the office for their new assignments; (2) on 7 February 2007, the
agency sent another letter addressed to Robis, directing him to report to the office for his
new assignment;7 (3) on 22 February 2007, the first complaint for illegal dismissal was filed
with the Labor Arbiter;8 (4) on 26 March 2007, a hearing before the Executive Labor Arbiter
was conducted, where petitioner agency's representative presented respondents an offer
to return to work;9 (5) the agency sent respondents letters dated 2410 and 2611 April 2007,
directing them to clarify their intentions as they have not been reporting to seek new
assignments; (6) on 3 August 2007, respondents filed a Supplemental Complaint, 12 the
purpose of which was to anticipate the possibility that the agency might set up the defense
of pre-maturity of filing of the constructive dismissal complaint; (7) respondents executed
their respective complaint affidavits on 8 August 2007;13 (8) and finally after the parties
submitted their respective position papers, the Executive Labor Arbiter rendered a decision
on 4 January 2008.14chanrobleslaw
Finding that respondents' failure to comply with the Memoranda amounted to
abandonment, the Labor Arbiter dismissed the complaint.15 The Labor Arbiter concluded
that there can be no dismissal to speak of, much less an illegal dismissal. On appeal, the
NLRC reversed the 4 January 2008 decision of the the Executive Labor Arbiter, ultimately
finding respondents to have been illegally dismissed. The NLRC ruled that the letters
directing respondents to "clarify their intentions" were not in the nature of return-to-work
orders, which may effectively interrupt their floating status. The NLRC observed that the
Memoranda received by respondents were but mere afterthoughts devised after the case
for illegal dismissal was filed. The NLRC also put the agency to task for failing to traverse
the guards' averment that there were other employee-guards who stayed with the same
client beyond the six-month term imposed.
Aggrieved, the petitioners brought the case to the Court of Appeals, asking the court to
issue an extraordinary writ of certiorari to reverse the NLRC decision. Reiterating that the
agency had no legitimate reasons for placing respondents on prolonged floating status, the
appellate court affirmed the decision of the NLRC. The dispositive portion of the NLRC
decision reads:
WHEREFORE, premises considered, the decision of the Executive Labor Arbiter Fatima
Jambaro-Franco dated 4 January 2008 is reversed and set aside and a new one is rendered
ordering [petitioners] to pay [respondents] the following:
chanRoblesvirtualLawlibrary1. Backwages from 21 January 2007 until finality of this
Decision;
2. Separation pay equivalent to one-month salary for every year of service from the date of
employment as appearing in the complaint also up to finality of this Decision; and
3. Salary differentials for the period not yet barred by prescription.
All other claims are dismissed for lack of merit.16chanroblesvirtuallawlibrary
Petitioners sought a reconsideration of the decision but the appellate court denied the
same. Hence, this Petition for Review on Certiorari.
Our Ruling
After a careful evaluation of the records of the case, this Court finds no reversible error in
the NLRC decision as affirmed by the Court of Appeals. The petition is denied for lack of
merit.
Placement on floating status as a management prerogative
The Court is mindful of the fact that most contracts for services stipulate that the client
may request the replacement of security guards assigned to it. 17 Indeed, the employer has
the right to transfer or assign its employees from one area of operation to another,
"provided there is no demotion in rank or diminution of salary, benefits, and other
privileges, and the transfer is not motivated by discrimination or bad faith, or effected as a
form of punishment or demotion without sufficient cause."18 During that period of time
when they are in between assignments or when they are made to wait for new
assignments after being relieved from a previous post, guards are considered on temporary
"off-detail" or under "floating status". It has long been recognized by this Court that the
industry practice of placing security guards on floating status does not constitute dismissal,
as the assignments primarily depend on the contracts entered into by the agency with third
parties19 and the same is a valid exercise of management prerogative. However, such
practice must be exercised in good faith and courts must be vigilant in assessing the
different situations, especially considering that the security guard does not receive any
salary or any financial assistance provided by law when placed on floating
status.20chanrobleslaw
Constructive Dismissal
Though respondents were not per se dismissed on 20 January 2007 when they were
ordered relieved from their posts, we find that they were constructively dismissed when
they were not given new assignments. As previously mentioned, placing security guards
under floating status or temporary off-detail has been an established industry practice. It
must be emphasized, however, that they cannot be placed under floating status
indefinitely; thus, the Court has applied Article 292 21 (formerly Article 286) of the Labor
Code by analogy to set the specific period of temporary off-detail to a maximum of six (6)
months.22 It must also be clarified that such provision does not entitle agencies to retain
security guards on floating status for a period of not more than six (6) months for whatever
reason. Placing employees on floating status requires the dire exigency of the employer's
bona fide suspension of operation. In security services, this happens when there is a
surplus of security guards over available assignments as when the clients that do not renew
their contracts with the security agency are more than those clients that
do.23chanrobleslaw
The crux of the controversy lies in the consequences of the lapse of a significant period of
time without respondents having been reassigned. Petitioner agency faults the
respondents for their repeated failure to comply with the directives to report to the office
for their new assignments. To support its argument, petitioner agency submitted in
evidence notices addressed to respondents, which read:
You are directed to report to the undersigned to clarify your intentions as you have not
been reporting to seek a new assignment after your relief from Interphil.
To this date, we have not received any update from you neither did you update your
government requirements x x x
We are giving you up to May 10, 2007 to comply or we will be forced to drop you from our
roster and terminate your services for abandonment of work and insubordination.
Consider this our final warning.24 (Emphasis ours)
As for respondents, they maintain that the offers of new assignments were mere empty
promises. Respondents claim that they have been reporting to the office for new
assignments only to be repeatedly turned down and ignored by petitioner's office
personnel.25cralawredchanrobleslaw
We rule that such notices were mere afterthoughts. The notices were allegedly sent to
respondents on 24 and 26 April 24 2007, a month after the hearing before the Executive
Labor Arbiter. By the time the notices were sent, a complaint for illegal dismissal with a
prayer for reinstatement was already filed. In fact, the agency, through its representative,
already had the chance to discuss new assignments during the hearing before the Labor
Arbiter. Instead of taking the opportunity to clarify during the hearing that respondents
were not dismissed but merely placed on floating status and instead of specifying details
about the available new assignments, the agency merely gave out empty promises. No
mention was made regarding specific details of these pending new assignments. If
respondent guards indeed had new assignments awaiting them, as what the agency has
been insinuating since the day respondents were relieved from their posts, the agency
should have identified these assignments during the hearing instead of asking respondents
to report back to the office. The agency's statement in the notices - that respondents have
not clarified their intentions because they have not reported to seek new assignments
since they were relieved from their posts - is specious at best. As mentioned, before these
notices were sent out, a complaint was already filed and a hearing before the Labor Arbiter
had already been conducted. The complaint clarified the intention of respondents. Indeed,
respondents' complaint for illegal dismissal with prayer for reinstatement is inconsistent
with the agency's claim that respondents did not report for reassignment despite the
notices directing them to do so. It is evident that the notices sent by the agency were mere
ostensible offers for new assignments. It was intended to cover the illegality of the
termination of respondents' employment.
Lack of service agreement for a continuous period of 6 months as an authorized cause for
termination
It is significant to note that had the reason for such failure to reassign respondents been
the lack of service agreements for a continuous period of six (6) months, petitioner agency
could have exercised its right to terminate respondents for an authorized cause upon
compliance with the procedural requirements.
On this score, Department Order No. 14, Series of 200126 (DO 14-01) of the Department of
Labor and Employment is instructive. Section 9.3 of the same
provides:ChanRoblesVirtualawlibrary
9.3 Reserved status - x x x
xxxx
If after a period of 6 months, the security agency/employer cannot provide work or give
assignment to the reserved security guard, the latter can be dismissed from service and
shall be entitled to separation pay as described in subsection 6.5
xxxx
In relation thereto, Section 6.5 of DO 14-01 treats such lack of service assignment for a
continuous period of six (6) months as an authorized cause for termination of employment
entitling the security guard to separation pay, to wit:
6.5 Other Mandatory Benefits. In appropriate cases, security guards/similar personnel are
entitled to the mandatory benefits as listed below, although the same may not be included
in the monthly cost distribution in the contracts, except the required premiums form their
coverage:
a. Maternity benefit as provided under SS Law;
b. Separation pay if the termination of employment is for authorized cause as
provided by law and as enumerated below:
Half-Month Pay Per Year of Service, but in no case less than One Month Pay if separation
pay is due to:
1. Retrenchment or reduction of personnel effected by management to prevent
serious losses;
 2. Closure or cessation of operation of an establishment not due to serious losses or
financial reverses;
3. Illness or disease not curable within a period of 6 months and continued
employment is prohibited by law or prejudicial to the employee's health or that of
co-employees;
4. Lack of service assignment for a continuous period of 6 months. (Emphasis and
underlining supplied)
xxxx
It bears stressing that the only time a prolonged floating status is considered an authorized
cause for dismissal is when the security agency experiences a surplus of security guards
brought about by lack of clients.27 We quote with approval the pertinent portion of the
NLRC's decision as affirmed by the appellate court, to wit:
Being placed on floating status is only legitimate when guaranteed by bona fide business
exigencies. In security services, this happens when there is a surplus of security guards over
available assignments as when the clients that do not renew their contracts with the
security agency are more than those clients that do x x x.28chanroblesvirtuallawlibrary
Otherwise stated, absent such justification, the placing of a security guard on floating
status is tantamount to constructive dismissal. And, when the floating status is justified, the
lapse of a continuous period of six (6) months results in an authorized cause for
termination of employment, the security guard being entitled, however, to separation pay.
As for the procedural aspect, employer agencies must be reminded that to validly
terminate a security guard for lack of service assignment for a continuous period of six
months, the agency must comply with the provisions of Article 289 (previously Art. 283) of
the Labor Code,29 "which mandates that a written notice should be served on the
employee on temporary off-detail or floating status and to the DOLE one (1) month before
the intended date of termination."30 Sec. 9.2 of DO 14-01 provides for a similar procedure,
to wit:
9.2 Notice of Termination - In case of termination of employment due to authorized causes
provided in Article 283 and 284 of the Labor Code and in the succeeding subsection, the
employer shall serve a written notice on the security guard/personnel and the DOLE at
least one (1) month before the intended date thereof.
It cannot be denied that the placement of security guards on floating status may be subject
to abuse by agencies, considering that they are not obliged to pay the security guards while
placed on floating status. Recognizing the jurisprudence elaborating on the application of
DO 14-01, we now provide a summary as follows:
The floating status period, wherein the security guards are not paid, should not last longer
than six (6) months as provided by law. Before the lapse of six (6) months, the agency
should have recalled the security guard for a new assignment. If the agency failed to do so
due to the lack of service agreements for a continuous period of six (6) months, an
authorized cause for dismissal as per DO 14-01, the security guard may be considered
permanently retrenched and validly dismissed upon compliance with the procedural
requirements laid down by the Department Order and the Labor Code. 31 It must be
emphasized however, that in order for the dismissal to be valid and in order for the
employer agency to free itself from any liability for illegal dismissal, the justification for the
failure to reassign should be the lack of service agreements for a continuous period of six
(6) months, aside from the other authorized causes provided by the Labor Code.
Corollarily, placing the security guard on floating status in bad faith, as when there is failure
to reassign despite the existence of sufficient service agreements will make the employer
agency liable for illegal dismissal. In such cases, there is no bona fide business exigency
which calls for the temporary retrenchment or laying-off of the security guards. Lastly, if six
(6) months have already lapsed and the employer agency failed to either (a) reassign the
security guard or (b) validly dismiss and give him/her the corresponding separation pay, the
security guard may be considered to have been constructively dismissed. 32chanrobleslaw
On the finding that respondents are entitled to their money claims
In its decision, the Court of Appeals discussed how the NLRC might have erred in its
computations of the wages received by the private respondents. However, despite such
observation, the appellate court dismissed the petition for certiorari, ultimately holding
that the NLRC based its decision on all the evidence presented, with nary an abuse of the
exercise of its discretion. The appellate court found that petitioners failed to discharge
their burden of showing at least an abuse of discretion on the part of the NLRC, when the
latter found that the security guards were underpaid. Petitioners now fault the appellate
court for affirming the NLRC decision declaring them liable for private respondents'
monetary claims.
Petitioners' contention is bereft of merit
In petitioners' Motion for Reconsideration of the NLRC decision, they invested heavily in
the argument about the validity of the dismissal, stating only briefly in the penultimate
paragraph their manifestation to reserve a purported right to submit additional evidence in
a supplemental pleading, if necessary to strengthen their arguments regarding the award
of monetary claims. The Court of Appeals correctly ruled that such scheme subverts the
reglementary periods established by law and more significantly, the NLRC would no longer
have the opportunity to correct itself, assuming errors, since the Motion for
Reconsideration filed before it did not detail the computations regarding monetary
benefits. Said computations were only subsequently raised in their petition before the
appellate court.
In the Court of Appeals, petitioners adopted a similar scheme. In their Petition for
Certiorari, they did not anymore dispute the NLRC's determinations as to the monetary
aspects. Instead, their arguments on the alleged issue of monetary awards were inserted in
their Reply to Comment pleading. The Court of Appeals correctly ruled that such scheme
contradicts elementary due process as the arguments raised were not dealt with in the
comment the Reply supposedly responds to.
From the foregoing, it is quite obvious that the NLRC may not be faulted for relying on the
evidence presented before it when it made its computations for underpayment. Neither
may the appellate court be faulted for declaring that the NLRC did not abuse its discretion.
The task of resolving the issue on monetary claims, purely factual, properly pertains to the
NLRC as the quasi-judicial appellate body to which these documents were presented to
review the arbiter's ruling.33 The appellate court correctly ruled that the usual appeal in
labor cases is exhausted after the NLRC has decided. Petitioner cannot fault the Court of
Appeals in affirming the NLRC decision despite the alleged computational error as the
special civil action of certiorari is a remedy to correct errors of jurisdiction and not mere
errors of judgment. Consequently, an error of judgment that the court may commit in the
exercise of its jurisdiction is not correctable through the original civil action of certiorari.
The present petition is a Rule 45 petition reviewing a Rule 65 ruling of the Court of Appeals.
This Court's jurisdiction is thus limited to errors of law which the appellate court might
have committed in its Rule 65 ruling.34 In essence, in ruling for legal correctness, "we have
to view the CA's decision in the same context that the petition for certiorari it ruled upon
was presented to it; we have to examine the CA decision from the prism of whether it
correctly determined the presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision on the merits of the case,
was correct."35 After a meticulous review of the facts of the case, the records, relevant laws
and jurisprudence, we rule that the Court of Appeals correctly determined that the NLRC
did not abuse its discretion when it held that respondents were constructively dismissed
and entitled to their monetary claims.
WHEREFORE, the petition is DENIED. The assailed 27 August 2010 Decision and 25
November 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 110905 are
AFFIRMED. Accordingly, petitioners Soliman Security Services, Inc. and Teresita L. Soliman
are hereby ORDERED to pay respondents Igmedio C. Sarmiento, Jose Jun Cada, and Ervin R.
Robis, to wit:
1. Backwages from 21 January 2007 until finality of this decision;
2. Separation pay equivalent to one-month salary for every year of service from the
date of employment as appearing in the complaint also up to finality of this
decision; and
3. Salary differentials for the period not yet barred by prescription.
All other claims are dismissed for lack of merit.
SO ORDERED.
G.R. No. 169570 March 2, 2007
RICARDO PORTUGUEZ, Petitioner,
vs.
GSIS FAMILY BANK (Comsavings Bank) and THE HON. COURT OF APPEALS, Respondents.
DECISION
CHICO-NAZARIO, J.:
For resolution is a Petition for Review by Certiorari under Rule 45 of the Revised Rules of
Court, of the Decision1 dated 25 April 2005 and the Resolution2 dated 25 August 2005 of
the Court of Appeals. The assailed Decision and Resolution reversed the findings of both
the National Labor Relations Commission (NLRC) and the Labor Arbiter, in their Decisions
dated 30 January 2004 and 30 June 2003, respectively, that respondent GSIS Family Bank is
guilty of the illegal dismissal of petitioner Ricardo Portuguez. The dispositive portion of the
assailed decision of the appellate court reads:
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED, the assailed
NLRC Decision dated January 30, 2004, together with the Resolution dated June 22, 2004,
are RECALLED and SET ASIDE, and a new one entered DISMISSING NLRC NCR CA No.
037015-03 (NLRC NCR Case. No. 07-05075-2002). No pronouncement as to costs.3
The factual and procedural antecedents of this instant petition are as follows:
Petitioner was employed by the respondent bank as utility clerk on 1 February 1971. Later,
he rose from the ranks and was promoted as branch manager of the Gen. Trias Branch, and
was subsequently assigned to other branches of respondent bank within the Province of
Cavite. Eventually, he was appointed as Business Development and Public Relations (BDPR)
Officer of the entire respondent bank.4
In addition to his regular duties as BDPR Officer, petitioner was designated as a member of
the Procurement Bidding and Awards Committee (PBAC), Oversight Committee and
Investigating Committee of the respondent bank.5
On 23 October 1997, petitioner was temporarily assigned as caretaker of respondent bank.
Finally, he was designated as Acting Assistant Vice-President and at the same time Officer-
In-Charge of the respondent bank on 15 June 1998.6
Respondent bank, on the other hand, is a banking institution duly authorized and existing
as such under the Philippine laws. It was originally known as Royal Savings Bank. In 1983
and the early part of 1984, respondent bank underwent serious liquidity problems and was
placed by the Central Bank of the Philippines (Central Bank) under receivership. However,
due to the continued inability to maintain a state of liquidity, the Central Bank ordered its
closure on 9 July 1984. After two months, the respondent bank was reopened under the
control and management of the Commercial Bank of Manila and was then renamed as
Comsavings Bank.7
In 1987, the Government Service Insurance System (GSIS) acquired the interest of the
Commercial Bank of Manila in the respondent bank and together with the Central Bank and
the Philippine Deposit Insurance Corporation (PDIC), GSIS infused a substantial amount of
fresh capital into respondent bank in order to ensure its effective rehabilitation.
Resultantly, GSIS took over the control and management of the respondent bank that was
renamed as GSIS Family Savings Bank.8
Accordingly, Amando Macalino (Macalino) was appointed as President of the respondent
bank on 21 December 1998. In view of Macalino’s appointment, the designation of
petitioner as Officer-In-Charge and caretaker of respondent bank was recalled; however,
his appointment as Acting Assistant Vice-President, was retained.9
In line with its policy to attain financial stability, respondent bank adopted measures
directed to cut down administrative overhead expenses through streamlining. Thus,
respondent bank came up with an early voluntary retirement program. On 15 April 2001,
petitioner opted to avail himself of this retirement package, supposedly, under protest, and
received the amount of ₱1.324 Million as retirement pay.10
On 11 July 2002, petitioner filed a complaint against the respondent bank and Macalino for
constructive dismissal and underpayment of wages, 13th month pay and retirement
benefits before the Labor Arbiter.11 In his Position Paper,12 petitioner alleged that due to
discrimination, unfair treatment, and intense pressure he had received from the new
management through Macalino, he was forced to retire at the prime of his life.
In a Decision13 dated 30 June 2003, the Labor Arbiter adjudged the respondent bank guilty
of illegal dismissal, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, finding complainant to have been illegally
dismissed. Concomitantly, Respondents are jointly and solidarily liable to pay RICARDO
PORTUGUEZ the following:
₱1,148,333.33 – representing backwages;
1,280,000.00 – representing separation pay;
443,884.32 – representing salary differentials;
500,000.00 – representing moral damages;
400,000.00 – representing exemplary damages;
Ten percent of the total award as attorney’s fees.
Other claims are dismissed for lack of merit.
The detailed computation of the Computation & Examination Unit, National Capital Region
is made part of this Decision.14
Aggrieved, respondent bank appealed the adverse decision to the NLRC which adopted in
toto the findings of the Labor Arbiter. In a Decision 15 dated 30 January 2004, the NLRC
dismissed the appeal and found the decision of the Labor Arbiter to be sufficiently
supported by the facts on record and law on the matter.
Respondent bank’s Motion for Reconsideration was likewise denied by the NLRC in its
Resolution16 dated 22 June 2004 for failing to show that patent or palpable errors have
been committed in the assailed decision.
The NLRC Resolution dated 22 June 2004, denying respondent bank’s motion for
reconsideration, was prematurely declared final and executory and was entered into
judgment on 6 August 2004.17
Shortly thereafter, on 16 August 2004, respondent bank timely elevated the matter to the
Court of Appeals through a Special Civil Action for Certiorari18 under Rule 65 of the Revised
Rules of Court. Incorporated with its petition was the Urgent Application for the Issuance
of Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction.
Pending resolution of its petition and application for the issuance of TRO and/or writ of
preliminary injunction before the appellate court, the Labor Arbiter, on 16 September
2004, issued a Writ of Execution19 for the satisfaction of the NLRC decision dated 30
January 2004. On the same date, a Notice of Garnishment20 was served on the
manager/cashier of respondent bank in the Pamplona Uno, Las Piñas City Branch.
Acting on the application for TRO, the Court of Appeals enjoined the implementation of the
NLRC decision dated 30 January 2004 and therefore, the satisfaction of the Writ of
Execution dated 16 September 2004 issued by the Labor Arbiter was tolled for a period of
60 days.21
Eventually, the appellate court issued a Writ of Preliminary Injunction22 permanently
enjoining the execution of the NLRC decision dated 30 January 2004 until the final
resolution of the case.
On 25 April 2005, the Court of Appeals resolved the controversy by reversing the judgment
of the Labor Arbiter and the NLRC and ruling out constructive dismissal considering that
petitioner’s separation from service was voluntary on his part when he chose to avail
himself of the respondent bank’s early retirement program and received the amount of
₱1.324 Million as retirement pay.23
Similarly ill-fated was Petitioner’s Motion for Reconsideration which was denied by the
Court of Appeals in its Resolution24 dated 25 August 2005.
Hence, this instant Petition for Review on Certiorari.25
For the resolution of this Court are the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT
PETITIONER WAS NOT CONSTRUCTIVELY DISMISSED FROM EMPLOYMENT.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT
PETITIONER IS NOT ENTITLED TO SALARY DIFFERENTIAL.
Before we delve into the merits of the case, it is best to underscore that the factual
findings of the NLRC affirming those of the Labor Arbiter, who are deemed to have
acquired expertise on the matters within their jurisdiction, when sufficiently supported by
evidence on record, are accorded respect if not finality, and are considered binding on this
Court.26 It is equally true, however, that when the findings of the Labor Arbiter and the
NLRC are inconsistent with that of the Court of Appeals, there is a need to review the
records to determine which of them should be preferred as more conformable to
evidentiary facts.27
As borne by the records, it appears that there is a divergence between the findings of the
Labor Arbiter as affirmed by the NLRC, and those of the Court of Appeals. For the purpose
of clarity and intelligibility, therefore, this Court will make an infinitesimal scrunity of the
records and recalibrate and reevaluate the evidence presented by the parties all over
again.
We have already repeatedly held that this Court is not a trier of facts. Rule 45 of the
Revised Rules of Court limits the office of a Petition for Review to questions of law and
leaves the factual issues as found by the quasi-judicial bodies, as long as they are
supported by evidence.28 We never fail to stress as well that when the rulings of the labor
tribunal and the appellate court are in conflict, we are constrained to analyze and weigh
the evidence again.29
Substantively, petitioner alleges that respondent bank, through Macalino, subjected him to
all forms of unbearable harassment that can be mustered in order to force him to resign.
Petitioner specifically claims that he was deprived of his salary and other benefits and
privileges appurtenant to his position as the Acting Assistant Vice-President, including his
office. Respondent bank allegedly granted much higher salary to the newly hired bank
officers compared to what he was receiving during his tenure.
In contrast, respondent bank maintains that petitioner was not coerced to resign but
voluntarily opted to avail himself of the early retirement program and was duly paid his
retirement benefits. It posits that petitioner was merely holding the position of Assistant
Vice-President in acting capacity subject to the ratification of the respondent bank’s Board
of Directors and since his appointment has never been ratified by the Board, respondent
bank cannot therefore grant him the salary and benefits accorded to such position.
In finding that petitioner was not constructively dismissed from employment, the Court of
Appeals stressed that there was no showing that petitioner’s separation from employment
was due to involuntary resignation or forced severance. Neither was it shown that there
was a decrease in salary and privileges or downgrading of petitioner’s rank. What can be
clearly deduced from the evidence was that until his voluntary retirement in 2001,
petitioner was holding the position of Acting Assistant Vice-President and was receiving the
salary and benefits accorded thereto.
After scrupulously examining the contrasting positions of the parties, and the conflicting
decisions of the Labor Arbiter and the NLRC, on one hand, and the appellate court, on the
other, we find the records of the case bereft of evidence to substantiate the conclusions
reached by both the Labor Arbiter and the NLRC that petitioner was constructively
dismissed from employment.
Constructive dismissal or constructive discharge has been defined as quitting because
continued employment is rendered impossible, unreasonable or unlikely, as an offer
involving a demotion in rank and a diminution in pay. 30 In the case at bar, a demotion in
rank or diminution in pay was never raised as an issue. Settled then is the fact that
petitioner suffered no demotion in rank or diminution in pay that could give rise to a cause
of action against respondent bank for constructive dismissal under this definition.
Worthy to stress, however, is that constructive dismissal does not always take the form of
demotion in rank or diminution in pay. In several cases, we have ruled that the act of a
clear discrimination, insensibility or disdain by an employer may become so unbearable on
the part of the employee so as to foreclose any choice on his part except to resign from
such employment.31
It is upon the aforementioned legal tenet that petitioner anchored his case. Petitioner
strenuously argues that while the newly hired bank officers were given higher salaries and
fat allowances, he was merely paid the amount of ₱15,000 basic pay and ₱4,000 allowance
for the position of Acting Assistant Vice-President which, according to him, was way below
what the newly hired bank officers were enjoying. Stated differently, petitioner avers that
he was discriminated against by the respondent bank in terms of payment of salary and
grant of benefits and allowances.
We do not agree.
Upon careful perusal of the position papers, memoranda and other pleadings submitted by
petitioner from the Labor Arbiter up to this Court, including the evidence appended
thereon, we find that no evidence, substantial or otherwise, was ever submitted by
petitioner to buttress the very premise of his position that there was discrimination.
Discrimination has been defined as the failure to treat all persons equally when no
reasonable distinction can be found between those favored and those not favored.32 Thus,
before a claim for discrimination can prosper, it must be established that, first, there is no
reasonable distinction or classification that can be obtained between persons belonging to
the same class, and second, persons belonging to the same class have not been treated
alike.33
Apropos thereto, petitioner failed to establish that he possessed the same skills,
competencies and expertise as those of the newly hired bank officers so as to eliminate any
possibility of substantial distinction that may warrant the unequal treatment between
them. No proof was likewise presented by petitioner to show that the functions, duties and
responsibilities he was performing are the same as those of the newly hired bank officers.
Petitioner likewise failed to present any proof tending to show that he was discriminated
against by the respondent bank. While he vigorously cried that the newly hired bank
officers were afforded higher salaries and benefits compared to what he was earning,
petitioner, however, miserably failed to substantiate his claim. No evidence was ever
offered by petitioner to prove the amount of salaries and bonuses actually enjoyed by the
newly hired bank officers, except for his bare allegations contained in his demand letter 34
dated 20 February 2001, to wit:
Mr. Portuguez has reliably learned that Bank records could show that your newly hired
officers are being paid the basic salaries in the range of ₱25,000 to ₱30,000.35
Such bare and sweeping statement contains nothing but empty imputation of a fact that
could hardly be given any evidentiary weight by this Court. It is indeed true that the
demand letter made reference to bank records upon which petitioner purportedly derived
his allegation but no such bank records were ever presented as evidence at any stage of
the proceedings.
Indubitably, such self-serving and unsubstantiated declaration is insufficient to establish a
case before quasi-judicial bodies. Well-entrenched is the rule that the quantum of evidence
required to establish a fact in quasi-judicial bodies is substantial evidence. Substantial
evidence is such amount of relevant evidence which a reasonable mind might accept as
adequate to support a conclusion, even if other equally reasonable minds might opine
otherwise.36
It is beyond question that the evidence presented by petitioner cannot be considered as
substantial evidence. Verily, petitioner’s case is devoid of substance to convince even the
unreasonable minds, for evidently the records are stripped of supporting proofs to, at the
very least, even just verify his claim.
In addition, petitioner asseverates that in cases of constructive dismissal, the burden of
proof rests on the employer to show that the employee was dismissed on a valid and just
cause.37 And failing to discharge such presumption, as in the case at bar, respondent bank
should be adjudged guilty of illegal dismissal.
Again, we are not persuaded. We are not unaware of the statutory rule that in illegal
dismissal cases, the employer has the onus probandi to show that the employee’s
separation from employment is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient cause.38 It bears stressing,
however, that this legal principle presupposes that there is indeed an involuntary
separation from employment and the facts attendant to such forced separation was clearly
established.
This legal principle has no application in the instant controversy for as we have succinctly
pointed above, petitioner failed to establish that indeed he was discriminated against and
on account of such discrimination, he was forced to sever his employment from the
respondent bank. What is undisputed is the fact that petitioner availed himself of
respondent bank’s early voluntary retirement program and accordingly received his
retirement pay in the amount of ₱1.324 Million under such program. Consequently, the
burden of proof will not vest on respondent bank to prove the legality of petitioner’s
separation from employment but aptly remains with the petitioner to prove his allegation
that his availment of the early voluntary retirement program was, in fact, done
involuntarily.
As we have explicitly ruled in Machica v. Roosevelt Service Center, Inc.39:
The rule is that one who alleges a fact has the burden of proving it; thus, petitioners were
burdened to prove their allegation that respondents dismissed them from their
employment. It must be stressed that the evidence to prove this fact must be clear, positive
and convincing. The rule that the employer bears the burden of proof in illegal dismissal
cases finds no application here because the respondents deny having dismissed the
petitioners. (Emphases supplied.)
Verily, petitioner did not present any clear, positive or convincing evidence in the present
case to support his claims. Indeed, he never presented any evidence at all other than his
own self-serving declarations. We must bear in mind the legal dictum that, "he who asserts,
not he who denies, must prove."40
In the same breath, we are constrained to deny petitioner’s claim for salary differentials.
We are not unmindful that the amount of ₱19,000 a month may not be commensurate
compensation to the position of Acting Assistant Vice-President, but in the case at bar, the
facts and the evidence did not establish even at least a rational basis for how much the
standard compensation for the said position must be. It is not enough that petitioner
perceived that he was receiving a very low salary in the absence of a comparative standard
upon which he can peg his supposed commensurate compensation.
Petitioner’s incessant reliance on the findings of the Labor Arbiter and the NLRC is equally
unavailing. At the outset, we have already laid down that findings of fact of quasi-judicial
bodies are conclusive and are not subject to review by the Court. However, this rule does
not apply if such findings are tainted with mistake or not supported by evidence. 41
In finding that respondent bank is guilty of constructive dismissal, the Labor Arbiter mainly
hinges its ruling on the Constitutional dogma that due to the lopsided power of capital over
labor, the State shall intervene as an equalizer consistent with the social justice policy
affording protection to labor.42
While we agree with the Labor Arbiter that in light of this Constitutional mandate, we must
be vigilant in striking down any attempt of the management to exploit or oppress the
working class, it does not mean, however, that we are but bound to uphold the working
class in every labor dispute brought before this Court for our resolution.
While our laws endeavor to give life to the constitutional policy on social justice and on the
protection of labor, it does not mean that every labor dispute will be decided in favor of
the workers. The law also recognizes that management has rights which are also entitled to
respect and enforcement in the interest of fair play.43
It should be remembered that the Philippine Constitution, while inexorably committed
towards the protection of the working class from exploitation and unfair treatment,
nevertheless mandates the policy of social justice so as to strike a balance between an
avowed predilection for labor, on the one hand, and the maintenance of the legal rights of
capital, the proverbial hen that lays the golden egg, on the other. Indeed, we should not be
unmindful of the legal norm that justice is in every case for the deserving, to be dispensed
with in light of established facts, the applicable law, and existing jurisprudence.44
The presumption in favor of labor cannot defeat the very purpose for which our labor laws
exist: to balance the conflicting interest of labor and management and to guaranty that
labor and management stand on equal footing when bargaining in good faith with each
other, not to tilt the scale to favor one over the other.
WHEREFORE, in view of the foregoing, the instant petition is DENIED. The Decision dated 25
April 2005, and the Resolution dated 25 August 2005, both rendered by the Court of
Appeals in CA-G.R. SP No. 85723, are hereby AFFIRMED. No costs.
SO ORDERED.
[ G.R. No. 195297, December 05, 2018 ]
COCA-COLA BOTTLERS PHILIPPINES, INC., PETITIONER, VS. ILOILO COCA-COLA PLANT
EMPLOYEES LABOR UNION (ICCPELU), AS REPRESENTED BY WILFREDO L. AGUIRRE,
RESPONDENT.
DECISION
A. REYES, JR., J.:
Challenged before this Court via this Petition for Review on Certiorari[1] under Rule 45 of
the Rules of Court is the Decision[2] dated June 23, 2010 of the Court of Appeals (CA), and
its Resolution[3] dated October 19, 2010 which reversed the Decision[4] dated September 7,
2006 of the National Conciliation and Mediation Board (NCMB), Regional Branch No.6,
Iloilo City, in Case No. PAC-613-RB6-02-01-06-2006.
The Antecedent Facts
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in
the business of manufacturing and selling of leading non-alcoholic products and other
beverages.[5] It operates a manufacturing plant in Ungka, Pavia, Iloilo City, where the
aggrieved former employees herein, as represented by respondent Iloilo Coca-Cola Plant
Employees Labor Union (respondent), worked as regular route drivers and helpers.[6]
The conflict arose due to the CCBPI's policy involving Saturday work. In the said policy,
several of CCBPI's employees were required to report for work on certain Saturdays to
perform a host of activities, usually involving maintenance of the facilities. This prerogative
was supposedly consistent with the pertinent provisions[7] in the Collective Bargaining
Agreement (CBA) between CCBPI and its employees, which stated that management had
the sole option to schedule, work on Saturdays on the basis of operational necessity.[8]
CCBPI later on informed the respondent that, starting July 2, 2005, Saturday work would no
longer be scheduled, with CCBPI citing operational necessity as the reason for the
decision.[9] Specifically, the discontinuance was done with the purpose of saving on
operating expenses and compensating for the anticipated decreased revenues. As Saturday
work involved maintenance-related activities, CCBPI would then only schedule the day's
work as the need arose for these particular undertakings, particularly on some Saturdays
from September to December 2005.[10]
On July 1, 2005, the parties met, with CCBPI's Manufacturing Manager setting forth the
official proposal to stop the work schedule during Saturdays.[11] This proposal was opposed
and rejected by the officers and members of the respondent who were present at the
meeting. Despite this opposition, CCBPI pushed through with the non-scheduling of work
on the following Saturday, July 2, 2005.
As a result of the foregoing, the respondent submitted to CCBPI its written grievance,
stating therein that CCBPI's act of disallowing its employees to report during Saturday is a
violation of the CBA provisions, specifically Section 1, Article 10 thereof.[12] Along with the
submission of the written grievance, the respondent also requested a meeting with CCBPI
to discuss the issue. CCBPI response to the request, however, was to merely send a letter
reiterating to the respondent that under the set of facts, management has the option to
schedule work on Saturday on the basis of operational necessity.[13] Further letters on the
part of the respondent were responded to in the same way by CCBPI.
Respondent thus brought its grievances to the office of the NCMB, and on June 9, 2006,
the parties pursuant to the provisions of their CBA submitted the case for voluntary
arbitration.[14] The panel comprised of three (3) voluntary arbitrators (the Panel of
Arbitrators), was charged with resolving two issues: First, whether or not members of the
respondent were entitled to receive their basic pay during Saturdays under the CBA even if
they would not report for work, and second, whether or not CCBPI could be compelled by
the respondent to provide work to its members during Saturdays under the CBA.[15]
After the presentation of evidence and the subsequent deliberations, the Panel of
Arbitrators ruled in favor of CCBPI, the dispositive part of the decision reading:
IN VIEW OF THE FOREGOING, the Panel of Arbitrators, rules on the first issue, that the
Complainant's Union members are nary entitled to receive their Basic Pay during Saturdays
under the CBA if they are not reporting for work, under Section I Article 10, and Sections
1(c) and 3(c) Article II of the CBA.
On the second issue, the PANEL, rules that [CCBPI] cannot be compelled by the
Complainant Union to provide works to its members during Saturdays under the CBA, for
lack of legal and factual basis.
SO ORDERED.[16]
Respondent's Motion for Reconsideration to the Panel of Arbitrators' ruling was denied for
lack of merit on October 24, 2006.[17]
Unwilling to accept the findings of the Panel of Arbitrators, the respondent elevated its
case to the CA via a Petition for Review under Rule 43 of the Rules of Court. After a review
of the same, the CA subsequently rendered a Decision[18] dated June 23, 2010 granting the
respondent's Petition for Review and reversing the decision of the Panel of Arbitrators. The
dispositive portion of the CA decision reads, to wit:
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision, dated
07 September 2006, and, Order, dated 24 October 2006, respectively, by the panel of
voluntary arbitrators, namely: Atty. Mateo A. Valenzuela, Atty. Inocencio Fener, Jr., and
Gloria Aniola, of the NCMB. Regional Branch No. 6, Iloilo City, are REVERSED and SET ASIDE.
A NEW judgment is rendered ORDERING CCBPI to:
1. COMPLY with the CBA provisions respecting its normal work week, that is, from Monday
to Friday for eight (8) hours a day and on Saturdays for four (4) hours;
2. ALLOW the concerned union members to render work for four (4) hours on Saturdays;
and
3. PAY the corresponding wage for the Saturdays work which were not performed pursuant
to its order to do so commencing on 02 July 2005, the date when it actually refused the
concerned union members to report tor work, until the finality of this decision. The rate for
work rendered on a Saturday is composed of the whole daily rate (not the amount
equivalent to one-half day rate) plus the corresponding premium.
No Costs.
SO ORDERED.[19]
CCBPI's Motion for Reconsideration was denied by the CA in a Resolution[20] dated October
19, 2010 received on January 28, 2011. On appeal to this Court, on February 11, 2011,
CCBPI filed Motion for Extension and requested for an additional period of 30 days from
February 12, 2011, or until March 14, 2014, within which to file its Petition for Certiorari,
which was granted by this Court in a Resolution[21] dated February 21, 2011.
Hence, this Petition, to which the respondent filed a Comment[22] to on June 11, 2011, the
latter pleading responded to by CCBPI via Reply[23] on September 6, 2011.
The Issues of the Case
A perusal of the parties' pleadings will show the following issues and points of contention:
First, whether or not the CA erred in ruling that under the CBA between the parties,
scheduling Saturday work for CCBPI's employees is mandatory on the part of the Company.
Second, whether scheduling Saturday work has ripened into a company practice, the
removal of which constituted a diminution of benefits, to which CCBPI is likewise liable to
the affected employees for, including the corresponding wage for the Saturday work which
was not performed pursuant to the policy of the Company to remove Saturday work based
on operational necessity.
 The Arguments of the Parties
It is the contention of CCBPI that the CA erred in reversing the decision of the Panel of
Arbitrators and finding that the CBA gave the employees the right to compel CCBPI to give
work on Saturdays, that the scheduling of work on a Saturday had ripened into a company
practice, and that the subsequent withdrawal of Saturday work constituted a prohibited
diminution of wages. CCBPI states that this ruling is contrary to fact and law and unduly
prejudiced CCBPI as the company was ordered to allow the affected employees to render
work for four hours on Saturdays. CCBPI was also ordered to pay the corresponding wage
for the Saturday work which were not performed pursuant to its order to do so, the said
amount corresponding to the date when the company actually refused the affected
employees to report for work, until the finality of this decision.[24]
CCBPI argues that based on the provisions of its CBA, specifically Article 10, Section 1, in
relation with, Article 11, Section 1 (c) and Section 2(c), it is clear that work on a Saturday is
optional on the part of management,[25] and constitutes a legitimate management
prerogative that is entitled to respect and enforcement in the interest of simple fair play.[26]
CCBPI likewise posits that the option to schedule work necessarily includes the prerogative
not to schedule it. And, as the provisions in the CBA are unmistakable and unambiguous,
the terms therein are to be understood literary just as they appear on the face of the
contract.[27]
For CCBPI, permitting the workers to suffer work on a Saturday would render the phrase
"required to work'' in Article 10, Section 1 and Article II, Section 2(c) meaningless and
superfluous, as while the scheduling of Saturday work would be optional on the pat1of
management, the workers would still be required to render service even if no Saturday
work was scheduled.[28]
Aside front the clear and unambiguous provisions of the CBA, CCBPI states that the
evidence on record negates the finding that Saturday work is mandatory.[29] The evidence
shows that only some, and not all the same daily-paid employees reported for work on a
Saturday, and the number of the daily-paid employees who reported for work on a
Saturday always depended on the CCBPI's operational necessity.[30] The optional nature of
the work on the Saturday is also highlighted by the fact that, subject to the fulfillment of
certain conditions, the employees who were permitted to suffer work on such day are
compensated with a premium pay.[31] This means that work on a Saturday is part of the
normal work week, as there would be no reason why employees who reported for work on
such date should be given additional compensation or premium pay.
CCBPI also disagrees with the CA that the scheduling of work on a Saturday had ripened
into a company practice and that the withdrawal of Saturday work constitutes a prohibited
diminution of wages.[32] CCBPI maintains that work on a Saturday does not amount to a
benefit as a result of a long-established practice. CCBPI states that in several analogous
cases involving overtime work, Manila Jockey Club Employees Labor-Union-PTGWO v.
Manila Jockey Club, Inc.[33] and San Miguel Corporation v. Layoc, Jr.,[34] the Court has
already ruled that the work given in excess of the regular work hours is not a "benefit" and
the previous grant thereof cannot amount to a "company practice." CCBPI particularly cites
the Layoc case which held that there is no violation of the rule on non-diminution of
benefits as.the nature of overtime work of the supervisory employees would show that
these are not freely given by the employer, and that on the contrary, the payment of
overtime pay is made as a means of compensation for services rendered in addition to the
regular hours of work.[35]
CCBPI likewise cites several cases involving overtime work, there the Court ruled that the
work given in excess of the regular work hours is not a "benefit" and the previous grant
thereof cannot amount to a "company practice."[36] As a premium day, that Saturday would
have the effect of being a holiday wherein the employees are entitled to receive their pay
whether they reported for work or not.[37]
For CCBPI, the previous grant of Saturday work cannot amount to a benefit that cannot be
withdrawn by the Company. Contrary to the nature of "benefits" under the law, CCBPI did
not freely give payment for Saturday work, instead paying the employees the
corresponding wage and premium pay as compensation for services rendered in addition
to the regular work of eight (8) hours per day from Mondays to Fridays.[38]
On the other hand, the respondents argue that CCBPI failed to regard the express provision
of the CBA which delineates CCBPI's normal work-week which consists of five (5)
consecutive days (Monday to Friday) or eight (8) hours each and one (1) day (Saturday) of
four (4) hours.[39] The highlighted provision reads as follows:
 ARTICLE 10 premium pay amounting to 50% of their hourly rate for the first eight (8) hours, and 75% of
HOURS OF WORK their hourly rate for the work rendered in excess thereof under Article 11, Section 2(c) of
the CBA.[47]

SECTION 1. Work Week. For daily paid workers the nom1al work week shall consist of five Ruling of the Court
(5) consecutive days (Monday to Friday) of eight (8) hours each find one (1) day (Saturday)
of four (4) hours. Provided, however, that any worker required to work on Saturday must The petition is impressed with merit..
complete the scheduled shift tor the day and shall be entitled to the premium pay provided
in Article IX hereof. As to whether or not the CBA between the parties mandates that CCBII schedule Saturday
work for its employees.
As such, the respondent advocates that the various stipulations of a contract shall be
interpreted together, and that assuming there is any ambiruity in the CBA, this ambiguity
A CBA is the negotiated contract between a legitimate labor organization and the employer
should not prejudice respondents under the principle that any doubt in all labor legislation
concerning wages, hours of work, and all other terms and conditions of employment in a
and all labor contracts shall be construed in favor of the safety and decent living for the
bargaining unit.[48] It incorporates the agreement reached after negotiations between the
laborer.[40] According to the respondent, Article 11, Section 1(c) merely grants to CCBPI the
employer and the bargaining agent with respect to terms and conditions of
option to schedule work on Saturdays on the basis of operational necessity, and by
employment.[49]
contrast nothing in the CBA allegedly allows or grants CCBPI the right or prerogative to
unilaterally amend the duly established work week by eliminating Saturday work.[41]
It is axiomatic that the CBA comprises the law between the contracting parties, and
compliance therewith is mandated by the express policy of the law.[50] The literal meaning
Respondent also alleges that CCBPI was obliged to provide work on Saturday, not only due
of the stipulations of the CBA, as with every other contract, control if they are clear and
to the apparent .mandate in the CBA, but also as the same ripened into an established
leave no doubt upon the intention of the contracting parties. Thus, where the CBA is clear
company practice, as CCBPI's practice of providing Saturday work had been observed for
and unambiguous, it, becomes the law between the parties and compliance therewith is
several years.[42] Respondent thus contends that the unilateral abrogation of the same
mandated by the express policy of the law.[51] Moreover, it is a familiar rule in
would squarely tantamount to diminution of benefits, especially as the CBA itself expressly
interpretation of contracts that the various stipulations of a contract shall be interpreted
provides that Saturday is part of CCBPI's normal work week, hence the same cannot be
together, attributing to the doubtful ones that sense which may result from all of them
unilaterally eliminated by CCBPI,[43] and that the option granted by the CBA to CCBPI is
taken jointly.[52]
merely to schedule Saturday work, not eliminate it entirely. Thus, to eliminate the Saturday
work allegedly would amount to diminution of benefits because the affected employees
Consequently, in this case, recourse to the CBA between CCBPI and the respondent as
are ultimately deprived of their supposed salaries or income for that day.[44]
regards the hours of work is essential. In Article 10 of the CBA, the company work week is
elaborated while also defining how a Saturday is treated and in fact delineating the same
In its Reply[45] to the counter-arguments posited by the respondent in its Comment, CCBPI
from the other days of the work week:
alleges that if indeed Saturday work is mandatory under the CBA and all the workers are
obliged to render work on a Saturday, then the phrase "required to work" under Article 10,
Section 1 and Article 11, Section 2(c) would be meaningless and superfluous.[46] Also, CCBPI
takes stock in the fact that the compensation for work on Saturday is not freely given. ARTICLE 10
Under the scheme followed by the parties under the CBA, i.e., if the daily-paid employees Hours of Work
were permitted to suffer work on a Saturday, they are given additional compensation or

SECTION 1. Work Week. For daily paid workers, the normal work week shall consist of five
(5) consecutive days (Monday to Friday) of eight (8) hours and each and one (1) day
(Saturday) of four (4) hours, provided, however, that any worker required to work on
Saturday must complete the scheduled shift for the day and shall be entitled to the
premium pay provided in Article IX hereof.
xxxx
(c) Saturdays. Saturday is a premium day but shall not be considered as a rest day or
equivalent to a Sunday. It is further agreed that management has the option to schedule
work on Saturdays on the basis of operational necessity.
Section 5 of Article 9 of the CBA, explicitly referred to in Article 10 states:
SECTION 5. Special Bonus. When a regular employee goes out on his route on a Saturday,
Sunday, or Legal Holiday, either because he is so required by District Sale Supervisor or
because, after securing approval from the District Sales Supervisor. he voluntarily chooses
to do so. he shall be entitled to a special bonus of P280.00.
In making its decision, the CA reasoned that had it really been the intention that Saturday
work, by itself, is optional on CCBPI's part, then there would have been no need to state
under the CBA that Saturday is part of the, normal work week together with the Monday to
Friday schedule, and that if Saturday work is indeed optional, then it would have expressly
stipulated the same.[53] According to the CA's interpretation, the provision wherein CCBPI
had the option to schedule work on Saturdays on the basis of operational necessity, simply
meant that CCBPI could schedule the mandated four (4) hours work any time within the
24-hour period on that day, but not remove the hours entirely.[54]
For the CA, to interpret the phrase "option to schedule'' as limited merely to scheduling the
time of work on Saturdays and not the option to allow or disallow or to grant or not to
grant the Saturday work itself, is more consistent with the idea candidly stated in the CBA
regarding the work week which is comprised of five (5) consecutive days (Monday to
Friday) of eight (8) hours each and one (1) day (Saturday) of four (4) hours. The foregoing
interpretation, as held by the CA, is in harmony with the context and the established
practice in which the CBA is negotiated,[55] and that, based on the foregoing, CCBPI should
comply with the provisions respecting its normal work week, that is, from Monday to
Friday of eight (8) hours a day and on Saturdays for four (4) hours. CCBPI thus should allow
the concerned union members to render work for four (4) hours on Saturday.[56]
The Court disagrees with the interpretation of the CA. In the perusal of the same, the Court
finds that a more logical and harmonious interpretation of the CBA provisions wherein
Saturday work is optional and not mandatory keeps more with the agreement between the
parties.
To note, the CBA under Article 11, Section 1(c), clearly provides that CCBPI has the option
to schedule work on Saturdays based on operational necessity. There is no ambiguity to
the provision, and no other interpretation of the word "work" other than the work itself
and not the working hours. If the parties had truly intended that the option would be to
change only the working hours, then it would have so specified that whole term "working
hours" be used, as was done in other provisions of the CBA. By comparison, there is a
provision in Article 10 that states:
SECTION 2. Changes in Work Schedule. The present regular working hours shall be
maintained for the duration of this Agreement. However, it is hereby agreed that the
COMPANY may change the prevailing working hours, if in its judgment, it shall find such
change or changes advisable or necessary either as a permanent or temporary measure,
provided at least twelve (12) hours notice in advance is given of such change or changes,
and provided, further, that they are in accordance with law.
Here, hours are specified as that which can be changed regarding the work schedule. The
Court compares this to Article 11, where it is expressly stated' that management has the
option to schedule work on Saturdays on the basis of operational necessity. To emphasize,
if it is only the hours that management may amend, then it would have been so stated,
with that specific term used instead of just merely "work," a more general term.
Also, as correctly pointed out by CCBPI, if Saturday work is indeed mandatory under the
CBA, the phrase "required to work on a Saturday" in Article 10, Section 1 would be
superfluous. The same phrase is also found in Article 11, Section 2(c) which provides that
"a worker paid on daily basis required to work on a Saturday shall be paid his basic hourly
rate plus fifty (50%) percent thereof."
For the Court, the phrase "schedule work on Saturdays based on operational necessity," by
itself, is union recognition that there are times when exigencies of the business will arise
requiring a manning complement to suffer work for four additional hours per week.
Necessarily, when no such exigencies exist, the additional hours of work need not be
rendered.
As such, the provisions' tenor and plain meaning give company management the right to
compel its employees to suffer work on Saturdays. This necessarily includes the prerogative
not to schedule work. Whether or not work will be scheduled on a given Saturday is made
to depend on operational necessity. The CBA therefore gives CCBPI the management
prerogative to provide its employees with Saturday work depending on the exigencies of
the business.
This reading of the CBA is made even more apparent by the fact that workers who are
required to work on Saturdays are paid a premium for such work. Notably, in the section
on Premium Pay, it is stated:
(c) Saturdays. Even though Saturday is not his rest day - A worker paid on daily basis
required to work on a Saturday shall be paid his basic hourly rate plus fifty (50%) percent
thereof for each hour worked not in excess of eight hours; if he is required to work more
than eight (8) hours, he shall be paid his basic hourly rate plus seventy-five (75%) thereof
for each hour worked in excess of eight (8) hours.
If Saturday was part of the regular work week and not dependent on management's
decision to schedule work, there would be no need to give additional compensation to
employees who report to work on that day. The CA erred in taking into account that
employees required to work on that day but who would fai1 to report, would be marked
down as having gone on leave.[57] The Court agrees with CCBPI that such conclusion is non
sequitur and that the markings merely indicated the fact that they did not report for work
(even if required) and the reasons for their absence, whether legitimate or not.[58] This
understanding is bolstered by the fact that not all daily-paid workers were required to
report for work, which and if indeed Saturday was to be considered a regular work day, all
the3e employees should have been required to report for work.[59]
In sum, by not taking these provisions into account, the CA ignored the well-settled rule
that the various stipulations of a contract must be interpreted together. The Court finds
that relying on the interpretation of the CA would result in the patent absurdity that the
company would have to look for work for the employees to do even if there is none, on the
Saturday as stated. Even if one were to downplay the lack of logic with this assertion, as
mentioned the CBA provisions are clear and unambiguous, leaving no need for a separate
interpretation of the same.
As to whether scheduling Saturday work has ripened into a company practice, the removal
of which constituted a diminution of benefits.
In the decision of the CA, it was held that the fact that CCBPI had been providing work to its
employees every Saturday for several years, a circumstance that proved Saturday was part
of the regular work week, made the grant of Saturday work ripen into company practice.
In asking the Court to reverse the ruling of the CA, CCBPI argues that work on a Saturday is
akin to overtime work because employees who are required to perform such work are
given additional compensation or premium in the CBA.[60] Citing Layoc,[61] CCBPI stresses
that since overtime work does not fall within the definition of benefits, the same is not
protected by Article 100 of the Labor Code which proscribes the diminution of benefits. To
wit:
First. respondents assert that Article 100 of the Labor Code prohibits the elimination or
diminution of benefits. However, contrary to the nature of benefits, petitioners did not
freely give the payment for overtime work to respondents. Petitioners paid respondents
overtime pay as compensation for services rendered in addition to the regular work hours.
Respondents rendered overtime work only when their services were needed after their
regular working hours and only upon the instructions of their superiors. Respondents even
differ as to the amount of overtime pay received on account of the difference in the
additional hours of services rendered.
xxxx
Aside from their allegations, respondents were not able to present anything to prove that
petitioners were obliged to permit respondents to render overtime work and give them the
corresponding overtime pay. Even if petitioners did not institute a "no time card policy,"
respondents could not demand overtime pay from petitioners if respondents did not
render overtime work. The requirement of rendering additional service differentiates
overtime pay from benefits such as thirteenth month pay or yearly merit increase. These
benefits do not require any additional service from their beneficiaries. Thus, overtime pay
does not fall within the definition of benefits under Article 100 of the Labor Code.[62]
The Court does not agree with the argument of CCBPI. CCBPI overlooks the fact that the
term overtime work has an established and technical meaning under our labor laws, to wit:
Article 87. Overtime work. Work may be performed beyond eight (8) hours a day provided
that the employee is paid for the overtime work, an additional compensation equivalent to
his regular wage plus at least twenty-five percent (25%) thereof. Work performed beyond
eight hours on a holiday or rest day shall be paid an additional compensation equivalent to
the rate of the first eight hours on a holiday or rest day plus at least thirty percent (30%)
thereof.
It can be deduced from the foregoing provision that overtime work is work exceeding eight
hours within the worker's 24-hour workday.[63] What is involved in this case is work
undertaken within the normal hours of work on Saturdays and not work performed beyond
eight hours in one day. Under Article 83 of the Labor Code:
Article. 83. Normal hours of work. The normal hours of work of any employee shall not
exceed eight (8) hours a day.
Despite the mistaken notion of CCBPI that Saturday work is synonymous to overtime work,
the Court still disagrees with the CA ruling that the previous practice of instituting Saturday
work by CCBPI had ripened into a company practice covered by Article 100 of the Labor
Code.
To note, it is not Saturday work per se which constitutes a benefit to the company's
employees. Rather, the benefit involved in this case is the premium which the company
pays its employees above and beyond the minimum requirements set by law. The CBA
between CCBPI and the respondent guarantees the employees that they will be paid their
regular wage plus an additional 50% thereof for the first eight (8) hours of work performed
on Saturdays. Therefore, the benefit, if ever there is one, is the premium pay given by
reason of Saturday work, and not the grant of Saturday work itself.
In Royal Plant Workers Union v. Coca-Cola Bottlers Philippines, Inc.-Cebu Plant,[64] the Court
had the occasion to rule that the term "benefits" mentioned in the non-diminution rule
refers to monetary benefits or privileges given to the employee with monetary equivalents.
Stated otherwise, the employee benefits contemplated by Article 100 are those which are
capable of being measured in terms of money. Thus, it can be readily concluded from past
jurisprudential pronouncements that these privileges constituted money in themselves or
were convertible into monetary equivalents.[65]
In order for there to be proscribed diminution of benefits that prejudiced the affected
employees, CCBPI should have unilaterally withdrawn the 50% premium pay without
abolishing Saturday work. These are not the facts of the case at bar. CCBPI withdrew the
Saturday work itself, pursuant, as already held, to its management prerogative. In fact, this
management prerogative highlights the fact that the scheduling of the Saturday work was
actually made subject to a condition, i.e., the prerogative to provide the company's
employees with Saturday work based on the existence of operational necessity.
In Eastern Telecommunications Philippines, Inc. v. Eastern Telecoms Employees Union,[66]
the company therein allegedly postponed the payment of the 14th, 15th, and 16th month
bonuses contained in the CBA, and unilaterally made the payment subject to availability of
funds. Because of its severe financial condition, the company refused to pay the subject
bonuses. The Court, in holding that such act violated the proscription against diminution of
benefits, observed that the CBA provided for the subject bonuses without qualification-
their grant was not made to depend on the existence o,f profits. Since no conditions were
specified in the CBA for the grant of the subject benefits, the company could not use its
dire financial straits to justify the omission.
As compared to the factual milieu in the Eastern Telecommunications case, the CBA
between CCBPI and the respondent has no analogous provision which grants that the 50%
premium pay would have to be paid regardless of the occurrence of Saturday work. Thus,
the non-payment of the same would not constitute a violation of the diminution of
benefits rule.
Also, even assuming arguendo that the Saturday work involved in this case falls within the
definition of a "benefit" protected by law, the fact that it was made subject to a condition
(i.e., the existence of operational necessity) negates the application of Article 100 pursuant
to the established doctrine that when the grant of a benefit is made subject to a condition
and such condition prevails, the rule on non-diminution finds no application. Otherwise
stated, if Saturday work and its corresponding premium pay were granted to CCBPI's
employees without qualification, then the company's policy of permitting its employees to
suffer work on Saturdays could have perhaps ripened into company practice protected by
the non-diminution rule.
Lastly, the Court agrees with the assertion of CCBPI that since the affected employees are
daily-paid employees, they should be given their wages and corresponding premiums for
Saturday work only if they are permitted to suffer work. Invoking the time-honored rule of
"a fair day's work for a fair day's pay," the CCBPI argues that the CA's ruling that such
unworked Saturdays should be compensated is contrary to law and the evidence on
record.
The CA, for its part, ruled that the principle of "a fair day's work for a fair day's pay" was
irrelevant to the instant case. According to the appellate court, since CCBPI's employees
are daily-paid workers, they should be paid their whole daily rate plus the corresponding
premium pay in the absence of a specific CBA provision that directed wages to be paid on a
different rate on Saturdays. This was notwithstanding the fact that the duration of Saturday
work lasted only for four hours or half the time spent on other workdays.
The CA erred in this pronouncement. The age-old rule governing the relation between
labor and capital, or management and employee, of a "fair day's,wage for a fair day's labor"
remains the basic factor in determining employees' wages.[67] If there is no work performed
by the employee, there can be no wage.[68] In cases where the employee's failure to work
was occasioned neither by his abandonment nor by termination, the burden of economic
loss is not rightfully shifted to the employer; each party must bear his own loss.[69] In other
words, where the employee is willing and able to work and is not illegally prevented from
doing so, no wage is due to him. To hold otherwise would be to grant to the employee that
which he did not earn at the prejudice of the employer.
In the case at bar, CCBPI's employees were not illegally prevented from working on
Saturdays. The company was simply exercising its option not to schedule work pursuant to
the CBA provision which gave it the prerogative to do so. It therefore follows that the
principle of "no work, no pay" finds application in the instant case.
Having disposed of the issue on wages for unworked Saturdays in consonance with the
well-settled rule of "no work, no pay," this Court deems it unnecessary to belabor on the
CA ruling that the concerned employees should be paid their whole daily rate, and not the
amount equivalent to one-half day's wage, plus corresponding premium.
On a final note, the Court cannot emphasize enough that its primary role as the vanguard
of constitutional guaranties charges it with the solemn duty of affording full protection to
labor.[70] It is, in fact, well-entrenched in the deluge of our jurisprudence on labor law and
social legislation that the scales of justice usually tilt in favor of the workingman.[71] Such
favoritism, however, has not blinded the Court to the rule that justice is, in every case for
the deserving, to be dispensed in the light of the established facts and applicable law and
doctrine.[72] The law does not authorize the oppression or self-destruction of the
employer.[73] Management also has its own rights, which, as such, are entitled to respect
and enforcement in the interest of simple fair play.[74] After all, social justice is, in the
eloquent words of Associate Justice Jose P. Laurel, "the humanization of laws and the
equalization of social and economic forces by the State so that justice in its rational and
objectively secular conception may at least be approximated."[75]
WHEREFORE, the Decision of the Court of Appeals dated June 23, 2010, and the Resolution
dated October 19, 2010 are REVERSED and SET ASIDE. The Decision of the National
Conciliation and Mediation Board, Regional Branch No. 6, Iloilo City dated September 7,
2006, in Case No. PAC-613-RB6-02-01-06-2006 is AFFIRMED.
SO ORDERED.
G.R. No. 119205 April 15, 1998
SIME DARBY PILIPINAS, INC. petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY SALARIED
EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.
BELLOSILLO, J.:
Is the act of management in revising the work schedule of its employees and discarding
their paid lunch break constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires,
tubes and other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP),
private respondent, is an association of monthly salaried employees of petitioner at its
Marikina factory. Prior to the present controversy, all company factory workers in Marikina
including members of private respondent union worked from 7:45 a.m. to 3:45 p.m. with a
30-minute paid "on call" lunch break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees
advising all its monthly salaried employees in its Marikina Tire Plant, except those in the
Warehouse and Quality Assurance Department working on shifts, a change in work
schedule effective 14 September 1992 thus —
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule of the factory
office will be as follows:
7:45 A.M. — 4:45 P.M. (Monday to Friday)
7:45 A.M. — 11:45 A.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. — 10:30 A.M. and
2:30 P.M. — 3:30 P.M.
Lunch break will be between:
12:00 NN — 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA employees who are
on shifting. Their work and break time schedules will be maintained as it is now.1
Since private respondent felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of its
members a complaint with the Labor Arbiter for unfair labor practice, discrimination and
evasion of liability pursuant to the resolution of this Court in Sime Darby International Tire
Co., Inc. v. NLRC.2 However, the Labor Arbiter dismissed the complaint on the ground that
the change in the work schedule and the elimination of the 30-minute paid lunch break of
the factory workers constituted a valid exercise of management prerogative and that the
new work schedule, break time and one-hour lunch break did not have the effect of
diminishing the benefits granted to factory workers as the working time did not exceed
eight (8) hours.
The Labor Arbiter further held that the factory workers would be unjustly enriched if they
continued to be paid during their lunch break even if they were no longer "on call" or
required to work during the break. He also ruled that the decision in the earlier Sime Darby
case3 was not applicable to the instant case because the former involved discrimination of
certain employees who were not paid for their 30-minute lunch break while the rest of the
factory workers were paid; hence, this Court ordered that the discriminated employees be
similarly paid the additional compensation for their lunch break.
Private respondent appealed to respondent National Labor Relations Commission (NLRC)
which sustained the Labor Arbiter and dismissed the appeal.4 However, upon motion for
reconsideration by private respondent, the NLRC, this time with two (2) new
commissioners replacing those who earlier retired, reversed its earlier decision of 20 April
1994 as well as the decision of the Labor Arbiter.5 The NLRC considered the decision of this
Court in the Sime Darby case of 1990 as the law of the case wherein petitioner was
ordered to pay "the money value of these covered employees deprived of lunch and/or
working time breaks." The public respondent declared that the new work schedule
deprived the employees of the benefits of a time-honored company practice of providing
its employees a 30-minute paid lunch break resulting in an unjust diminution of company
privileges prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition
alleging that public respondent committed grave abuse of discretion amounting to lack or
excess of jurisdiction: (a) in ruling that petitioner committed unfair labor practice in the
implementation of the change in the work schedule of its employees from 7:45 a.m. —
3:45 p.m. to 7:45 a.m. — 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.;
(b) in holding that there was diminution of benefits when the 30-minute paid lunch break
was eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming the
decision of the NLRC, petitioner was authorized to discontinue the practice of having a 30-
minute paid lunch break should it decide to do so; and, (d) in ignoring petitioner's inherent
management prerogative of determining and fixing the work schedule of its employees
which is expressly recognized in the collective bargaining agreement between petitioner
and private respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and motion
recommending that the petitioner be granted, alleging that the 14 August 1992
memorandum which contained the new work schedule was not discriminatory of the union
members nor did it constitute unfair labor practice on the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the
employees rests principally on their employer. In the instant case petitioner, as the
employer, cites as reason for the adjustment the efficient conduct of its business
operations and its improved production.6 It rationalizes that while the old work schedule
included a 30-minute paid lunch break, the employees could be called upon to do jobs
during that period as they were "on call." Even if denominated as lunch break, this period
could very well be considered as working time because the factory employees were
required to work if necessary and were paid accordingly for working. With the new work
schedule, the employees are now given a one-hour lunch break without any interruption
from their employer. For a full one-hour undisturbed lunch break, the employees can freely
and effectively use this hour not only for eating but also for their rest and comfort which
are conducive to more efficiency and better performance in their work. Since the
employees are no longer required to work during this one-hour lunch break, there is no
more need for them to be compensated for this period. We agree with the Labor Arbiter
that the new work schedule fully complies with the daily work period of eight (8) hours
without violating the Labor Code.7 Besides, the new schedule applies to all employees in
the factory similarly situated whether they are union members or not.8
Consequently, it was grave abuse of discretion for public respondent to equate the earlier
Sime Darby case9 with the facts obtaining in this case. That ruling in the former case is not
applicable here. The issue in that case involved the matter of granting lunch breaks to
certain employees while depriving the other employees of such breaks. This Court affirmed
in that case the NLRC's finding that such act of management was discriminatory and
constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of
employees but only the issue of whether the change of work schedule, which management
deems necessary to increase production, constitutes unfair labor practice. As shown by the
records, the change effected by management with regard to working time is made to apply
to all factory employees engaged in the same line of work whether or not they are
members of private respondent union. Hence, it cannot be said that the new scheme
adopted by management prejudices the right of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may devise
means to attain that goal. Even as the law is solicitous of the welfare of the employees, it
must also protect the right of an employer to exercise what are clearly management
prerogatives.10 Thus, management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay off of workers
and discipline, dismissal and recall of workers.11 Further, management retains the
prerogative, whenever exigencies of the service so require, to change the working hours of
its employees. So long as such prerogative is exercised in good faith for the advancement
of the employer's interest and not for the purpose of defeating or circumventing the rights
of the employees under special laws or under valid agreements, this Court will uphold such
exercise.12
While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every dispute will be automatically decided in
favor of labor. Management also has rights which, as such, are entitled to respect and
enforcement in the interest of simple fair play. Although this Court has inclined more often
than not toward the worker and has upheld his cause in his conflicts with the employer,
such favoritism has not blinded the Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law and
doctrine.13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations
Commission dated 29 November 1994 is SET ASIDE and the decision of the Labor Arbiter
dated 26 November 1993 dismissing the complaint against petitioner for unfair labor
practice is AFFIRMED.
SO ORDERED.
G.R. No. 164774 April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer
banning spouses from working in the same company violates the rights of the employee
under the Constitution and the Labor Code or is a valid exercise of management
prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated
August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor
Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading –
principally of paper products. Josephine Ongsitco is its Manager of the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol),
Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the
company.1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage,
Ongsitco advised the couple that should they decide to get married, one of them should
resign pursuant to a company policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative,
up to [the] 3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another
female) developed a friendly relationship during the course of their employment
and then decided to get married, one of them should resign to preserve the policy
stated above.3
Simbol resigned on June 20, 1998 pursuant to the company policy.4
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-
employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that
pursuant to company policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker.
Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The company
allegedly could have terminated her services due to immorality but she opted to resign on
December 21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They stated therein
that they have no money and property accountabilities in the company and that they
release the latter of any claim or demand of whatever nature.7
Respondents offer a different version of their dismissal. Simbol and Comia allege that they
did not resign voluntarily; they were compelled to resign in view of an illegal company
policy. As to respondent Estrella, she alleges that she had a relationship with co-worker
Zuñiga who misrepresented himself as a married but separated man. After he got her
pregnant, she discovered that he was not separated. Thus, she severed her relationship
with him to avoid dismissal due to the company policy. On November 30, 1999, she met an
accident and was advised by the doctor at the Orthopedic Hospital to recuperate for
twenty-one (21) days. She returned to work on December 21, 1999 but she found out that
her name was on-hold at the gate. She was denied entry. She was directed to proceed to
the personnel office where one of the staff handed her a memorandum. The
memorandum stated that she was being dismissed for immoral conduct. She refused to
sign the memorandum because she was on leave for twenty-one (21) days and has not
been given a chance to explain. The management asked her to write an explanation.
However, after submission of the explanation, she was nonetheless dismissed by the
company. Due to her urgent need for money, she later submitted a letter of resignation in
exchange for her thirteenth month pay.8
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorney’s fees. They averred that the aforementioned company policy
is illegal and contravenes Article 136 of the Labor Code. They also contended that they
were dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for
lack of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation
perceived as management prerogative. This management prerogative is quite broad and
encompassing for it covers hiring, work assignment, working method, time, place and
manner of work, tools to be used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers. Except as provided for or limited by special law,
an employer is free to regulate, according to his own discretion and judgment all the
aspects of employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on
January 11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for
Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as
follows:
(1) Declaring illegal, the petitioners’ dismissal from employment and ordering
private respondents to reinstate petitioners to their former positions without loss
of seniority rights with full backwages from the time of their dismissal until actual
reinstatement; and
(2) Ordering private respondents to pay petitioners attorney’s fees amounting to
10% of the award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding
that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional rights
towards marriage and the family of employees and of Article 136 of the Labor
Code; and
2. x x x respondents’ resignations were far from voluntary. 14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the
following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers, recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case
at bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed
resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice
a woman employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege
that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes
a new meaning if read together with the first paragraph of the rule. The rule does not
require the woman employee to resign. The employee spouses have the right to choose
who between them should resign. Further, they are free to marry persons other than co-
employees. Hence, it is not the marital status of the employee, per se, that is being
discriminated. It is only intended to carry out its no-employment-for-relatives-within-the-
third-degree-policy which is within the ambit of the prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from working in the same
company takes the nature of an anti-nepotism employment policy. Companies adopt these
policies to prevent the hiring of unqualified persons based on their status as a relative,
rather than upon their ability.17 These policies focus upon the potential employment
problems arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment
policies specifically prohibiting spouses from working for the same company. We note that
two types of employment policies involve spouses: policies banning only spouses from
working in the same company (no-spouse employment policies), and those banning all
immediate family members, including spouses, from working in the same company (anti-
nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19
there are twenty state statutes20 in the United States prohibiting marital discrimination.
Some state courts21 have been confronted with the issue of whether no-spouse policies
violate their laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants
utilize two theories of employment discrimination: the disparate treatment and the
disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an
employment policy is discriminatory on its face. No-spouse employment policies requiring
an employee of a particular sex to either quit, transfer, or be fired are facially
discriminatory. For example, an employment policy prohibiting the employer from hiring
wives of male employees, but not husbands of female employees, is discriminatory on its
face.22
On the other hand, to establish disparate impact, the complainants must prove that a
facially neutral policy has a disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate which spouse will be
required to transfer or leave the company, the policy often disproportionately affects one
sex.23
The state courts’ rulings on the issue depend on their interpretation of the scope of marital
status discrimination within the meaning of their respective civil rights acts. Though they
agree that the term "marital status" encompasses discrimination based on a person's
status as either married, single, divorced, or widowed, they are divided on whether the
term has a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as
married, single, divorced, or widowed reason that if the legislature intended a broader
definition it would have either chosen different language or specified its intent. They hold
that the relevant inquiry is if one is married rather than to whom one is married. They
construe marital status discrimination to include only whether a person is single, married,
divorced, or widowed and not the "identity, occupation, and place of employment of one's
spouse." These courts have upheld the questioned policies and ruled that they did not
violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it
encompassed the identity, occupation and employment of one's spouse. They strike down
the no-spouse employment policies based on the broad legislative intent of the state
statute. They reason that the no-spouse employment policy violate the marital status
provision because it arbitrarily discriminates against all spouses of present employees
without regard to the actual effect on the individual's qualifications or work performance. 27
These courts also find the no-spouse employment policy invalid for failure of the employer
to present any evidence of business necessity other than the general perception that
spouses in the same workplace might adversely affect the business.28 They hold that the
absence of such a bona fide occupational qualification29 invalidates a rule denying
employment to one spouse due to the current employment of the other spouse in the
same office.30 Thus, they rule that unless the employer can prove that the reasonable
demands of the business require a distinction based on marital status and there is no
better available or acceptable policy which would better accomplish the business purpose,
an employer may not discriminate against an employee based on the identity of the
employee’s spouse.31 This is known as the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employer’s no-spouse rule, the exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for which no alternative exists other
than the discriminatory practice.32 To justify a bona fide occupational qualification, the
employer must prove two factors: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and, (2) that there is a factual basis
for believing that all or substantially all persons meeting the qualification would be unable
to properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We
employ the standard of reasonableness of the company policy which is parallel to the bona
fide occupational qualification requirement. In the recent case of Duncan Association of
Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on
the validity of the policy of a pharmaceutical company prohibiting its employees from
marrying employees of any competitor company. We held that Glaxo has a right to guard
its trade secrets, manufacturing formulas, marketing strategies and other confidential
programs and information from competitors. We considered the prohibition against
personal or marital relationships with employees of competitor companies upon Glaxo’s
employees reasonable under the circumstances because relationships of that nature might
compromise the interests of Glaxo. In laying down the assailed company policy, we
recognized that Glaxo only aims to protect its interests against the possibility that a
competitor company will gain access to its secrets and procedures.35
The requirement that a company policy must be reasonable under the circumstances to
qualify as a valid exercise of management prerogative was also at issue in the 1997 case of
Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the employee was
dismissed in violation of petitioner’s policy of disqualifying from work any woman worker
who contracts marriage. We held that the company policy violates the right against
discrimination afforded all women workers under Article 136 of the Labor Code, but
established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a
"bona fide occupational qualification," or BFOQ, where the particular requirements of the
job would justify the same, but not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement of that nature would be
valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance.37 (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be
clearly established to uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity. The burden was
successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners’ sole contention that "the company did not just want to have two (2) or more of
its employees related between the third degree by affinity and/or consanguinity"38 is lame.
That the second paragraph was meant to give teeth to the first paragraph of the
questioned rule39 is evidently not the valid reasonable business necessity required by the
law.
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee.
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator,
to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its
business operations. Neither did petitioners explain how this detriment will happen in the
case of Wilfreda Comia, then a Production Helper in the Selecting Department, who
married Howard Comia, then a helper in the cutter-machine. The policy is premised on the
mere fear that employees married to each other will be less efficient. If we uphold the
questioned rule without valid justification, the employer can create policies based on an
unproven presumption of a perceived danger at the expense of an employee’s right to
security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The questioned
policy may not facially violate Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate impact theory, the only way it could pass
judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit
disproportionate, effect. The failure of petitioners to prove a legitimate business concern in
imposing the questioned policy cannot prejudice the employee’s right to be free from
arbitrary discrimination based upon stereotypes of married persons working together in
one company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction
is vast and extensive that we cannot prudently draw inferences from the legislature’s
silence41 that married persons are not protected under our Constitution and declare valid a
policy based on a prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that the questioned policy is
an invalid exercise of management prerogative. Corollarily, the issue as to whether
respondents Simbol and Comia resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular
fact that her resignation letter was written in her own handwriting. Both ruled that her
resignation was voluntary and thus valid. The respondent court failed to categorically rule
whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol
and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in
dire need of money. We examined the records of the case and find Estrella’s contention to
be more in accord with the evidence. While findings of fact by administrative tribunals like
the NLRC are generally given not only respect but, at times, finality, this rule admits of
exceptions,42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to
her alleged immoral conduct. At first, she did not want to sign the termination papers but
she was forced to tender her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got
impregnated by a married man and she could not stand being looked upon or talked about
as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation,
she would not have gone back to work at all. Nor would she have filed a suit for illegal
dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the
employee is compelled by personal reason(s) to dissociate himself from employment. It is
done with the intention of relinquishing an office, accompanied by the act of
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal
dismissal. Given the lack of sufficient evidence on the part of petitioners that the
resignation was voluntary, Estrella’s dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated
August 3, 2004 is AFFIRMED.1avvphil.net
SO ORDERED.
G.R. No. 163269 April 19, 2006
ROLANDO C. RIVERA, Petitioner,
vs.
SOLIDBANK CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision1 of the Court of Appeals
(CA) in CA-G.R. CV No. 52235 as well as its Resolution2 denying the Motion for Partial
Reconsideration of petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July 1, 1977. 3 He was initially
employed as an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant Accountant,
and Assistant Manager. Prior to his retirement, he became the Manager of the Credit
Investigation and Appraisal Division of the Consumer’s Banking Group. In the meantime,
Rivera and his brother-in-law put up a poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to its employees: (a) the
Ordinary Retirement Program (ORP), under which an employee would receive 85% of his
monthly basic salary multiplied by the number of years in service; and (b) the Special
Retirement Program (SRP), under which a retiring employee would receive 250% of the
gross monthly salary multiplied by the number of years in service.4 Since Rivera was only 45
years old, he was not qualified for retirement under the ORP. Under the SRP, he was
entitled to receive P1,045,258.95 by way of benefits.5
Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied
for retirement under the SRP. Solidbank approved the application and Rivera was entitled
to receive the net amount of P963,619.28. This amount included his performance incentive
award (PIA), and his unearned medical, dental and optical allowances in the amount of
P1,666.67, minus his total accountabilities to Solidbank amounting to P106,973.00.6 Rivera
received the amount and confirmed his separation from Solidbank on February 25, 1995.7
Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim,
which was notarized on March 1, 1995.8 Rivera acknowledged receipt of the net proceeds
of his separation and retirement benefits and promised that "[he] would not, at any time,
in any manner whatsoever, directly or indirectly engage in any unlawful activity prejudicial
to the interest of Solidbank, its parent, affiliate or subsidiary companies, their stockholders,
officers, directors, agents or employees, and their successors-in-interest and will not
disclose any information concerning the business of Solidbank, its manner or operation, its
plans, processes, or data of any kind."9
Aside from acknowledging that he had no cause of action against Solidbank or its affiliate
companies, Rivera agreed that the bank may bring any action to seek an award for
damages resulting from his breach of the Release, Waiver and Quitclaim, and that such
award would include the return of whatever sums paid to him by virtue of his retirement
under the SRP.10 Rivera was likewise required to sign an undated Undertaking as a
supplement to the Release, Waiver and Quitclaim in favor of Solidbank in which he
declared that he received in full his entitlement under the law (salaries, benefits, bonuses
and other emoluments), including his separation pay in accordance with the SRP. In this
Undertaking, he promised that "[he] will not seek employment with a competitor bank or
financial institution within one (1) year from February 28, 1995, and that any breach of the
Undertaking or the provisions of the Release, Waiver and Quitclaim would entitle Solidbank
to a cause of action against him before the appropriate courts of law.11 Unlike the Release,
Waiver and Quitclaim, the Undertaking was not notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as
Manager of its Credit Investigation and Appraisal Division of its Consumers’ Banking
Group.12 Upon discovering this, Solidbank First Vice-President for Human Resources
Division (HRD) Celia J.L. Villarosa wrote a letter dated May 18, 1995, informing Rivera that
he had violated the Undertaking. She likewise demanded the return of all the monetary
benefits he received in consideration of the SRP within five (5) days from receipt;
otherwise, appropriate legal action would be taken against him.13
When Rivera refused to return the amount demanded within the given period, Solidbank
filed a complaint for Sum of Money with Prayer for Writ of Preliminary Attachment 14
before the Regional Trial Court (RTC) of Manila on June 26, 1995. Solidbank, as plaintiff,
alleged therein that in accepting employment with a competitor bank for the same position
he held in Solidbank before his retirement, Rivera violated his Undertaking under the SRP.
Considering that Rivera accepted employment with Equitable barely three months after
executing the Undertaking, it was clear that he had no intention of honoring his
commitment under said deed.
Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28 plus
interests therein, and attorney’s fees, thus:
WHEREFORE, it is respectfully prayed that:
1. At the commencement of this action and upon the filing of a bond in such
amount as this Honorable Court may fix, a writ of preliminary attachment be
forthwith issued against the properties of the defendant as satisfaction of any
judgment that plaintiff may secure;
2. After trial, judgment be rendered ordering defendant to pay plaintiff the
following sums: NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED
NINETEEN AND 28/100 ONLY (P963,619.28) PESOS, Philippine Currency, as of 23
May 1995, plus legal interest of 12% per annum until fully paid;
3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00 for every
appearance by way of attorney’s fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the premises.15
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a copy of
the Release, Waiver and Quitclaim and Undertaking which Rivera executed.16
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary Attachment 17
ordering Deputy Sheriff Eduardo Centeno to attach all of Rivera’s properties not exempt
from execution. Thus, the Sheriff levied on a parcel of land owned by Rivera.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he
received the net amount of P963,619.28 as separation pay. However, the employment ban
provision in the Undertaking was never conveyed to him until he was made to sign it on
February 28, 1995. He emphasized that, prior to said date, Solidbank never disclosed any
condition to the retirement scheme, nor did it impose such employment ban on the bank
officers and employees who had previously availed of the SRP. He alleged that the
undertaking not to "seek employment with any competitor bank or financial institution
within one (1) year from February 28, 1995" was void for being contrary to the
Constitution, the law and public policy, that it was unreasonable, arbitrary, oppressive,
discriminatory, cruel, unjust, inhuman, and violative of his human rights. He further
claimed that the Undertaking was a contract of adhesion because it was prepared solely by
Solidbank without his participation; considering his moral and economic disadvantage, it
must be liberally construed in his favor and strictly against the bank.
On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment, alleging
therein that Rivera raised no genuine issue as to any material fact in his Answer except as
to the amount of damages. It prayed that the RTC render summary judgment against
Rivera. Solidbank alleged that whether or not the employment ban provision contained in
the Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It insisted
that Rivera signed the Undertaking voluntarily and for valuable consideration; and under
the Release, Waiver and Quitclaim, he was obliged to return the P963,619.28 upon
accepting employment from a competitor bank within the one-year proscribed period.
Solidbank appended to its motion the Affidavit of Villarosa, where she declared that Rivera
was employed by Equitable on May 1, 1995 for the same position he held before his
retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the pleadings of the parties
as well as Villarosa’s Affidavit, there are genuine issues as to material facts which call for
the presentation of evidence. He averred that there was a need for the parties to adduce
evidence to prove that he did not sign the Undertaking voluntarily. He claimed that he
would not have been allowed to avail of the SRP if he had not signed it, and consequently,
his retirement benefits would not have been paid. This was what Ed Nallas, Solidbank
Assistant Vice-President for HRD and Personnel, told him when he received his check on
February 28, 1995. Senior Vice-President Henry Valdez, his superior in the Consumers’
Banking Group, also did not mention that he would have to sign such Undertaking which
contained the assailed provision. Thus, he had no choice but to sign it. He insisted that the
question of whether he violated the Undertaking is a genuine issue of fact which called for
the presentation of evidence during the hearing on the merits of the case. He also asserted
that he could not cause injury or prejudice to Solidbank’s interest since he never acquired
any sensitive or delicate information which could prejudice the bank’s interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove that he had been faithful
to the provisions of the Release, Waiver and Quitclaim, and the Undertaking, and had not
committed any act or done or said anything to cause injury to Solidbank.18
Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that he had
to sign the Undertaking containing the employment ban provision, otherwise his availment
of the SRP would not push through. There was no truth to the bank’s allegation that, "in
exchange for receiving the larger amount of P1,045,258.95 under the SRP, instead of the
very much smaller amount of P224,875.81 under the ORP, he agreed that he will not seek
employment in a competitor bank or financial institution within one year from February 28,
1995." It was the bank which conceived the SRP to streamline its organization and all he did
was accept it. He stressed that the decision whether to allow him to avail of the SRP
belonged solely to Solidbank. He also pointed out that the employment ban provision in
the Undertaking was not a consideration for his availment of the SRP, and that if he did not
avail of the retirement program, he would have continued working for Solidbank for at
least 15 more years, earning more than what he received under the SRP. He alleged that he
intended to go full time into the poultry business, but after about two months, found out
that, contrary to his expectations, the business did not provide income sufficient to support
his family. Being the breadwinner, he was then forced to look for a job, and considering his
training and experience as a former bank employee, the job with Equitable was all he could
find. He insisted that he had remained faithful to Solidbank and would continue to do so
despite the case against him, the attachment of his family home, and the resulting mental
anguish, torture and expense it has caused them.19
In his Supplemental Opposition, Rivera stressed that, being a former bank employee, it was
the only kind of work he knew. The ban was, in fact, practically absolute since it applied to
all financial institutions for one year from February 28, 1995. He pointed out that he could
not work in any other company because he did not have the qualifications, especially
considering his age. Moreover, after one year from February 28, 1995, he would no longer
have any marketable skill, because by then, it would have been rendered obsolete by non-
use and rapid technological advances. He insisted that the ban was not necessary to
protect the interest of Solidbank, as, in the first place, he had no access to any "secret"
information which, if revealed would be prejudicial to Solidbank’s interest. In any case, he
was not one to reveal whatever knowledge or information he may have acquired during his
employment with said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from the 1995
SRP is purely a management prerogative. It was not for Rivera to question and decry the
bank’s policy to protect itself from unfair competition and disclosure of its trade secrets.
The substantial monetary windfall given the retiring officers was meant to tide them over
the one-year period of hiatus, and did not prevent them from engaging in any kind of
business or bar them from being employed except with competitor banks/financial
institutions.21
On December 18, 1995, the trial court issued an Order of Summary Judgment. 22 The fallo
of the decision reads:
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff and against
defendant ordering the latter to pay to plaintiff bank the amount of NINE HUNDRED SIXTY-
THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine
Currency, as of May 23, 1995, plus legal interest at 12% per annum until fully paid, and the
costs of the suit.
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are directed to
meet again and sit down to find out how they can finally end this rift and litigation, all in
the name of equity, for after all, defendant had worked for the bank for some 18 years. 23
The trial court declared that there was no genuine issue as to a matter of fact in the case
since Rivera voluntarily executed the Release, Waiver and Quitclaim, and the Undertaking.
He had a choice not to retire, but opted to do so under the SRP, and, in fact, received the
benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was not
unreasonable. To allow Rivera to be excused from his undertakings in said deed and, at the
same time, benefit therefrom would be to allow him to enrich himself at the expense of
Solidbank. The RTC ruled that Rivera had to return the P963,619.28 he received from
Solidbank, plus interest of 12% per annum from May 23, 1998 until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June 14, 2002
partially granting the appeal. The fallo of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed from is AFFIRMED
with the modification that the attachment and levy upon the family home covered by TCT
No. 51621 of the Register of Deeds, Las Piñas, Metro Manila, is hereby SET ASIDE and
DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any material fact except as to
the amount of damages. It ratiocinated that the agreement between Rivera and Solidbank
was the law between them, and that the interpretation of the stipulations therein could
not be left upon the whims of Rivera. According to the CA, Rivera never denied signing the
Release, Waiver, and Quitclaim, including the Undertaking regarding the employment
prohibition. He even admitted joining Equitable as an employee within the proscribed one-
year period. The alleged defenses of Rivera, the CA declared, could not prevail over the
admissions in his pleadings.1avvphil.net Moreover, Rivera’s justification for taking the job
with Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or fraud in its
execution. Having executed the said deed and thereafter receiving the benefits under the
SRP, he is deemed to have waived the right
to assail the same, hence, is estopped from insisting or retaining the said amount of
P963,619.28.
However, the CA ruled that the attachment made upon Rivera’s family home was void,
and, pursuant to the mandate of Article 155, in relation to Article 153 of the Family Code,
must be discharged.
Hence, this recourse to the Court.
Petitioner avers that –
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE SUMMARY
JUDGMENT RENDERED BY THE TRIAL COURT CONSIDERING THE EXISTENCE OF GENUINE
ISSUES AS TO MATERIAL FACTS WHICH CALL FOR THE PRESENTATION OF EVIDENCE IN A
TRIAL ON THE MERITS.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR EMPLOYMENT BAN
IMPOSED BY RESPONDENT SOLIDBANK UPON HEREIN PETITIONER NULL AND VOID FOR
BEING UNREASONABLE AND OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE
WHICH VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR CONSTITUTION AND LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION ORDERING
HEREIN RESPONDENT TO PAY SOLIDBANK THE AMOUNT OF P963,619.28 AS OF MAY 23,
1995, PLUS LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE PORTION OF THE
SUMMARY JUDGMENT ORDERING PETITIONER TO PAY SOLIDBANK LEGAL INTEREST OF
12% PER ANNUM UNTIL FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a genuine issue in their
pleadings, affidavits, and documents, that is, whether the employment ban incorporated in
the Undertaking which petitioner executed upon his retirement is unreasonable,
oppressive, hence, contrary to public policy; and (2) whether petitioner is liable to
respondent for the restitution of P963,619.28 representing his retirement benefits, and
interest thereon at 12% per annum as of May 23, 1995 until payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of the parties, and the
documents and affidavits appended thereto, genuine issues as to matters of fact were
raised therein. He insists that the resolution of the issue of whether the employment ban is
unreasonable requires the presentation of evidence on the circumstances which led to
respondent bank’s offer of the SRP and ORP, and petitioner’s eventual acceptance and
signing of the Undertaking on March 1, 1995. There is likewise a need to adduce evidence
on whether the employment ban is necessary to protect respondent’s interest, and
whether it is an undue restraint on petitioner’s constitutional right to earn a living to
support his family. He further insists that respondent is burdened to prove that it sustained
damage or injury by reason of his alleged breach of the employment ban since neither the
Release, Waiver and Quitclaim, and Undertaking he executed contain any provision that
respondent is automatically entitled to the restitution of the P963,619.28. Petitioner points
out that all the deeds provide is that, in case of breach thereof, respondent is entitled to
protection before the appropriate courts of law.
On the second issue, petitioner avers that the prohibition incorporated in the Release,
Waiver and Quitclaim barring him as retiree from engaging directly or indirectly in any
unlawful activity and disclosing any information concerning the business of respondent
bank, as well as the employment ban contained in the Undertaking he executed, are
oppressive, unreasonable, cruel and inhuman because of its overbreath. He reiterates that
it is against public policy, an unreasonable restraint of trade, because it prohibits him to
work for one year in the Philippines, ultimately preventing him from supporting his family.
He points out that a breadwinner in a family of four minor daughters who are all studying,
with a wife who does not work, one would have a very difficult time meeting the financial
obligations even with a steady, regular-paying job. He insists that the Undertaking deprives
him of the means to support his family, and ultimately, his children’s chance for a good
education and future. He reiterates that the returns in his poultry business fell short of his
expectations, and unfortunately, the business was totally destroyed by typhoon "Rosing" in
November 1995.
Petitioner further maintains that respondent’s management prerogative does not give it a
license to entice its employees to retire at a very young age and prohibit them from
seeking employment in a so-called competitor bank or financial institution, thus prevent
them from working and supporting their families (considering that banking is the only kind
of work they know). Petitioner avers that "management’s prerogative must be without
abuse of discretion. A line must be drawn between management prerogative regarding
business operations per se and those which affect the rights of the employees. In treating
its employees, management should see to it that its employees are at least properly
informed of its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he received was his retirement
benefit which he earned after serving the bank for 18 years. It was not a mere gift or
gratuity given by respondent bank, without the latter giving up something of value in
return. On the contrary, respondent bank received "valuable consideration," that is,
petitioner quit his job at the relatively young age of 45, thus enabling respondent to effect
its reorganization plan and forego the salary, benefits, bonuses, and promotions he would
have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to a cause of
action against him before the appropriate courts of law if he had violated the employment
ban. He avers that respondent must prove its entitlement to the P963,619.28. The
Undertaking contains no provision that he would have to return the amount he received
under the SRP; much less does it provide that he would have to pay 12% interest per
annum on said amount. On the other hand, the Release, Waiver and Quitclaim does not
contain the provision prohibiting him from being employed with any competitor bank or
financial institution within one year from February 28, 1995. Petitioner insists that he acted
in good faith when he received his retirement benefits; hence, he cannot be punished by
being ordered to return the sum of P963,619.28 which was given to him for and in
consideration of his early retirement.
Neither can petitioner be subjected to the penalty of paying 12% interest per annum on his
retirement pay of P963,619.28 from May 23, 1995, as it is improper and oppressive to him
and his family. As of July 3, 2002, the interest alone would amount to P822,609.67, thus
doubling the amount to be returned to respondent bank under the decision of the RTC and
the CA. The imposition of interest has no basis because the Release, Waiver and Quitclaim,
and the Undertaking do not provide for payment of interest. The deeds only state that
breach thereof would entitle respondent to bring an action to seek damages, to include the
return of the amount that may have been paid to petitioner by virtue thereof. On the other
hand, any breach of the Undertaking or the Release, Waiver and Quitclaim would only
entitle respondent to a cause of action before the appropriate courts of law. Besides, the
amount received by petitioner was not a loan and, therefore, should not earn interest
pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking employment with another
bank within one year from February 28, 1995 because he needed to earn a living to
support his family and finance his children’s education. Hence, the imposition of interest,
which is a penalty, is unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is the law
between it and petitioner. As such, the latter could not assail the deed after receiving the
retirement benefit under the SRP. As gleaned from the averments in his petition, petitioner
admitted that he executed the Undertaking after having been informed of the nature and
consequences of his refusal to sign the same, i.e., he would not be able to receive the
retirement benefit under the SRP.
Respondent maintains that courts have no power to relieve parties of obligations
voluntarily entered into simply because their contracts turned out to be disastrous deeds.
Citing the ruling of this Court in Eastern Shipping Lines, Inc. v. Court of Appeals, 26
respondent avers that petitioner is obliged to pay 12% per annum interest of the
P963,619.28 from judicial or extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it sustained damages,
including the amount thereof, and that neither the Release, Waiver and Quitclaim nor the
Undertaking obliged him to pay interest to respondent.
The petition is meritorious.
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
Section 1. Summary judgment for claimant. – A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor upon all or any part thereof.
xxxx
Sec. 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days
before the time specified for the hearing. The adverse party may serve opposing affidavits,
depositions, or admissions at least three (3) days before the hearing. After the hearing, the
judgment sought shall be rendered forthwith if the pleadings, supporting affidavits,
depositions, and admissions on file, show that, except as to the amount of damages, there
is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two requisites: (a) there
must be no genuine issue as to any material fact, except for the amount of damages; and
(b) the party presenting the motion for summary judgment must be entitled to a judgment
as a matter of law.27 Where, on the basis of the pleadings of a moving party, including
documents appended thereto, no genuine issue as to a material fact exists, the burden to
produce a genuine issue shifts to the opposing party. If the opposing party fails, the moving
party is entitled to a summary judgment.28
A genuine issue is an issue of fact which requires the presentation of evidence as
distinguished from an issue which is a sham, fictitious, contrived or a false claim. The trial
court can determine a genuine issue on the basis of the pleadings, admissions, documents,
affidavits or counteraffidavits submitted by the parties. When the facts as pleaded appear
uncontested or undisputed, then there is no real or genuine issue or question as to any fact
and summary judgment called for. On the other hand, where the facts pleaded by the
parties are disputed or contested, proceedings for a summary judgment cannot take the
place of a trial.29 The evidence on record must be viewed in light most favorable to the
party opposing the motion who must be given the benefit of all favorable inferences as can
reasonably be drawn from the evidence.30
Courts must be critical of the papers presented by the moving party and not of the
papers/documents in opposition thereto.31 Conclusory assertions are insufficient to raise
an issue of material fact.32 A party cannot create a genuine dispute of material fact through
mere speculations or compilation of differences.33 He may not create an issue of fact
through bald assertions, unsupported contentions and conclusory statements.34 He must
do more than rely upon allegations but must come forward with specific facts in support of
a claim. Where the factual context makes his claim implausible, he must come forward
with more persuasive evidence demonstrating a genuine issue for trial.35
Where there are no disputed material facts, the determination of whether a party
breached a contract is a question of law and is appropriate for summary judgment.36 When
interpreting an ambiguous contract with extrinsic evidence, summary judgment is proper
so long as the extrinsic evidence presented to the court supports only one of the
conflicting interpretations.37 Where reasonable men could differ as to the contentions
shown from the evidence, summary judgment might be denied.
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of Appeals
resolved the issue of whether a summary judgment is proper in a breach of contract action
involving the interpretation of such contract, and ruled that:
[A] contract can be interpreted by the court on summary judgment if (a) the contract’s
terms are clear, or (b) the evidence supports only one construction of the controverted
provision, notwithstanding some ambiguity. x x x If the court finds no ambiguity, it should
proceed to interpret the contract – and it may do so at the summary judgment stage. If,
however, the court discerns an ambiguity, the next step – involving an examination of
extrinsic evidence – becomes essential. x x x Summary judgment may be appropriate even
if ambiguity lurks as long as the extrinsic evidence presented to the court supports only
one of the conflicting interpretations.39
In this case, there is no dispute between the parties that, in consideration for his availment
of the SRP, petitioner executed the Release, Waiver and Quitclaim, and the Undertaking as
supplement thereto, and that he received retirement pay amounting to P963,619.28 from
respondent. On May 1, 1995, within the one-year ban and without prior knowledge of
respondent, petitioner was employed by Equitable as Manager of its Credit Investigation
and Appraisal Division, Consumers’ Banking Group. Despite demands, petitioner failed to
return the P963,619.28 to respondent on the latter’s allegation that he had breached the
one-year ban by accepting employment from Equitable, which according to respondent
was a competitor bank.
We agree with petitioner’s contention that the issue as to whether the post-retirement
competitive employment ban incorporated in the Undertaking is against public policy is a
genuine issue of fact, requiring the parties to present evidence to support their respective
claims.
As gleaned from the records, petitioner made two undertakings. The first is incorporated in
the Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly engage in any
unlawful activity prejudicial to the interest of the BANK, its parent, affiliate or subsidiary
companies, their stockholders, officers, directors, agents or employees, and their
successors-in-interest and will not disclose any information concerning the business of the
BANK, its manner or operation, its plans, processes or data of any kind.40
The second undertaking is incorporated in the Undertaking following petitioner’s execution
of the Release, Waiver and Quitclaim which reads:
4. That as a supplement to the Release and Quitclaim, I executed in favor of Solidbank on
FEBRUARY 28, 1995, I hereby expressly undertake that I will not seek employment with any
competitor bank or financial institution within one (1) year from February 28, 1995.41
In the Release, Waiver and Quitclaim, petitioner declared that respondent may bring "an
action for damages which may include, but not limited to the return of whatever sums he
may have received from respondent under said deed if he breaks his undertaking
therein."42 On the other hand, petitioner declared in the Undertaking that "any breach on
his part of said Undertaking or the terms and conditions of the Release, Waiver and
Quitclaim will entitle respondent to a cause of action against [petitioner] for protection
before the appropriate courts of law."43
Article 1306 of the New Civil Code provides that the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order or public policy. The freedom
of contract is both a constitutional and statutory right.44 A contract is the law between the
parties and courts have no choice but to enforce such contract as long as it is not contrary
to law, morals, good customs and against public policy.
The well-entrenched doctrine is that the law does not relieve a party from the effects of an
unwise, foolish or disastrous contract, entered into with full awareness of what he was
doing and entered into and carried out in good faith. Such a contract will not be discarded
even if there was a mistake of law or fact. Courts have no jurisdiction to look into the
wisdom of the contract entered into by and between the parties or to render a decision
different therefrom. They have no power to relieve parties from obligation voluntarily
assailed, simply because their contracts turned out to be disastrous deals.45
On the other hand, retirement plans, in light of the constitutional mandate of affording full
protection to labor, must be liberally construed in favor of the employee, it being the
general rule that pension or retirement plans formulated by the employer are to be
construed against it.46 Retirement benefits, after all, are intended to help the employee
enjoy the remaining years of his life, releasing him from the burden of worrying for his
financial support, and are a form of reward for being loyal to the employer. 47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries and in the
United States and the Philippines:
By "public policy," as defined by the courts in the United States and England, is intended
that principle of the law which holds that no subject or citizen can lawfully do that which
has a tendency to be injurious to the public or against the public good, which may be
termed the "policy of the law," or "public policy in relation to the administration of the
law." (Words & Phrases Judicially Defined, vol. 6, p. 5813, and cases cited.) Public policy is
the principle under which freedom of contract or private dealing is restricted by law for the
good of the public. (Id., Id.) In determining whether a contract is contrary to public policy
the nature of the subject matter determines the source from which such question is to be
solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)
The foregoing is sufficient to show that there is no difference in principle between the
public policy (orden publico) in the two jurisdictions (the United States and the Philippine
Islands) as determined by the Constitution, laws, and judicial decisions. 49
The Court proceeded to define "trade" as follows:
x x x In the broader sense, it is any occupation or business carried on for subsistence or
profit. Anderson’s Dictionary of Law gives the following definition: "Generally equivalent to
occupation, employment, or business, whether manual or mercantile; any occupation,
employment or business carried on for profit, gain, or livelihood, not in the liberal arts or in
the learned professions." In Abbott’s Law Dictionary, the word is defined as "an occupation,
employment or business carried on for gain or profit." Among the definitions given in the
Encyclopaedic Dictionary is the following: "The business which a person has learnt, and
which he carries on for subsistence or profit; occupation; particularly employment,
whether manual or mercantile, as distinguished from the liberal arts or the learned
professions and agriculture." Bouvier limits the meaning to commerce and traffic, and the
handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply
the broader meaning given by the lexicographers.50
In the present case, the trial court ruled that the prohibition against petitioner accepting
employment with a competitor bank or financial institution within one year from February
28, 1995 is not unreasonable. The appellate court held that petitioner was estopped from
assailing the post-retirement competitive employment ban because of his admission that
he signed the Undertaking and had already received benefits under the SRP.
The rulings of the trial court and the appellate court are incorrect.
There is no factual basis for the trial court’s ruling, for the simple reason that it rendered
summary judgment and thereby foreclosed the presentation of evidence by the parties to
prove whether the restrictive covenant is reasonable or not. Moreover, on the face of the
Undertaking, the post-retirement competitive employment ban is unreasonable because it
has no geographical limits; respondent is barred from accepting any kind of employment in
any competitive bank within the proscribed period. Although the period of one year may
appear reasonable, the matter of whether the restriction is reasonable or unreasonable
cannot be ascertained with finality solely from the terms and conditions of the
Undertaking, or even in tandem with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and received P963,619.28 from respondent.
However, petitioner is not proscribed, by waiver or estoppel, from assailing the post-
retirement competitive employment ban since under Article 1409 of the New Civil Code,
those contracts whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy are inexistent or void from the beginning. Estoppel cannot give
validity to an act that is prohibited by law or one that is against public policy.51
Respondent, as employer, is burdened to establish that a restrictive covenant barring an
employee from accepting a competitive employment after retirement or resignation is not
an unreasonable or oppressive, or in undue or unreasonable restraint of trade, thus,
unenforceable for being repugnant to public policy. As the Court stated in Ferrazzini v.
Gsell,52 cases involving contracts in restraint of trade are to be judged according to their
circumstances, to wit:
x x x There are two principal grounds on which the doctrine is founded that a contract in
restraint of trade is void as against public policy. One is, the injury to the public by being
deprived of the restricted party’s industry; and the other is, the injury to the party himself
by being precluded from pursuing his occupation, and thus being prevented from
supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:
Public welfare is first considered, and if it be not involved, and the restraint upon one party
is not greater than protection to the other party requires, the contract may be sustained.
The question is, whether, under the particular circumstances of the case and the nature of
the particular contract involved in it, the contract is, or is not, unreasonable. 53
In cases where an employee assails a contract containing a provision prohibiting him or her
from accepting competitive employment as against public policy, the employer has to
adduce evidence to prove that the restriction is reasonable and not greater than necessary
to protect the employer’s legitimate business interests.54 The restraint may not be unduly
harsh or oppressive in curtailing the employee’s legitimate efforts to earn a livelihood and
must be reasonable in light of sound public policy.55
Courts should carefully scrutinize all contracts limiting a man’s natural right to follow any
trade or profession anywhere he pleases and in any lawful manner. But it is just as
important to protect the enjoyment of an establishment in trade or profession, which its
employer has built up by his own honest application to every day duty and the faithful
performance of the tasks which every day imposes upon the ordinary man. What one
creates by his own labor is his. Public policy does not intend that another than the
producer shall reap the fruits of labor; rather, it gives to him who labors the right by every
legitimate means to protect the fruits of his labor and secure the enjoyment of them to
himself.56 Freedom to contract must not be unreasonably abridged. Neither must the right
to protect by reasonable restrictions that which a man by industry, skill and good judgment
has built up, be denied.57
The Court reiterates that the determination of reasonableness is made on the particular
facts and circumstances of each case.58 In Esmerson Electric Co. v. Rogers,59 it was held
that the question of reasonableness of a restraint requires a thorough consideration of
surrounding circumstances, including the subject matter of the contract, the purpose to be
served, the determination of the parties, the extent of the restraint and the specialization
of the business of the employer. The court has to consider whether its enforcement will be
injurious to the public or cause undue hardships to the employee, and whether the
restraint imposed is greater than necessary to protect the employer. Thus, the court must
have before it evidence relating to the legitimate interests of the employer which might be
protected in terms of time, space and the types of activity proscribed.60
Consideration must be given to the employee’s right to earn a living and to his ability to
determine with certainty the area within which his employment ban is restituted. A
provision on territorial limitation is necessary to guide an employee of what constitutes as
violation of a restrictive covenant and whether the geographic scope is co-extensive with
that in which the employer is doing business. In considering a territorial restriction, the
facts and circumstances surrounding the case must be considered.61
Thus, in determining whether the contract is reasonable or not, the trial court should
consider the following factors: (a) whether the covenant protects a legitimate business
interest of the employer; (b) whether the covenant creates an undue burden on the
employee; (c) whether the covenant is injurious to the public welfare; (d) whether the time
and territorial limitations contained in the covenant are reasonable; and (e) whether the
restraint is reasonable from the standpoint of public policy. 62
Not to be ignored is the fact that the banking business is so impressed with public interest
where the trust and interest of the public in general is of paramount importance such that
the appropriate standard of diligence must be very high, if not the highest degree of
diligence.63
We are not impervious of the distinction between restrictive covenants barring an
employee to accept a post-employment competitive employment or restraint on trade in
employment contracts and restraints on post-retirement competitive employment in
pension and retirement plans either incorporated in employment contracts or in collective
bargaining agreements between the employer and the union of employees, or separate
from said contracts or collective bargaining agreements which provide that an employee
who accepts post retirement competitive employment will forfeit retirement and other
benefits or will be obliged to restitute the same to the employer. The strong weight of
authority is that forfeitures for engaging in subsequent competitive employment included
in pension and retirement plans are valid even though unrestricted in time or geography.
The raison d’etre is explained by the United States Circuit Court of Appeals in Rochester
Corporation v. W.L. Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious distinction between
restraints on competitive employment in employment contracts and in pension plans. The
strong weight of authority holds that forfeitures for engaging in subsequent competitive
employment, included in pension retirement plans, are valid, even though unrestricted in
time or geography. The reasoning behind this conclusion is that the forfeiture, unlike the
restraint included in the employment contract, is not a prohibition on the employee’s
engaging in competitive work but is merely a denial of the right to participate in the
retirement plan if he does so engage. A leading case on this point is Van Pelt v. Berefco,
Inc., supra, 208 N.E.2d at p. 865, where, in passing on a forfeiture provision similar to that
here, the Court said:
"A restriction in the contract which does not preclude the employee from engaging in
competitive activity, but simply provides for the loss of rights or privileges if he does so is
not in restraint of trade." (emphasis added)65
A post-retirement competitive employment restriction is designed to protect the employer
against competition by former employees who may retire and obtain retirement or
pension benefits and, at the same time, engage in competitive employment.66
We have reviewed the Undertaking which respondent impelled petitioner to sign, and find
that in case of failure to comply with the promise not to accept competitive employment
within one year from February 28, 1995, respondent will have a cause of action against
petitioner for "protection in the courts of law." The words "cause of action for protection in
the courts of law" are so broad and comprehensive, that they may also include a cause of
action for prohibitory and mandatory injunction against petitioner, specific performance
plus damages, or a damage suit (for actual, moral and/or exemplary damages), all inclusive
of the restitution of the P963,619.28 which petitioner received from respondent. The
Undertaking and the Release, Waiver and Quitclaim do not provide for the automatic
forfeiture of the benefits petitioner received under the SRP upon his breach of said deeds.
Thus, the post-retirement competitive employment ban incorporated in the Undertaking of
respondent does not, on its face, appear to be of the same class or genre as that
contemplated in Rochester.
It is settled that actual damages or compensatory damages may be awarded for breach of
contracts. Actual damages are primarily intended to simply make good or replace the loss
covered by said breach.67 They cannot be presumed. Even if petitioner had admitted to
having breached the Undertaking, respondent must still prove that it suffered damages
and the amount thereof.68 In determining the amount of actual damages, the Court cannot
rely on mere assertions, speculations, conjectures or guesswork but must depend on
competent proof and on the best evidence obtainable regarding the actual amount of
losses.69 The benefit to be derived from a contract which one of the parties has absolutely
failed to perform is of necessity to some extent a matter of speculation of the injured
party.
On the assumption that the competitive employment ban in the Undertaking is valid,
petitioner is not automatically entitled to return the P963,619.28 he received from
respondent. To reiterate, the terms of the Undertaking clearly state that any breach by
petitioner of his promise would entitle respondent to a cause of action for protection in
the courts of law; as such, restitution of the P963,619.28 will not follow as a matter of
course. Respondent is still burdened to prove its entitlement to the aforesaid amount by
producing the best evidence of which its case is susceptible.70
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 52235 is SET ASIDE. Let this case be REMANDED to the Regional
Trial Court of Manila for further proceedings conformably with this decision of the Court.
SO ORDERED.
G.R. No. 220998, August 08, 2016
HOLCIM PHILIPPINES, INC., Petitioner, v. RENANTE J. OBRA, Respondent.
DECISION
PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari,1 filed by petitioner Holcim
Philippines, Inc. (petitioner), assailing the Decision2 dated February 13, 2015 and the
Resolution3 dated September 7, 2015 of the Court of Appeals (CA) in CA-G.R. SP No.
136413, which affirmed the Decision4 dated March 31, 2014 and the Resolution5 dated
April 30, 2014 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 03-
000696-14(8) / NLRC CN. RAB-I-09-1102-13(LU-l), holding that respondent Renante J. Obra
(respondent) was illegally dismissed and, thereby, ordering petitioner to pay him
separation pay amounting to P569,772.00 in lieu of reinstatement.
The Facts
Respondent was employed by petitioner as packhouse operator in its La Union Plant for
nineteen (19) years, from March 19, 19946 until August 8, 2013.7 As packhouse operator,
respondent ensures the safe and efficient operation of rotopackers, auto-bag placers, and
cariramats, as well as their auxiliaries.8 At the time of his dismissal, he was earning a
monthly salary of P29,988.00.
On July 10, 2013, at around 4 o'clock in the afternoon, respondent was about to exit Gate 2
of petitioner's La Union Plant when the security guard on duty, Kristian Castillo (Castillo),
asked him to submit himself and the backpack he was carrying for inspection.10
Respondent refused and confided to Castillo that he has a piece of scrap electrical wire in
his bag.11 He also requested Castillo not to report the incident to the management, and
asked the latter if respondent could bring the scrap wire outside the company premises;
otherwise, he will return it to his locker in the Packhouse Office.12 However, Castillo did not
agree, which prompted respondent to turn around and hurriedly go back to the said office
where he took the scrap wire out of his bag.13 Soon thereafter, a security guard arrived and
directed him to go to the Security Office where he was asked to write a statement
regarding the incident.14
In his statement,15 respondent admitted the incident, but asserted that he had no intention
to steal.16 He explained that the 16-meter electrical wire was a mere scrap that he had
asked from the contractor who removed it from the Packhouse Office. 17 He also averred
that as far as he knows, only scrap materials which are to be taken out of the company
premises in bulk required a gate pass and that he had no idea that it was also necessary to
takeout a piece of loose, scrap wire out of the company's premises.18 Respondent also
clarified that he hurriedly turned around because he had decided to just return the scrap
wire to the said office.19
On July 16, 2013, respondent received a Notice of Gap20 requiring him to explain within five
(5) days therefrom why no disciplinary action, including termination, should be taken
against him on account of the above-mentioned incident.21 He was also placed on
preventive suspension for thirty (30) days effective immediately. 22 In a statement23 dated
July 23, 2013, respondent reiterated that he had no intention to steal from petitioner and
that the scrap wire which he had asked from a contractor was already for disposal
anyway.24 He also expressed his remorse over the incident and asked that he be given a
chance to correct his mistake.25cralawred Meetings of petitioner's Review Committee were
thereafter conducted, with respondent and the security guards concerned in attendance. 26
On August 8, 2013, petitioner issued a Decision/Resolution Memo27 dismissing from service
respondent for serious misconduct.28 Petitioner found no merit in respondent's claim that
he was unaware that a gate pass is required to take out a piece of scrap wire, pointing out
that the same is incredulous since he had been working thereat for nineteen (19) years
already.29 It also drew attention to the fact that respondent refused to submit his bag for
inspection, which, according to petitioner, confirmed his intention to take the wire for his
personal use.30 Further, petitioner emphasized that respondent's actions violated its rules
which, among others, limit the use of company properties for business purposes only and
mandate the employees, such as respondent, to be fair, honest, ethical, and act
responsibly and with integrity.31
In a letter32 dated August 14, 2013, respondent sought reconsideration and prayed for a
lower penalty, especially considering the length of his service to it and the lack of intent to
steal.33 However, in a Memo34 dated August 28, 2013, petitioner denied respondent's
appeal. Hence, on September 30, 2013, respondent filed a complaint35 before the NLRC for
illegal dismissal and money claims, docketed as NLRC Case No. (CN) RAB-I-09-1102-13(LU-
l), averring that the penalty of dismissal from service imposed upon him was too harsh
since he had acted in good faith in taking the piece of scrap wire.36 Respondent maintained
that there was no wrongful intent on his part which would justify his dismissal from service
for serious misconduct, considering that the contractor who removed it from the
Packhouse Office led him to believe that the same was already for disposal.37
Meanwhile, petitioner countered that respondent's taking of the electrical wire for his
personal use, without authority from the management, shows his intent to gain.38 In
addition to this, it was highlighted that respondent refused to submit himself and his bag
for inspection and attempted to corrupt Castillo by convincing him to refrain from
reporting the incident to the management.39 These, coupled with his sudden fleeing from
Gate 2, bolster the charge of serious misconduct against him.40 With respect to
respondent's claim that the contractor who removed the wire from the Packhouse Office
led him to believe that the same was already for disposal, petitioner pointed out that the
contractor's personnel have issued statements belying respondent's claim and categorically
stated that they did not give away any electrical wire to anyone.41
The Labor Arbiter's Ruling
In a Decision42 dated January 24, 2014, the Labor Arbiter (LA) dismissed respondent's
complaint and held that the latter was validly dismissed from service by petitioner for
committing the crime of theft, and therefore, not entitled to reinstatement, backwages,
and other money claims.43
The NLRC Ruling
In a Decision44 dated March 31, 2014, the NLRC reversed the LA's ruling and held that the
penalty of dismissal from service imposed upon respondent was unduly harsh since his
misconduct was not so gross to deserve such penalty.45 It found merit in respondent's
defense that he took the scrap wire on the belief that it was already for disposal, noting
that petitioner never denied the same.46 The NLRC also emphasized that petitioner did not
suffer any damage since respondent was not able to take the wire outside the company
premises.47 Moreover, he did not hold a position of trust and confidence and was
remorseful of his mistake, as evidenced by his repeated pleas for another chance.48 These,
coupled with the fact that he had been in petitioner's employ for nineteen (19) years,
made respondent's dismissal from service excessive and harsh.49 Considering, however, the
strained relations between the parties, the NLRC awarded separation pay in favor of
respondent in lieu of reinstatement.
Petitioner moved for reconsideration,51 which was, however, denied in a Resolution52
dated April 30, 2014.
The CA Ruling
In a Decision53 dated February 13, 2015, the CA dismissed the petition for certiorari and
affirmed the ruling of the NLRC. It agreed with the NLRC's observation that respondent was
illegally dismissed, pointing out that petitioner failed to prove that it prohibited its
employees from taking scrap materials outside the company premises. Besides,
respondent's taking of the scrap wire did not relate to the performance of his work as
packhouse operator.54
The CA also drew attention to respondent's unblemished record in the company where he
had been employed for nineteen (19) years already, adding too that bad faith cannot be
ascribed to him since he volunteered the information about the scrap wire to Castillo and
offered to return the same if it was not possible to bring it outside of the company
premises.55 According to the CA, respondent's acts only constituted a lapse in judgment
which does not amount to serious misconduct that would warrant his dismissal from
service.56
Dissatisfied, petitioner moved for reconsideration,57 which was denied by the CA in its
Resolution58 dated September 7, 2015; hence, the present petition.
The Issue Before the Court
The sole issue for the Court's resolution is whether or not the CA erred in affirming the
ruling of the NLRC.
The Court's Ruling
The petition is partly meritorious.
There is no question that the employer has the inherent right to discipline, including that of
dismissing its employees for just causes.59 This right is, however, subject to reasonable
regulation by the State in the exercise of its police power.60 Accordingly, the finding that an
employee violated company rules and regulations is subject to scrutiny by the Court to
determine if the dismissal is justified and, if so, whether the penalty imposed is
commensurate to the gravity of his offense.61
In this case, the Court agrees with the CA and the NLRC that respondent's misconduct is
not so gross as to deserve the penalty of dismissal from service. As correctly observed by
the NLRC, while there is no dispute that respondent took a piece of wire from petitioner's
La Union Plant and tried to bring it outside the company premises, he did so in the belief
that the same was already for disposal. Notably, petitioner never denied that the piece of
wire was already for disposal and, hence, practically of no value. At any rate, petitioner did
not suffer any damage from the incident, given that after being asked to submit himself
and his bag for inspection, respondent had a change of heart and decided to just return the
wire to the Packhouse Office. Respondent has also shown remorse for his mistake,
pleading repeatedly with petitioner to reconsider the penalty imposed upon him. 62

Time and again, the Court has held that infractions committed by an employee should
merit only the corresponding penalty demanded by the circumstance. 63 The penalty must
be commensurate with the act, conduct or omission imputed to the employee. 64
In Sagales v. Rustan 's Commercial Corporation,65 the dismissal of a Chief Cook who tried to
take home a pack of squid heads, which were considered as scrap goods and usually
thrown away, was found to be excessive. In arriving at such decision, the Court took into
consideration the fact that the Chief Cook had been employed by the company for 31 years
already and the incident was his first offense. Besides, the value of the squid heads was a
negligible sum of P50.00 and the company practically lost nothing since the squid heads
were considered scrap goods and usually thrown away. Moreover, the ignominy he
suffered when he was imprisoned over the incident, and his preventive suspension for one
(1) month was enough punishment for his infraction.
Similarly, in Farrol v. CA,M66 a district manager of a bank was dismissed after he incurred a
shortage of P5 0,985.3 7, which sum was used to pay the retirement benefits of five (5)
employees of the bank. Despite being able to return majority of the missing amount,
leaving a balance of only P6,995.37, the district manager was dismissed on the ground that
under the bank's rules, the penalty therefor is dismissal. According to the Court, the
"dismissal imposed on [him] is unduly harsh and grossly disproportionate to the infraction
which led to the termination of his services. A lighter penalty would have been more just, if
not humane,"67 considering that it was his first infraction and he has rendered 24 years of
service to the bank.
Meanwhile, in the earlier case of Associated Labor Unions-TUCP v. NLRC,68 the dismissal of
an employee, who was caught trying to take a pair of boots, an empty aluminum container,
and 15 hamburger patties, was considered excessive. The Court ruled that the employee's
dismissal would be disproportionate to the gravity of the offense committed, considering
the value of the articles he pilfered and the fact that he had no previous derogatory record
during his two (2) years of employment in the company. According to the Court, while the
items taken were of some value, such misconduct was not enough to warrant his dismissal.
As in the foregoing cases, herein respondent deserves compassion and humane
understanding more than condemnation, especially considering that he had been in
petitioner's employ for nineteen (19) years already, and this is the first time that he had
been involved in taking company property, which item, at the end of the day, is practically
of no value. Besides, respondent did not occupy a position of trust and confidence, the loss
of which would have justified his dismissal over the incident. As packhouse operator,
respondent's duties are limited to ensuring the safe and efficient operation of rotopackers,
auto-bag placers, and cariramats, as well as their auxiliaries.69 He is not a managerial
employee vested with the powers or prerogatives to lay down management policies and to
hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or
effectively recommend such managerial actions, or one who, in the normal and routine
exercise of his functions, regularly handles significant amounts of money or property. 70
Neither can respondent's infraction be characterized as a serious misconduct which, under
Article 282 (now Article 297) of the Labor Code,71 is a just cause for dismissal. Misconduct
is an improper or wrong conduct, or a transgression of some established and definite rule
of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment.72 To constitute a valid cause for dismissal within the
text and meaning of Article 282 (now Article 297) of the Labor Code, the employee's
misconduct must be serious, i.e., of such grave and aggravated character and not merely
trivial or unimportant,73 as in this case where the item which respondent tried to takeout
was practically of no value to petitioner. Moreover, ill will or wrongful intent cannot be
ascribed to respondent, considering that, while he asked Castillo not to report the incident
to the management, he also volunteered the information that he had a piece of scrap wire
in his bag and offered to return it if the same could not possibly be brought outside the
company premises sans a gate pass.
The Court is not unaware of its ruling in Reno Foods, Inc. v. Nagkakaisang Lakas ng
Manggagawa (NLM) – KATIPUNAN,74 which was cited in the petition,75 where an employee
was dismissed after being caught hiding six (6) Reno canned goods wrapped in nylon
leggings inside her bag. However, in that case, the main issue was the payment of
separation pay and/or financial assistance and not the validity of the employee's dismissal.
Furthermore, unlike the present case where respondent tried to take a piece of scrap wire,
the employee in Reno Foods tried to steal items manufactured and sold by the company.
Her wrongful intent is also evident as she tried to hide the canned goods by wrapping them
in nylon leggings. Here, as earlier adverted to, respondent volunteered the information
that he had a piece of scrap wire in his bag.
In fine, the dismissal imposed on respondent as penalty for his attempt to take a piece of
scrap wire is unduly harsh and excessive. The CA therefore did not err in affirming the
NLRC's ruling finding respondent's dismissal to be invalid. Clearly, the punishment meted
against an errant employee should be commensurate with the offense committed.76 Thus,
care should be exercised by employers in imposing dismissal to erring employees. 77 Based
on the circumstances of this case, respondent's dismissal was not justified. This
notwithstanding, the disposition of the CA should be modified with respect to the
consequential award of "separation pay in lieu of reinstatement," which was assailed in the
instant petition as one which has "no factual, legal or even equitable basis."78
As a general rule, an illegally dismissed employee is entitled to: (a) reinstatement (or
separation pay, if reinstatement is not viable); and (b) payment of full backwages.79
In this case, the Court cannot sustain the award of separation pay in lieu of respondent's
reinstatement on the bare allegation of the existence of "strained relations" between him
and the petitioner. It is settled that the doctrine on "strained relations" cannot be applied
indiscriminately since every labor dispute almost invariably results in "strained relations;"
otherwise, reinstatement can never be possible simply because some hostility is
engendered between the parties as a result of their disagreement.80 It is imperative,
therefore, that strained relations be demonstrated as a fact and adequately supported by
substantial evidence showing that the relationship between the employer and the
employee is indeed strained as a necessary consequence of the judicial controversy.81
Unfortunately, the Court failed to find the factual basis for the award of separation pay to
herein respondent. The NLRC Decision did not state the facts which demonstrate that
reinstatement is no longer a feasible option that could have justified the alternative relief
of granting separation pay.82 Hence, reinstatement cannot be barred, especially, as in this
case, when the employee has not indicated an aversion to returning to work, or does not
occupy a position of trust and confidence in, or has no say in the operation of the
employer's business.83 As priorly stated, respondent had expressed remorse over the
incident and had asked to be given the chance to correct his mistake. He had also prayed
for a lower penalty than dismissal, especially considering his lack of intent to steal, and his
unblemished record of 19 years of employment with petitioner. All these clearly indicate
his willingness to continue in the employ of petitioner and to redeem himself. Considering
further that respondent did not occupy a position of trust and confidence and that his
taking of the scrap wire did not relate to the performance of his work as packhouse
operator, his reinstatement remains a viable remedy. The award of separation pay,
therefore, being a mere exception to the rule, finds no application herein. Accordingly, he
should be reinstated to his former position.
Meanwhile, anent the propriety of awarding backwages, the Court observes that
respondent's transgression – even if not deserving of the ultimate penalty of dismissal –
warrants the denial of the said award following the parameters in Integrated
Microelectronics, Inc. v. Pionilla.84 In that case, the Court ordered the reinstatement of the
employee without backwages on account of the following: (a) the fact that the dismissal of
the employee would be too harsh a penalty; and (b) that the employer was in good faith in
terminating the employee, viz. :
The aforesaid exception was recently applied in the case of Pepsi-Cola Products, Phils., Inc.
v. Molon[(704 Phil. 120, 144-145 [2013 ]), wherein the Court, citing several precedents,
held as follows:
An illegally dismissed employee is entitled to either reinstatement, if viable, or separation
pay[,] if reinstatement is no longer viable, and backwages. In certain cases, however, the
Court has ordered the reinstatement of the employee without backwages[,] considering
the fact that: (1) the dismissal of the employee would be too harsh a penalty; and (2) the
employer was in good faith in terminating the employee. For instance, in the case of Cruz v.
Minister of Labor and Employment [(205 Phil. 14, 18-19 [1983 ]), the Court ruled as follows:
The Court is convinced that petitioner's guilt was substantially established. Nevertheless,
we agree with respondent Minister's order of reinstating petitioner without backwages
instead of dismissal which may be too drastic. Denial of backwages would sufficiently
penalize her for her infractions. The bank officials acted in good faith. They should be
exempt from the burden of paying backwages. The good faith of the employer, when clear
under the circumstances, may preclude or diminish recovery of backwages. Only employees
discriminately dismissed are entitled to backpay.
Likewise, in the case of Ilogon-Suyoc Mines, Inc. v. [NLRC] [(202 Phil. 850, 856 [1982 ]), the
Court pronounced that "the ends of social and compassionate justice would therefore be
served if private respondent is reinstated but without backwages in view of petitioner's
good faith."
The factual similarity of these cases to Remandaban's situation deems it appropriate to
render the same disposition.85 (Emphases supplied)
Having established that respondent's dismissal was too harsh a penalty for attempting to
take a piece of scrap wire that was already for disposal and, hence, practically of no value,
and considering that petitioner was in good faith when it dismissed respondent for his
misconduct, the Court deems it proper to order the reinstatement of respondent to his
former position but without backwages. Respondent was not entirely faultless and
therefore, should not profit from a wrongdoing.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated February 13, 2015 and the
Resolution dated September 7, 2015 of the Court of Appeals in CA-G.R. SP No. 136413 are hereby
AFFIRMED with MODIFICATION deleting the award of separation pay and in lieu thereof, directing the
reinstatement of respondent Renante J. Obra to his former position without backwages.
SO ORDERED.
G.R. No. 148340 January 26, 2004
J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JOSE F. MASCARINAS, Respondents.
 DECISION
QUISUMBING, J.:
For review are the Decision1 dated February 27, 2001 of the Court of Appeals in CA-G.R. SP
No. 60337, and its Resolution2 dated May 28, 2001, denying the motion for
reconsideration. The Court of Appeals dismissed the petition for certiorari filed by
petitioners and affirmed the Resolution3 of the National Labor Relations Commission
(NLRC), Third Division, which affirmed the Decision4 of Labor Arbiter Jose G. De Vera in
NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for illegal dismissal and
ordered petitioners to pay private respondent Jose Mascarinas separation pay, backwages,
legal holiday pay, service incentive leave pay and 13th month pay in the aggregate sum of
₱85,871.00.
The facts, as culled from the records, are as follows:
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship
engaged in the business of selling second-hand heavy equipment. JAT is owned by its
namesake, co-petitioner Jesusa Adlawan Torobu. Sometime in April 1997, JAT hired private
respondent Jose F. Mascarinas as helper tasked to coordinate with the cleaning and
delivery of the heavy equipment sold to customers. Initially, private respondent was hired
as a probationary employee and was paid ₱165 per day that was increased to ₱180 in July
1997 and ₱185 in January 1998.
In October 1997, the sales of heavy equipment declined because of the Asian currency
crisis. Consequently, JAT temporarily suspended its operations. It advised its employees,
including private respondent, not to report for work starting on the first week of March
1998. JAT indefinitely closed shop effective May 1998.
A few days after, private respondent filed a case for illegal dismissal and underpayment of
wages against petitioners before the NLRC.
In his Complaint, private respondent alleged that he started as helper mechanic of JAT on
January 6, 1997 with an initial salary rate of ₱165.00 per day, which was increased to
₱180.00 per day after six (6) months in employment. He related that he was one of those
retrenched from employment by JAT and was allegedly required to sign a piece of paper
which he refused, causing his termination from employment.
On December 14, 1998, JAT filed an Establishment Termination Report with the
Department of Labor and Employment (DOLE), notifying the latter of its decision to close
its business operations due to business losses and financial reverses.
After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding
the dismissal of herein private respondent unjustified and ordering JAT to pay private
respondent separation pay and backwages, among others. The decretal portion of the
decision reads as follows:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
ordering the respondents [herein petitioners] to pay complainant the aggregate sum of
₱85,871.00.
SO ORDERED.5
The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas’ dismissal was
unjustified because of petitioners’ failure to serve upon the private respondent and the
DOLE the required written notice of termination at least one month prior to the effectivity
thereof and to submit proof showing that petitioners suffered a business slowdown in
operations and sales effective January 1998; (2) private respondent may recover
backwages from March 1, 1998 up to March 1, 1999 or ₱66,924.006 and separation pay, in
lieu of reinstatement, at the rate of one (1) month pay for every year of service, or
₱10,296.00;7 (3) the payrolls submitted by JAT showed that effective May 1, 1997, private
respondent’s wages did not conform to the prevailing minimum wage, hence, private
respondent is entitled to salary differentials from May 1, 1997 to January 6, 1998, in the
amount of ₱1,066.00;8 (4) that private respondent be awarded legal holiday pay in the
amount of ₱1,850.00,9 service incentive leave pay in the amount of ₱925.0010 and 13th
month pay for 1997 in the amount of ₱4,810.00.11
On appeal, the NLRC affirmed the decision of the labor arbiter. 12 The NLRC found that the
financial statements submitted on appeal were questionable, unreliable and inconsistent
with petitioners’ allegations in the pleadings, particularly as to the date of the alleged
closure of operation; hence, they cannot be used to support private respondent’s
dismissal. The NLRC also affirmed the monetary awards because petitioners failed to prove
the payment of benefits claimed by private respondent.
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of
Appeals, which the latter dismissed. The decretal portion of the decision reads as follows:
WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact
and in law, is hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed
decision of the National Labor Relations Commission AFFIRMED, with costs to petitioners.
SO ORDERED.13
The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal
of the private respondent. The appellate court held that the petitioners failed to prove by
clear and convincing evidence their compliance with the requirements for valid
retrenchment. It cited the findings of the NLRC on the belated submission of the financial
statements during appeal that could not be given sufficient weight, and that the
petitioners’ late submission of notice of closure is indicative of their bad faith.
Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.
Hence, the present petition alleging that the:
A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE
DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) IS NECESSARY IN CASE OF
TEMPORARY SUSPENSION OF BUSINESS;
B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT IS
ENTITLED TO BACKWAGES DESPITE THE FACT THAT PRIVATE RESPONDENT WAS
NOT DISMISSED FROM SERVICE AT THE TIME THE COMPLAINT WAS FILED;
C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE
BURDEN OF PROVING THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES;
D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT FAILED
TO COMPLY WITH THE ONE-MONTH PERIOD, THE LOWER COURT (sic) ERRED IN
AWARDING BACKWAGES AND/OR SEPARATION PAY TO PRIVATE RESPONDENT
EVEN FOR PERIOD AFTER PETITIONERS FILED A NOTICE OF ACTUAL CLOSURE OF
THE COMPANY BEFORE THE LABOR DEPARTMENT.14
The relevant issues for our resolution are: (a) whether or not private respondent was
illegally dismissed from employment due to closure of petitioners’ business, and (b)
whether or not private respondent is entitled to separation pay, backwages and other
monetary awards.
On the first issue, the petitioners claim that the Court of Appeals erroneously concluded
that they are liable for illegal dismissal because of non-compliance of the procedural and
substantive requirements of terminating employment due to retrenchment and cessation
of business. They argued that there was no closure but only suspension of operation in
good faith in March 1998, when private respondent claimed to have been illegally
dismissed, due to the decline in sales and heavy losses incurred in its business arising from
the 1997 Asian financial crisis. Petitioners assert that under Article 286 of the Labor Code, a
bona fide suspension of the operation of a business for a period not exceeding six (6)
months shall not terminate employment and no notice to an employee is required.
However, petitioners relate that JAT was compelled to permanently close its operation
eight (8) months later or on November 1998, when the hope of recovery became nil but
only after sending notices to all its workers and DOLE. Thus, petitioners argue that it cannot
be held liable for illegal dismissal in March 1998 since there was no termination of
employment during suspension of operations and a notice to employee is not required,
unlike in the case of permanent closure of business operation.
We need not belabor the issue of notice requirement for a suspension of operation of
business under Article 28615 of the Labor Code. This matter is not pertinent to, much less
determinative of, the disposition of this case. Suffice it to state that there is no termination
of employment during the period of suspension, thus the procedural requirement for
terminating an employee does not come into play yet. Rather, the issue demanding a
sharpened focus here concerns the validity of dismissal resulting from the closure of JAT.
A brief discussion on the difference between retrenchment and closure of business as
grounds for terminating an employee is necessary. While the Court of Appeals defined the
issue to be the validity of dismissal due to alleged closure of business, it cited jurisprudence
relating to retrenchment to support its resolution and conclusion. While the two are often
used interchangeably and are interrelated, they are actually two separate and independent
authorized causes for termination of employment. Termination of an employment may be
predicated on one without need of resorting to the other.
Closure of business, on one hand, is the reversal of fortune of the employer whereby there
is a complete cessation of business operations and/or an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of business as an authorized cause
for termination of employment aims to prevent further financial drain upon an employer
who cannot pay anymore his employees since business has already stopped. On the other
hand, retrenchment is reduction of personnel usually due to poor financial returns so as to
cut down on costs of operations in terms of salaries and wages to prevent bankruptcy of
the company. It is sometimes also referred to as down-sizing. Retrenchment is an
authorized cause for termination of employment which the law accords an employer who
is not making good in its operations in order to cut back on expenses for salaries and wages
by laying off some employees. The purpose of retrenchment is to save a financially ailing
business establishment from eventually collapsing.16
In the present case, we find the issues and contentions more centered on closure of
business operation rather than retrenchment. Closure or cessation of operation of the
establishment is an authorized cause for terminating an employee under Article 283 of the
Labor Code, to wit:
ART. 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. … In case
of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six (6) months shall
be considered one (1) whole year.
However, the burden of proving that such closure is bona fide falls upon the employer. 17 In
the present case, JAT justifies its closure of business due to heavy losses caused by
declining sales. It belatedly submitted its 1997 Income Statement18 and Comparative
Statement of Income and Capital for 1997 and 199819 to the NLRC to prove that JAT
suffered losses starting 1997. However, as noted earlier, these were not given much
evidentiary weight by the NLRC as well as the Court of Appeals, to wit:
The financial statements submitted by the respondents on appeal are questionable for the
following reasons: (1) the figures in Annexes "D-2" and "E" of the appeal memorandum
(which both refer to 1997) do not tally; (2) they (the respondents) allegedly closed on
March 1, 1998. Yet, their 1998 financial statement (Annex "E") indicates operations up to
and ending December 31, 1998. In view of the foregoing, the above-mentioned financial
statements do not justify the complainant’s dismissal. …20
The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent
reason to set it aside. While business reverses or losses are recognized by law as an
authorized cause for terminating employment, it is an essential requirement that alleged
losses in business operations must be proven convincingly. Otherwise, said ground for
termination would be susceptible to abuse by scheming employers, who might be merely
feigning business losses or reverses in their business ventures in order to ease out
employees.21 In this case, the financial statements were not only belatedly submitted but
were also bereft of necessary details on the extent of the alleged losses incurred, if any.
The income statements only indicated a decline in sales in 1998 as compared to 1997.
These fell short of the stringent requirement of the law that the employer prove
sufficiently and convincingly its allegation of substantial losses. While the comparative
income statement shows a net loss of ₱207,091 in 1998, the income statement of 1997 still
shows JAT posting a net income of ₱19,361. Both statements need interpretation as to
their impact on the company’s termination of certain personnel as well as business closure.
Having concluded that private respondent was not validly dismissed resulting from closure
of business operations due to substantial losses, we now proceed to determine whether or
not private respondent was validly dismissed on the ground of closure or cessation of
operations for reasons other than substantial business losses.
A careful examination of Article 283 of the Labor Code shows that closure or cessation of
business operation as a valid and authorized ground of terminating employment is not
limited to those resulting from business losses or reverses. Said provision in fact provides
for the payment of separation pay to employees terminated because of closure of business
not due to losses, thus implying that termination of employees other than closure of
business due to losses may be valid.
Hence, in one case,22 we emphasized that:
…Art. 283 governs the grant of separation benefits "in case of closures or cessation of
operation" of business establishments "NOT due to serious business losses or financial
reverses x x x." Where, however, the closure was due to business losses–as in the instant
case, in which the aggregate losses amounted to over ₱20 billion–the Labor Code does not
impose any obligation upon the employer to pay separation benefits, for obvious reasons.
There is no need to belabor this point. Even the public respondents, in their Comment filed
by the Solicitor General, impliedly concede this point.
In another case,23 we held more emphatically that:
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his
business operations or undertaking even if he is not suffering from serious business losses
or financial reverses, as long as he pays his employees their termination pay in the amount
corresponding to their length of service. It would, indeed, be stretching the intent and
spirit of the law if we were to unjustly interfere in management’s prerogative to close or
cease its business operations just because said business operation or undertaking is not
suffering from any loss.
In the present case, while petitioners did not sufficiently establish substantial losses to settled that in case of closure or cessation of operation of a business establishment not
justify closure of the business, its income statement shows declining sales in 1998, due to serious business losses or financial reverses, the employees are always given
prompting the petitioners to suspend its business operations sometime in March 1998, separation benefits.29 The amount of separation pay must be computed from the time
eventually leading to its permanent closure in December 1998. Apparently, the petitioners private respondent commenced employment with petitioners until the time the latter
saw the declining sales figures and the unsustainable business environment with no hope ceased operations.30 1âwphi1
of recovery during the period of suspension as indicative of bleak business prospects,
justifying a permanent closure of operation to save its business from further collapse. On Considering that private respondent was not illegally dismissed, however, no backwages
this score, we agree that undue interference with an employer’s judgment in the conduct need to be awarded. Backwages in general are granted on grounds of equity for earnings
of his business is uncalled for. Even as the law is solicitous of the welfare of employees, it which a worker or employee has lost due to illegal dismissal.31 It is well settled that
must also protect the right of an employer to exercise what is clearly a management backwages may be granted only when there is a finding of illegal dismissal. 32
prerogatives. As long as the company’s exercise of the same is in good faith to advance its
interest and not for the purpose of defeating or circumventing the rights of employees The other monetary awards to private respondent are undisputed by petitioners and
under the law or a valid agreement such exercise will be upheld.24 unrefuted by any contrary evidence. These awards, namely legal holiday pay, service
incentive leave pay and 13th month pay, should be maintained.
In the event, under Article 283 of the Labor Code, three requirements are necessary for a
valid cessation of business operations, namely: (a) service of a written notice to the WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of
employees and to the DOLE at least one (1) month before the intended date thereof; (b) Appeals in CA-G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that the award of
the cessation of business must be bona fide in character; and (c) payment to the ₱66,924.00 as backwages is deleted. The award of separation pay amounting to
employees of termination pay amounting to at least one-half (1/2) month pay for every ₱10,296.00 and the other monetary awards, namely salary differentials in the amount of
year of service, or one (1) month pay, whichever is higher.25 ₱1,066.00, legal holiday pay in the amount of ₱1,850.00, service incentive leave pay in the
amount of ₱925.00 and 13th month pay in the amount of ₱4,910, or a total of ₱29,047.00
The closure of business operation by petitioners, in our view, is not tainted with bad faith are maintained. No pronouncement as to costs. SO ORDERED.
or other circumstance that arouses undue suspicion of malicious intent. The decision to
permanently close business operations was arrived at after a suspension of operation for
several months precipitated by a slowdown in sales without any prospects of improving.
There were no indications that an impending strike or any labor-related union activities
precipitated the sudden closure of business. Further, contrary to the findings of the Labor
Arbiter, petitioners had notified private respondent26 and all other workers through written
letters dated November 25, 1998 of its decision to permanently close its business and had
submitted a termination report to the DOLE.27 Generally, review of labor cases elevated to
this Court on a petition for review on certiorari is confined merely to questions of law. But
in certain cases, we are constrained to analyze or weigh the evidence again if the findings
of fact of the labor tribunals and the appellate court are in conflict, or not supported by
evidence on record or the judgment is based on a misapprehension of facts.28

In this case, we are persuaded that the closure of JAT’s business is not unjustified.1âwphi1
Further we hold that private respondent was validly terminated, because the closure of
business operations is justified.

Nevertheless in this case, we must stress that the closure of business operation is allowed
under the Labor Code, provided separation pay be paid to the terminated employee. It is