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Labor II

OTHER CAUSES. BUSINESS RELATED CAUSES Recognition of Right- Business Related Causes/ Protection Agabon vs. NLRC (Monette) Facts: Agabon was dismissed for abandonment of work (subcontracting for another company). The court held that the cause for the dismissal was valid but the company failed to follow notice requirements. The company reasoned that it would be useless because the Agabons did not reside there anymore. Held: This is not a valid excuse because the twin notice requirements are mandatory. The dismissal is upheld but the company should be held liable for nominal damages, for the violation of his right to statutory due process. The law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct and loyalty. The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests. where terminated due to massive retrenchment of the company to forestall serious business losses and/or closure of operations. Issue: When, or under what circumstances, the employer becomes legally privileged to retrench and reduce the number of employees? Held: The ff. are general standards in terms of which the acts of petitioner employer must be appraised: Firstly, the losses expected should be substantial and not merely de minimis in extent. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. Thirdly, must be reasonably necessary and likely to effectively prevent the expected losses. Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. To impart operational meaning to the constitutional policy of providing full protection to labor, the employers prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc.

Uichico vs. NLRC (Monette) Facts: The case is an illegal dismissal case filed by workers of Crispa, Inc. who were terminated on the ground of retrenchment due to alleged serious business losses suffered by the company. Held: The Statement of Profit and Losses submitted by Crispa, Inc. to prove its alleged losses, without the accompanying signature of a certified public accountant or audited by an independent auditor, are not credible. This is not the kind of sufficient and convincing evidence necessary to discharge the burden of proof required to establish the alleged losses suffered by Crispa. The corporate directors and officers of Crispa are solidarily liable with the corporation for the termination of employment done with malice or in bad faith. In this case, it is undisputed that they have a direct hand in the illegal dismissal of respondent employees. The law recognizes the right of every business entity to reduce its work force if the same is made necessary by compelling economic factors which would endanger its existence or stability. In spite of overwhelming support granted by the social justice provisions of our Constitution in favor of labor, the fundamental law itself guarantees, even during the process of tilting the scales of social justice towards workers and employees, "the right of enterprises to reasonable returns of investment and to expansion and growth.

Business Services of the Future Today vs. CA (Monette) Facts: The employee was terminated on the ground of severe business losses. The employers believe, however, that since the employee was also a stockholder, there was no need to notify DOLE of the closure since as stockholder, he was presumed to have taken part in the decision to close the business. Held: Notice of closure to the DOLE is mandatory. It allows the DOLE to ascertain whether the closure and/or dismissals were done in good faith and not a pretext for evading obligations to the employees. This requirement protects the workers right to security of tenure. Failure to comply with this requirement taints the dismissal. An exceptions is when the employee consented to his retrenchment, the required prior notice to the DOLE is not necessary as the employee thereby acknowledges the existence of a valid cause for termination of his employment. However, there is no evidence to show that the employee consented to his dismissal and for these reasons the petitioners should have submitted a written notice of BSFTIs closure to the DOLE. The NLRC and the Court of Appeals were unanimous in finding that the closure was bona fide. As in the case of Agabon, nominal damages were awarded to vindicate employees right to due process. A. Installation of Labor Saving Devices- 283

Filipinas vs. Gatbalayan (Monette) Facts: Another illegal dismissal case by the workers who

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 1

Labor II
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 Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. B. Redundancy- 283 (above) Business Judgment Wiltshire File vs. NLRC (Monette) Facts: Ong was dismissed because of serious business losses. In the termination letter, the ground alleged was redundancy of the position. Ong countered that there could be no redundancy because nobody except himself, in the company was then performing the same duties. Held: Dismissal was valid. The losses were proven by the company and most importantly, company finally closed its doors and terminated all its operations. SC considered that finally shutting down business operations constitutes strong confirmatory evidence of financial distress. Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. That no other person was holding the same position that employee held, does not show that his position had not become redundant. The characterization of private respondent's services as no longer necessary or sustainable, and therefore properly terminable, was an exercise of business judgment on the part of petitioner company. The wisdom or soundness of such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not shown. The determination of the continuing necessity of a particular officer or position in a business corporation is management's prerogative, and the courts will not interfere with the exercise of such so long as no abuse of discretion or merely arbitrary or malicious action on the part of management is shown. Asufrin vs. San Miguel Corp (Monette) Facts: An illegal dismissal case which stemmed from SMCs new marketing system known as the "pre-selling scheme". As a consequence, all positions of route sales and warehouse personnel were declared redundant. Held: Dismissal was invalid. In selecting employees to be dismissed, a fair and reasonable criteria must be used, such as but not limited to (a) less preferred status, e.g. temporary employee; (b) efficiency; and (c) seniority. In the case at bar, no criterion whatsoever was adopted by the employee. Furthermore, SMC has not shown how the cessation of the employees services would contribute to the ways and means of improving efficiency and cutting distribution overhead and other related costs. In other words, it is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof that such is the actual situation to justify the dismissal of the affected employees for redundancy.

Soriano Jr. vs. NLRC (Monette) Facts: PLDT utilized high technology equipment in its operation such as computers and digital switches which necessarily resulted in the reduction of the demand for the services of a Switchman. Held: Dismissal was valid. PLDT submitted the relevant documents attesting redundancy of employing switchmen and it has also paid separation pay to the dismissed workers. PLDT, as employer, has the recognized right and prerogative to select the persons to be hired and to designate the work as well as the employee or employees to perform it. This includes the right of the PLDT to determine the employees to be retained or discharged and who among the applicants are qualified and competent for a vacant position. The rationale for this principle is that respondent PLDT is in the best position to ascertain what is proper for the advancement of its interest. Thus, this Court cannot interfere in the wisdom and soundness of the PLDTs decision as to who among the Switchmen should be retained or discharged or who should be transferred to vacant positions, as long as such was made in good faith and not for the purpose of curbing the rights of an employee. Financial loss Ecareal vs. NLRC (Monette) Facts: Escareals position as Pollution Control and Safety

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 2

Labor II
Manager was declared redundant. Held: Illegal dismissal. Philippine Refining Company (PRC)had no valid and acceptable basis to declare the position redundant as the same may not be considered superfluous. If the aim was to generate savings in terms of the salaries that PRC would not be paying the petitioner any more as a result of the streamlining of operations for improved efficiency, such a move could hardly be justified in the face of PRCs hiring frsh graduates for various positions. Besides, there would seem no compelling reason to save money by removing such an important position. As shown by their recent financial statements, PRCs net profits has steadily increased. While concededly, Art. 283 of the Labor Code does not require that the employer should be suffering financial losses before he can terminate the services of an employee on the ground of redundancy, it does not mean either that a company which is doing well can effect such a dismissal whimsically or capriciously. The fact that a company is suffering from business losses merely provides stronger justification for the termination. Law Required Position Position of Pollution Control and Safety Manager is required by law. Thus, it cannot be gainsaid that the services of the petitioner are in excess of what is reasonably required by the enterprise. Escareal vs. NLRC When Redundancy Lopez Sugar Corp vs. Franco (Eds) Facts: Lopez Sugar Corp. issued a Memorandum for the adoption of a special retirement program for selected supervisory and middle level managers, allegedly due to over-staffing and duplication of functions. Private respondents, all supervisory employees of the Corp who organized a labor union which was currently undergoing CBA negotiations with the corp, were included in its coverage and terminated from employment. Issue: Was the termination of respondents by virtue of the special retirement program valid? Held: No. The corp illegally dismissed the private respondents by including them in its special retirement program, thus debilitating the union, rendering it pliant by decapacitating its leadership. The so-called downsizing of the departments based on the SGV Study Report was a farcecapricious and arbitrary. No standard, criteria or guidelines for the selection of the dismissed employoees was made known to them, and all that they were told was that they had been selected for termination. Redundancy exists when the service capability of the work force is in excess of what is reasonably needed to meet the demands on the enterprise. A redundant position is one rendered superfluous by any number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product line or phasing out of a service activity priorly undertaken by the business. Tierra International Construction Corp. vs. NLRC (Eds) Facts: Isidro Olivar, a shift supervisor for shipping company FEBROE, was dismissed from service and repatriated to the Philippines 6 months before his contract expired. Ground for dismissal: promotion of economy, efficiency and profitability in operations, and reduction of personnel whose positions are redundant or surplusage and/or reassignment of personnel to other available useful positions. Issue: Was the termination of Olivar for a just and valid cause? Held: Yes. Olivars position was deleted due to a decrease in scope of work assigned to FEBROEs Base Operating Support Contract. Unfortunately, there were no other available positions for which he could qualify. Other positions were also abolished, including both U.S. and Third Country Nations positions, showing that he was not singled out and his termination was not arbitrary or malicious. Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. A position is redundant where it is superfluous, and superfluity of a position(s) may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. The law does not make any distinction between a technical and a nontechnical position for purposes of determining the validity of termination due to redundancy. Neither does the law nor the stipulations of the employment contract here involved require that junior employees should first be terminated. In redundancy, what is looked into is the position itself, the nature of the services performed by the employees and the necessity of such position.

Edge Apparel vs. NLRC (Eds) Facts: Edge Apparel, Inc. dismissed some of its employees pursuant to a retrenchment program. Upon advice of the DOLE Regional Director, they received the separation pay benefits offered, but they still filed a complaint for illegal dismissal, alleging that the retrenchment program was a mere subterfuge used to give a semblance of regularity and validity to the dismissal.

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 3

Labor II
Issue: What is the amount of the separation pay due to the respondents? Held: They are only entitled to severance compensation equivalent to month pay for every year of service. The amount depends on the ground for the termination of employment, and in this case, contrary to the ruling of the NLRC, they were terminated due to retrenchment not redundancy. The fact alone that a mere portion of the business of an employer, not the whole of it, is shut down does not necessarily remove that measure from the ambit of the term retrenchment within the meaning of Sec. 283(c) of the Labor Code. Redundancy exists where the services of an employee are in excess of what would reasonably be demanded by the actual requirements of the enterprise. Retrenchment, in contrast to redundancy, is an economic ground to reduce the number of employees. It is a measure of last resort when other less drastic means have been tried and found to be inadequate. For it to be valid, the losses expected must be substantial and not merely de minimis in extent; the expected losses must be reasonably imminent such as can be perceived objectively and in good faith by the employer; the retrenchment must be reasonably necessary and like to effectively prevent such losses; and the imminent losses sought to be forestalled are substantiated. In exercising its right to retrench emplooyees, the firm amy choose to close all, or a part of, its business to avoid further losses or mitigate expenses. program, such as but not limited to, a) preferred status, b) efficiency and c) seniority. Such appraisal was not done in the instant case. Golden Thread Knitting Industries vs. NLRC (Eds) Facts: Several charges were filed against Golden Thread Knitting Industries, one of which was the illegal dismissal of some union members. The company alleged redundancy in their position as defense for dismissing them. Issue: Were the dismissals on the ground of redundancy valid? Held: No. The characterization of an employees services as no longer necessary or sustainable, and therefore properly terminable, is an exercise of business judgment on the part of the employer, and is not subject to the discretionary review on the aprt of the Labor Arbiter nor the NLRC, provided that violation of law or arbitrary or malicious action is not shown. In this case, however, it is not shown that Rivera and Macaspacs positions were indeed unnecessary, much less was the companys claim supported by any evidence. It is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof that such is the actual situation in order to justify the dismissal of the affected employees for redundancy. In selecting the employees to be dismissed, a fair and reasonable criteria must be used, such as but not limited to: a) less preferred status (e.g. temporary employee), b) efficiency, and c) seniority. In this case, no criterion whatsoever was adopted by the company in dismissing Rivera and Macaspac

Criteria- Selection of Employee Panlilio vs. NLRC (Eds) Facts: Moises Panlilio, a Recreational Manager of Sheraton Hotel in oman, was dismissed 6 months after being hired on the ground that his position had become redundant. Issue: Was Panlilios dismissal on the ground of redundancy valid? Held: No. There was no substantial evidence to justify Panlilios dismissal on such ground. The documents submitted do not present the necessary factors which would confirm that a position is indeed redundant, such as overhiring of workers, decreased volume of business or dropping of a line or service activity. It is not enough for a company to allege that the employees position became redundant and that there was restructuring of the staff at the Health Club of the Oman Sheraton Hotel. Evidence should have been presented to support this contention, such as new staffing pattern, feasibility studies/proposal, viability of the newly created positions, job description, and the approval by the management of the restructuring. It is important for a company to have fair and reasonable criteria in implementing its redundancy

Tanjuan vs. Phil. Postal Savings Bank (Eds) Facts: Philippine Postal Savings Bank, Inc., issued a Board Resolution for the banks reorganization via retrenchment of employees and realignment of functions and positions for the purpose of preventing further serious losses. Prudencio Tanjuan, a Property Appraisal Specialist and a Department Officer-in-Charge, who was preventively suspended for alleged negligence in performance of duties and misrepresentation of bank rules and regulations, was one of those termininated. Issue: Was Tanjuans dismissal illegal? Held: No. The corp has sufficiently and convincingly established business reverses of the kind or the amount that would justify the retrenchment. Before any reduction of personnel becomes legal, any claim of acutal or potential business losses must satisfy established standards as follows: 1) losses incurred are substantial and not de minimis; 2) the losses are actual or reasonably imminent; 3) the retrenchment is reasonably necessary and is likely to be effective in preventing the expected losses; and 4) the alleged losses, if already incurred, or the expected imminent losses sought to be forestalled are proven by sufficient and convincing evidence. The employer has the burden of proving that the losses are

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 4

Labor II
serious, actual and real. In this case, the audited financial statements submitted by the corp adequately supported their claim of actual, real and substantial losses. In selecting the employees to be dismissed, a fair and reasonable criteria must be used, such as but not limited to: a) less preferred status (e.g. temporary employee), b) efficiency, and c) seniority. In this case, no criterion whatsoever was adopted by the company in dismissing Rivera and Macaspac. Golden Thread Knitting Industries v. NLRC The absence of criteria, guidelines, or standard for selection of dismissed employees renders the dismissals whimsical, capricious and vindictive. It is imperative for the employer to have fair and reasonable criteria in implementing its redundancy program, such as but not limited to a) preferred status; b) efficiency; and c) seniority. Lopez Sugar Corp vs. Franco an independent contractor is justified when the latter is undertaken in order to effectuate more economic and efficient methods of production. Here, no proof was offered to show that the management acted in a malicious or arbitrary manner in engaging the services of an independent contractor to operate the Laura wells. Procedure Requirement Retrenchment and redundancy are just causes for the employer to terminate the services of workers to preserve the viability of the business. However, management must faithfully comply with the substantial and procedural requirements laid down by law and jurisprudence. Such requirements for retrenchment are: 1) that the retrenchment is reasonably necessary and likely to prevent business losses, which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected are reasonably imminent are perceived objectively and in good faith by the employer; 2) that the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; 3) that the employer pays the retrenched employees separation pay equivalent to one month pay or at least month pay for every year of service, whichever is higher; 4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees right to security of tenure; and 5) that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers. Asian Alcohol v. NLRC

Employment of Independent Contractor- Effect Asian Alcohol Corp vs. NLRC (Eds) Facts: Due to mounting business losses, Asian Alcohols management implemented an organizational plan and other cost-saving measures, whereby 21 union members and 51 non-union members were terminated on the ground that their positions had become redundant. Some of the dismissed union members filed a suit for illegal dismissal, claiming that Asian Alcohol used the retrenchment program as a subterfuge for union busting, and that they were singled out for separation by reason of their active participation in the union. Issue: Were the private respondents illegally dismissed? Held: No. The law allows an employer to downsize his business to meet clear and continuing economic threats. Reductions in work force to forestall business losses or stop the hemorrhaging of capital is allowed, as long as the requirements under the law are complied with. Under Art. 283 of the Labor Code, retrenchment to prevent losses is also allowed. Retrenchment must be undertaken by the employer before losses are actually sustained, contrary to the respondents claim. In this case, private respondents, never contested the veracity of the audited financial documents offered by Asian Alcohol, showing that the latter has accumulated losses and that there was no sign of its abating in the near future. There was also no proof that the program was designed to bust the union. Besides, union and non-union members were treated alike. An employers good faith in implementing a redundancy program is not necessarily destroyed by the availment of the services of an independent contractor to replace the services of the terminated employees. The reduction of the number of workers in a company made necessary by the introduction of

Hearing Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of the "Rules to Implement the Labor Code" read as follows: Sec. 2. Notice of dismissal. ?? Any employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of work, the notice shall be served at the worker's last known address. xxx xxx xxx Sec. 5. Answer and hearing. ?? The worker may answer the allegations stated against him in the notice of dismissal within a reasonable period from receipt of such notice. The employer shall

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 5

Labor II
afford the worker ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires. (emphasis supplied) We note that Section 2 of Rule XIV quoted above requires the notice to specify "the particular acts or omissions constituting the ground for his dismissal", a requirement which is obviously applicable where the ground for dismissal is the commission of some act or omission falling within Article 282 of the Labor Code. Again, Section 5 gives the employee the right to answer and to defend himself against "the allegations stated against him in the notice of dismissal". It is such allegations by the employer and any counter-allegations that the employee may wish to make that need to be heard before dismissal is effected. Thus, Section 5 may be seen to envisage charges against an employee constituting one or more of the just causes for dismissal listed in Article 282 of the Labor Code. Where, as in the instant case, the ground for dismissal or termination of services does not relate to a blameworthy act or omission on the part of the employee, there appears to us no need for an investigation and hearing to be conducted by the employer who does not, to begin with, allege any malfeasance or non-feasance on the part of the employee. In such case, there are no allegations which the employee should refute and defend himself from. Thus, to require petitioner Wiltshire to hold a hearing, at which private respondent would have had the right to be present, on the business and financial circumstances compelling retrenchment and resulting in redundancy, would be to impose upon the employer an unnecessary and inutile hearing as a condition for legality of termination. (Wiltshire vs. NLRC) Defined FF Marine Corp vs. NLRC (Eds) Facts: FF Marine Corp filed with DOLE notice of a retrenchment program to curb serious business reverses brought about by the Asian economic crisis. They had already clsoed down their dry docking and ship repair division and their dredging services were heavily affected by the economic slowdown being experienced by the construction industry. Ricardo Magno, Lead Electrician for the corp, was one of those terminated. Issue: Was the termination by virtue of the retrenchment program valid? Held: No. The ground for retrenchment availed of was not sufficiently and convincingly established. It is essentially required that the alleged losses in business operations be proven. The corp failed to adduce financial statements duly audited by independent external auditor. The corp also failed to comply wikth the rule that retrenchment shall be a remedy of last resort. Retrenchment is the termination of employment initiated by the employer through no fault of the employees and without prejudice to the latter, resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of automation.

Venue of Complaint This is not to say that the employee may not contest the reality or good faith character of the retrenchment or redundancy asserted as grounds for termination of services. The appropriate forum for such controversion would, however, be the Department of Labor and Employment and not an investigation or hearing to be held by the employer itself. It is precisely for this reason that an employer seeking to terminate services of an employee or employees because of "closure of establishment and reduction of personnel", is legally required to give a written notice not only to the employee but also to the Department of Labor and Employment at least one month before effectivity date of the termination. (Wiltshire vs. NLRC)

The three basic requisites for a valid retrenchment are: a) the retrenchment is necessary to prevent losses and such losses are proven; b) written notice to the employees and to the DOLE at least 1 month prior to the intended ndate of retrenchment; and c) payment of separation pay equivalent to 1 month pay or at least month pay for every year of service, whichever is higher. The losses expected should be substantial and not merely de minimis in extent. Such substantial loss apprehended must be reasonably imminent, as such, imminence can be perceived objectively and in good faith by the employer. Retrenchment must also be reasonably necessary and likely to effectively prevent the expected losses. The employers prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means. Alleged losses if already realized, and expected imminent losses sought to be forestalled, must also be proved by sufficient and convincing evidence. Distinction Redundancy and Retrenchment AG & P United Bank and File Assn vs. NLRC(Charms)

C. Retrenchment to prevent losses

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 6

Labor II
Facts: As a result of a deadlock in the negotiations for a collective bargaining agreement, the union declared a strike. Prior to the rendition of the decision of the Secretary of Labor and Employment, the president of respondent company announced the adoption by the company of several cost-cutting measures to forestall impending financial losses. Among these was a socalled "redundancy program," which, as implemented on March 1, 1988, resulted in the layoff of around 177 employees, some of whom were officers and members of the petitioner union. The affected employees were given separation pay equivalent to one month pay for every year of service, for which they signed documents of waiver. Held: No illegal dismissal. There was substantial proof that the company was incurring substantial losses. As already stated, the Labor Code recognizes retrenchment as one of the authorized causes for terminating the employer-employee relationship and the decision to retrench or not to retrench is a management prerogative. In the case at bar, the company losses were duly established by the financial statements presented by both parties. Both are mentioned in Art. 283 of the Labor Code as just causes for the closing of establishments or reduction of personnel. "Redundancy" exists when the services of an employee are in excess of what is required by an enterprise. 4 "Retrenchment," on the other hand, is one of the economic grounds for dismissing employees and is resorted to primarily to avoid or minimize business losses. Private respondent's "redundancy program," while denominated as such, is more precisely termed "retrenchment" because it is primarily intended to prevent serious business losses. Distinction Closure and Retrenchment J.A.T General Services vs. NLRC Facts: 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. 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. Held: No Illegal Dismissal. 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 respondent 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. Alabang Country Club vs. NLRC (Charms) Facts: Francisco Ferrer, then President of ACCI, requested its Internal Auditor, Irene Campos-Ugalde, to conduct a study on the profitability of ACCIs Food and Beverage Department (F & B Department). Consequently, her report showed that from1989 to 1993, F & B Department had been incurring substantial losses in the aggregate amount of P8,727,135.00. ACCI then sent its F & B Department employees individual letters informing them that their services were being terminated effective January 1, 1995; and that they would be paid separation pay equivalent to one hundred twenty five (125%) percent of their monthly salary for every year of service. Held: NO ILLEGAL DISMISSAL. As in the case of retrenchment, however, for the closure of a business or a department due to serious business losses to be regarded as an authorized cause for terminating employees, it must be proven that the losses incurred are substantial and actual or reasonably imminent; that the same increased through a period of time; and that the condition of the company is not likely to improve in the near future. As did the appellate court, this Court finds that the study report submitted by the internal auditor of petitioner, the only evidence submitted to prove its alleged losses, is self-serving and falls short of the stringent requirement of the law that the employer prove sufficiently and convincingly its allegation of substantial losses. Petitioners failure to prove that the closure of its F & B Department was due to substantial losses notwithstanding, this Court finds that individual respondents were dismissed on the ground of closure or cessation of an undertaking not due to serious business losses or financial reverses, which is allowed under Article 283 of the Labor Code.

Coverage Philippine Tuberculosis Society vs. NLRC (Charms) Facts: In the proceedings before the NLRC, it was shown that, in 1989, the Society began to experience serious financial difficulties when it incurred a deficit of P2 million. The shortfall increased to P9,100,000.00 in 1990 and was certain to become worse were it not for quick measures taken by petitioner. 1 First, the Society leased a property in Tayuman to a fastfood outlet, cancelled its service agreement with a janitorial company, and sold its equity in the Philippine

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 7

Labor II
Long Distance Telephone Company (PLDT). Second, it withdrew from the Pag-Ibig Fund Program, negotiated with the Government Service Insurance System for the restructuring of its obligations, and applied for exemption from minimum wage increases. Finally, it disapproved the overtime pay of supervisory and managerial employees, obtained the waiver of personnel of their entitlement to wage differentials, and implemented the retrenchment of one hundred sixteen (116) employees. 2 The retrenchment is the subject of the present suit. Held: ILLEGALLY DISMISSED. Indeed, there is substantial evidence in the record to support the NLRC's finding that the Society suffered financial distress as a result of growing deficits which were not likely to abate. Petitioner presented to the NLRC the balance sheets, financial statements, and the reports of its external auditors for the years 1989 and 1990. We cannot, therefore, say that the finding of the NLRC is unsupported by substantial evidence. Nor do we think the NLRC erred in holding that though the Society was justified in ordering a retrenchment, its implementation of the scheme rendered the retrenchment invalid. NLRC ruled: We noted with concern that the criteria used by the Society failed to consider the seniority factor in choosing those to be retrenched, a failure which, to our mind, should invalidate the retrenchment, as the omission immediately makes the selection process unfair and unreasonable. Things being equal, retaining a newly hired employee and dismissing one who had occupied the position for years, even if the scheme should result in savings for the employer, since he would be paying the newcomer a relatively smaller wage, is simply unconscionable and violative of the senior employee's tenurial rights. Although petitioner is a non-stock and non-profit organization, retrenchment as a measure adopted to stave off threats to its existence is available to it. Article 278 of the Labor Code states that the fiscal measures recognized therein which an employer may validly adopt apply to "all establishments or undertakings, whether for profit or not." employer to prove economic or business losses with appropriate supporting evidence. After all, not every asserted potential loss is sufficient legal warrant for a reduction of personnel and the evidence adduced in support of a claim of actual or potential business losses should satisfy certain established standards, to wit: (1) The losses expected and sought to be avoided must be substantial and not merely de minimis; (2) The apprehended substantial losses must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer; (3) The retrenchment should reasonably necessary and likely to prevent effectively the expected losses; (4) The losses, both the past and forthcoming, must be proven by sufficient and convincing evidence. It need not be overemphasized that the State recognizes the pivotal role of small rural banks, such as the respondent bank, in the development of the countryside through its loan portfolios and other services to the rural folk. While courts must be constantly vigilant in validating claims of business losses to prevent unscrupulous employers from feigning such losses in order to dismiss their personnel, we are satisfied that respondent bank undertook the drastic act of cutting down its workforce in order to prevent imminent substantial loss to its business.

Procedure Mayop Hotel & Restaurant vs. Adora (Charms) Facts: Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the business were suspended on March 31, 1999. The operation of the restaurant was continued in its new location at Elizondo Street, Legazpi City, while waiting for the construction of a new Mayon Hotel & Restaurant at Pearanda Street, Legazpi City. Only nine (9) of the sixteen (16) employees continued working in the Mayon Restaurant at its new site. Held: ILLEGALLY DISMISSED. While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the evidence on record belie any claim of petitioners that the lay-off of respondents on that same date was merely temporary. On the contrary, we find substantial evidence that petitioners intended the termination to be permanent. Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of six (6) months, pursuant to Article 286 of the Labor Code.

Balbalec vs. NLRC (Charms) Facts: On June 30, 1989, the Rural Bank of Bangued dismissed three of its employees, namely, Paulino Balbalec, Juan Bolante and Rolando Beleno (herein petitioners) alleging that its workforce was being retrenched for losses suffered by respondent bank during the years 1984-1988. Held: Article 283 not only contemplates the termination of employment of workers or employees to minimize established business losses but also to prevent impending losses, for the law's phraseology explicitly uses the phrase "retrenchment to prevent losses." However, retrenchment strikes at the very core of an individual's employment and the burden clearly falls upon the

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 8

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To say the least, if it were true that the lay-off was temporary but then serious business losses prevented the reinstatement of respondents, then petitioners should have complied with the requirements of written notice. The requirement of law mandating the giving of notices was intended not only to enable the employees to look for another employment and therefore ease the impact of the loss of their jobs and the corresponding income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination. And even assuming that the closure was due to a reason beyond the control of the employer, it still has to accord its employees some relief in the form of severance pay. The employer must comply with the following requisites to ensure the validity of the implementation of a redundancy program: 1) a written notice served on both the employees and the Department of Labor and Employment at least one month prior to the intended date of retrenchment; 2) payment of separation pay equivalent to at least one month pay or at least one month pay for every year of serve, whichever is higher; 3) good faith in abolishing the redundant positions; and 4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished. Lopez Sugar vs. Franco

Temporary Retrenchment Sebugero vs. NLRC (Charms) Facts: The petitioners were among the thirty-eight (38) regular employees of private respondent GTI Sportswear Corporation (hereinafter GTI), a corporation engaged in the manufacture and export of ready-to-wear garments, who were given "temporary lay-off" notices by the latter on 22 January 1991 due to alleged lack of work and heavy losses caused by the cancellation of orders from abroad and by the garments embargo of 1990. Held: ILLEGAL DISMISSAL DUE TO FAILURE TO GIVE NOTICE. To determine whether the petitioners were validly retrenched or were illegally dismissed, we must determine whether there was compliance with the law regarding a valid retrenchment at anytime within the six month-period that they were temporarily laid-off. There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides for the requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating status. Six months is the period set by law that the operation of a business or undertaking may be suspended thereby suspending the employment of the employees concerned. The temporary lay-off wherein the employees likewise cease to work should also not last longer than six months. After six months, the employees should either be recalled to work or permanently retrenched following the requirements of the law, and that failing to comply with this would be tantamount to dismissing the employees and the employer would thus be liable for such dismissal.

EMCO Plywood Corp vs. Abelgas (Charms) Facts: On January 20, 1993 and of March 2, 1993, EMCO, represented by Lim, informed the Department of Labor and Employment (DOLE) of its intention to retrench some of its workers. The intended retrenchment was grounded on purported financial difficulties occasioned by alleged lack of raw materials, frequent machinery breakdown, low market demand and expiration of permit to operate its sawmill department. A memorandum was thereafter issued by EMCO, addressed to all its foremen, section heads, supervisors and department heads. Retrenchment is one of the authorized causes for the dismissal of employees. Resorted to by employers to avoid or minimize business losses, it is recognized under Article 283 of the Labor Code. The loss referred to in this provision cannot be of just any kind or amount; otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted employees. The Court has laid down the following standards that a company must meet to justify retrenchment and to guard against abuse: Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bonafide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laidoff. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs other than labor costs. Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must

Requirements- Standards

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be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees. Blucor Minerals Corp. vs. Amarilla (Jake) Facts: Blucor notified Amarilla, Aldiano and Parcon to the effect that Blucor is terminating their employment due to retrenchment. The CA ruled that the dismissal was unjustified, as Blucor had failed to prove with clear and satisfactory evidence that legitimate business reasons existed to justify retrenchment. The CA also found that the company had failed to show that retrenchment was reasonably necessary to avert substantial losses, or that a fair and reasonable criteria had been used in selecting the employees to be retrenched. Held: Decision of CA affirmed. Petitioners failed to show any reasonable necessity for the retrenchment. Not every loss incurred or expected to be incurred by an employer can justify retrenchment. Any claim of actual or potential business losses must satisfy the following established standards: (1) the losses incurred are substantial, not de minimis; (2) the losses are actual or reasonably imminent; (3) the retrenchment can be fairly regarded as necessary and likely to be effective in preventing the expected losses; and (4) sufficient and convincing evidence prove the alleged losses, if already incurred, or the expected imminent losses sought to be forestalled. The failure of the employer to prove by convincing evidence any of the foregoing requirements will result in an illegal dismissal. expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. For termination due to retrenchment to be valid, however, the law requires that written notices of the intended retrenchment be served by the employer on the worker and on the DOLE at least one month before the actual date of the retrenchment, in order to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination. Philippine Carpet vs. Sto. Tomas (Jake) Facts: A Memorandum was issued informing all employees that a comprehensive cost reduction program would be implemented by the Corporation, "on account of depressed business conditions brought about by the currency crisis in Southeast Asia, the Middle East war and the 9/11 incident in the United States of America. After the retrenchment program was implemented, more than 100 new workers were hired, including some of those who had been retrenched, and 12 managers and supervisors were promoted. Held: Respondents failed to adduce clear and convincing evidence to prove the confluence of the essential requisites for a valid retrenchment of its employees. We believe that respondents acted in bad faith in terminating the employment of the members of petitioner Union. The requirements are: (1) that the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) that the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; (3) that the employer pays the retrenched employees separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher; (4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees right to security of tenure; and (5) that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status (i.e., whether they are temporary, casual, regular or managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for certain workers.

San Miguel Corp vs. Aballa (Jake) Facts: Private respondents filed a Complaint# for illegal dismissal following SMCs closure of its Bacolod Shrimp Processing Plant which resulted in the termination of their services. Held: Company losses were duly established by audited financial documents showing that the aquaculture operations of SMCs Agribusiness Division accumulated losses resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental, which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant. SMC has thus proven substantial business reverses justifying retrenchment of its employees. For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the

Nature of Loss Lopez Sugar vs. Federation of Free Workers(Heidi)

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 10

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Fact: Employer, allegedly to prevent losses due to major economic problems, and exercising its privilege under the CBA entered into between petitioner and PLUANACUSIP, caused the retrenchment and retirement of a number of its employees. The workers claimed that the terminations undertaken by employer were violative of the security of tenure of its members and were intended to "bust" the union and hence constituted an unfair labor practice. They that after the termination of the services of its members, Employer advised 110 casuals to report to its personnel office. Employer reasoned that the calling of 110 casuals was for the purpose of organizing a pool of extra workers which could be tapped whenever there were temporary vacancies by reason of leaves of absence of regular workers. Not every asserted possibility of loss is sufficient legal warrant for reduction of personnel. In the nature of things, the possibility of incurring losses is constantly present, in greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the factors which impact upon the profitability or viability of such operations may be substantially outside the control of the employer. Thus, the difficult question is determination of when, or under what circumstances, the employer becomes legally privileged to retrench and reduce the number of his employees. closure to the Department of Labor and Employment (DOLE) and to the complainants who were then employed in the remaining branches or outlets. Held: Respondents assert that the company was taking losses of such magnitude which left its survival or future existence in the dark. To stem these serious losses, the company found no recourse but to shut down its outlets. Thus, as found by the Court of Appeals, respondents had no option but to lay off employees and eventually close shop. Petitioners herein are not entitled to separation pay under Article 283 of the Labor Code. It is only in instances 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" that employees whose employment has been terminated as a result are entitled to separation pay. In other words, Article 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to serious losses. To require an employer to be generous when it is no longer in a position to do so, in our view, would be unduly oppressive, unjust, and unfair to the employer. In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of some employees is authorized to be undertaken by the employer sometime before the losses anticipated are actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay his hand and keep all his employees until sometime after losses shall have, in fact, materialized; if such an intent were expressly written into the law, that law may well be vulnerable to constitutional attack as taking property from one man to give to another. Phil. Carpet vs. Sto. Tomas

Bogo Medellin Sugar Cane Planters vs. NLRC (Jake) Facts: While Respondent Commission agreed with petitioners that management had the prerogative to terminate employment on account of business reversals, it held, however, that petitioners failed to present adequate proof of such losses. Held: NLRC decision affirmed. To justify retrenchment, the employer must prove serious business losses. Indeed, not all business losses suffered by the employer would justify retrenchment under this article. The Court has held that the "loss' referred to in Article 283 cannot be just any kind or amount of loss; otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted employees."

Sliding Income San Miguel Jeepney Service vs. NLRC (Jake) Facts: Petitioner SMJS had a contract with the U.S. Naval Base Facility located in San Miguel, San Antonio, Zambales, to provide transportation services to personnel and dependents inside said facility. When the said contract expired, petitioner Galace, owner and general manager of SMJS, "opted not to renew the existing contract nor bid on the new contract", due to financial difficulties, he having suffered a net loss the prior year. As a consequence, the services of the complainants were terminated. Held: Apparently, petitioner did not renew his contract because of "sliding incomes", and not because of serious business losses, thus petitioner cannot justify the nonpayment of separation pay. As petitioners themselves admitted, what they

Cama vs. Jonis Food Services (Jake) Facts: In the 1990s, JFSI had 8 outlets for its coffee shop and restaurant business. In 1997, faced with dropping sales, it shut down three of these shops to avert serious business losses. JFSI shut down more outlets, leaving it with just three operating outlets at the end of 1998. Bleak business conditions continued to plague the company and by the end of the first quarter of 1999, the remaining branches were also closed. One month before the target closure date of its remaining outlets, JFSI sent notices of

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 11

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suffered were "sliding incomes", in other words, decreasing gross revenues. What the law speaks of is serious business losses or financial reverses. Clearly, sliding incomes are not necessarily losses, much less serious business losses within the meaning of the law. Proof of Loss The proof of actual declining gross and net revenues must be submitted. Financial statements audited by independent external auditors constitute the normal method of proof of the profit and loss performance of a company. Lopez Sugar vs. Federation of Free Workers A comparative statement of revenue and expenses for two years, by itself, is not conclusive proof of serious business losses. The Court has previously ruled that financial statements audited by independent external auditors constitute the normal method of proof of the profit and loss performance of a company. Bogo Medelin vs. NLRC might be merely feigning business losses or reverses in their business ventures to ease out employees. 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. Danzas International vs. Daguman (Jake) Facts: Petitioners aver that they were compelled to close the companys brokerage department, to which losses were allegedly traceable due to incorrect handling of sales, in order to prevent further losses which threatened the companys viability. Essentially, petitioners invoke a blend of retrenchment to prevent losses and closure of a section of the companys business to justify the termination of private respondents. The labor arbiter and the NLRC both found that petitioners validly exercised their management prerogatives. Held: The termination of private respondents was unjustified either as retrenchment to prevent losses because petitioners evidence to prove business losses was insufficient, or closure of the establishment because the brokerage department did not actually cease operations. The condition of business losses justifying retrenchment is normally shown by audited financial documents like yearly balance sheets and profit and loss statements as well as annual income tax returns. Financial statements must be prepared and signed by independent auditors. Otherwise, they may be assailed as self-serving. Since the losses incurred must be substantial and actual or reasonably imminent, it is necessary that the employer show that the losses increased through a period of time and that the condition of the company is not likely to improve in the near future. The same evidence is generally required when the termination of employees is by reason of closure of the establishment or a division thereof for economic reasons, although the more overriding consideration is, of course, good faith. The employer must prove that the cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees. Parenthetically, if the business losses that justify the closure of the establishment are duly proved, the right of affected employees to separation pay is lost for obvious reasons. Otherwise, the employer closing his business is obligated to pay his employees their separation pay.

Mitsubishi Motors vs. Chrysler (Jake) Facts: The petitioner asserts that assuming respondent Paras was illegally dismissed, his reinstatement had become moot and academic because of its retrenchment program which was effected beginning February 1998. The petitioner posits that even if respondent Paras had become a regular employee by November 26, 1996, he would have been included in the first phase of its retrenchment program, pursuant to the "last in first out policy" embedded in the CBA. Hence, the petitioner concludes, the payment of backwages should be computed up to February of 1998. Held: The petitioners losses in 1997 and 1998 are not insignificant. It is beyond cavil then, that the serious and actual business reverses suffered by the petitioner justified its resort to retrenchment of 700 of its employees. The records show that the petitioner informed the Department of Labor and Employment of its plight and intention to retrench employees as a result of the shutdown of its plants. The termination of the 531 affected employees was made effective a month from receipt of the termination letter. In accordance with the CBA, employees who were recently hired were the ones retrenched. Considering that respondent Paras had just been regularized on November 24, 1996, he would have been included among those who had been retrenched had he not been dismissed. Business reverses or losses are recognized by law as an authorized cause for termination of employment. Still, it is an essential requirement that alleged losses in business operations must be proven convincingly. Otherwise, such ground for termination would be susceptible to abuse by scheming employers, who

Composite Enterprises Inc. vs. Caparoso (Kristel) Facts: Caparoso and Quindipan were employed as

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 12

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deliverymen with Composite Enterprises. They were terminated from their work allegedly as a result of the expiration of contract which was on a month to month basis. Caparoso and Quindipan filed a case for illegal dismissal. For retrenchment to be considered valid, the following substantial requirements must be met: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. In other words, it is not enough for a company to merely declare that it has implemented a retrenchment program. It must produce adequate proof that such is the actual situation to justify the retrenchment of employees. Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and annual income tax returns. The financial statements must be prepared and signed by independent auditors, failing which these can be assailed as self-serving documents. employment is to expire on November 3, 1997, or only three days later from the date of the Memorandum. Worse, there is no evidence at all that petitioner dismissed respondent because it actually ceased or suspended business operations, or it resorted to the dismissal of respondent and other employees to stave off cessation or suspension of its business. The best evidence of reversal of fortune is audited financial and income statements which detail the extent and pattern of business losses suffered by the employer. Petitioner did not present any such document where it could have demonstrated how the 1997 Asian financial currency crisis or the rehabilitation of Uniwide adversely and significantly affected the viability of its business.

Burden of Proof Sy vs. CA (Kristel) Facts: Sahot was hired as truck helper by the family owned SBT Trucking Corp. When he was 59 years old, he started to incur absences due to several ailments the most severe of all being the pain in his left thigh. He filed a week long leave and found that he had osteoarthritis, UTI, heart enlargement. He found that his employers were not remitting his SSS contributions. He filed for a month leave but SBT refused and it was during this that SBT terminated him. As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC, the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employee?s illness and thus defeat the public policy in the protection of labor. In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahots dismissal was effected. In the same case of Sevillana vs. I.T. (International) Corp., we ruled: Since the burden of proving the validity of the dismissal of the employee rests on the employer, the latter should likewise bear the burden of showing that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required certification by a competent public health authority, this Court has ruled against the validity of the employee?s dismissal. It is therefore incumbent upon the private respondents to prove by the quantum of evidence required by law that petitioner was not dismissed, or if dismissed, that the dismissal was not illegal; otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal premised on mere conjectures and

Raycor Aircontrol Systems vs. San Pedro (Kristel) Facts: Raycor hired Mario San Pedro as tinsmith operator for the duration of its contract with Uniwide. After the expiration of his contract he was rehired (this extended for 5 contracts). After the 5th, his employment contract was not renewed. He filed an illegal dismissal case. Petitioner claims that respondent was laid off due to adverse business conditions it suffered at that time, attributing these to the Asian currency crisis, in general, and to the rehabilitation of Uniwide, in particular. To justify termination of employment under Article 283[24] of the Labor Code, the employer must prove compliance with the following requirements: (a) a written notice must be served on the employees, and the Department of Labor and Employment (DOLE) at least one month before the intended cessation of business; and (b) the cessation of business must be bona fide in character. It is readily apparent that petitioner did not comply with any of the foregoing requirements. There is no evidence that it complied with the one-month notice requirement. While petitioner claims that it issued to respondent an October 30, 1997 Memorandum of termination of employment, it failed to prove that such document was ever served upon respondent and the DOLE. Moreover, the notice is less than one month, for the memorandum states that respondents contract of

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suspicions, the evidence must be substantial and not arbitrary and must be founded on clearly established facts sufficient to warrant his separation from work. National Bookstore Inc. vs. CA (Kristel) Facts: Maria Ymasa and Edna Gabriel were the head custodian and cashier of National Bookstore. They were terminated for gross neglect of duty and loss of confidenc. Ymasa and Gabriel filed a case for illegal dismissal. Anent the first requisite, the employer must furnish the employee with two (2) written notices: (a) a written notice containing a statement of the cause for the termination to afford the employee ample opportunity to be heard and defend himself with the assistance of his representative, if he so desires; and, (b) if the employer decides to terminate the services of the employee, the employer must notify him in writing of the decision to dismiss him, stating clearly the reasons therefor. Petitioner National Bookstore, as correctly pointed out by the Labor Arbiter in his decision, more than substantially observed this requirement. On 30 July 1992 it gave private respondents an opportunity to explain why they should not be dismissed for the loss of company funds, which private respondents immediately complied with by submitting their joint answer on 31 July 1992. Moreover, on 29 August 1992 petitioner National Bookstore sent another written notice to private respondents informing them of its decision to terminate their services setting forth the reasons therefor. But the burden imposed on petitioner National Bookstore does not stop here. It must also show with convincing evidence that the dismissal was based on any of the just or authorized causes provided by law for termination of employment by an employer. When effected In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of some employees is authorized to be undertaken by the employer sometime before the losses anticipated are actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay his hand and keep all his employees until sometime after losses shall have in fact materialized; if such an intent were expressly written into the law, that law may well be vulnerable to constitutional attack as taking property from one man to Lopez Sugar Corp vs. Federation of Free Workers corporate term from 50 years to 2 years and 7 months. In fact, it was dissolved on January 27, 1998. With respect to respondent TP Vinyl, it shifted its business from production to marketing and trading of Thai Petrochemical products. Thus, respondents implemented cost-cutting measures resulting in the retrenchment or termination from the service of their employees, including petitioner. Article 283 entails, among others, only a situation where there is "retrenchment to prevent losses."14 The phrase "to prevent losses" means that retrenchment or termination from the service of some employees is authorized to be undertaken by the employer sometime before the losses anticipated are actually sustained or realized.15 This is the situation in the case at bar. Evidently, actual losses need not set in prior to retrenchment. As mandated by Article 283, the employer shall serve notice of retrenchment to prevent losses on the worker and the DOLE at least one month before the intended date thereof. Records show that on December 3, 1998, respondents sent petitioner and the DOLE separate notices of retrenchment effective December 30, 1998. Following the provision of Article 283, these notices should have been served one month before, or on November 30, 1998. Clearly, respondents failed to comply with the one-month notice requirement.

Procedure (For both retrenchment and redundancy) Petitioners were given notice of the temporary layoff but there is no evidence of compliance with the notice of requirement. GTI conveyed to the petitioners the impossibility of recalling them, but what the law requires is a written notice to the employees concerned. Such requirement is mandatory. The notice must be given at least 1 month in advance of the intended retrenchment, to enable the employees to look for other means of employment and therefore ease the impact of the loss of their jobs and incomes. That petitioners were already on temporary lay-off at the time the notice should have been given is not an excuse to forego the written notice, because this time their lay-off is to become permanent. A written notice given to the DOLE is required by law. This notice is essential because the right to retrench is not an absolute prerogative of an employer but is subject to the requirement of law that retrenchment be done to prevent losses. The DOLE is the agency that will determine whether the planned retrenchment is justified & adequately supported by facts. When the required notices to the employees and to the DOLE are not given, the retrenchment is defective. Sebugero vs. NLRC For an employer to validly terminate the service of

Cajucom VII vs. IPI Phils. Cement Corp. (Kristel) Facts: Benedicto Cajucom was the VP Legal Affairs of IPI Cement. Due to economic slowdown, respondent TP Cement, having no viable projects, shortened its

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his employees under Art. 283, there are three basic requisites for a valid retrenchment: 1) The retrenchment is necessary to prevent losses and such losses are proven; 2) Written notice to the employees and to DOLE at least one month prior to the intended date of retrenchment; and 3) Payment of separation pay equivalent to 1 month OR at least month pay for every year of service, whichever is higher. The requirement of notice must be given to both DOLE and the employees concerned 1 month before the intended date of retrenchment. This is to allow the employees to look for other employment. The purpose of notice to the DOLE is to allow the department to assess whether the retrenchment is being done in good faith. EMCO vs. Abelgas Industrial Timber Corp. vs. Ababon (Kristel) Facts: Industrial Plywood Group Corp. (IPGC) leased a plywood plant to Industrial Timber Corp. (ITC) ITC employed 387 workers. ITC notified the DOLE and its workers of the plant's shutdown due to the non-renewal of anti-pollution permit that expired in April 1990 and alleged lack of logs for milling. IPGC took over the plywood plant coincidentally on the same day the ITC ceased operation of the plant.. Ababon, et al. filed a complaint against ITC and IPGC for illegal dismissal, unfair labor practice and damages. They alleged, among others, that the cessation of ITC's operation was intended to bust the union and that both corporations are one and the same entity being controlled by one owner. A reading of the foregoing law shows that a partial or total closure or cessation of operations of establishment or undertaking may either be due to serious business losses or financial reverses or otherwise. Under the first kind, the employer must sufficiently and convincingly prove its allegation of substantial losses, while under the second kind, the employer can lawfully close shop anytime as long as cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees, and as long as he pays his employees their termination pay in the amount corresponding to their length of service. Just as no law forces anyone to go into business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes with management's prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment. In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations: (a) service of a written notice to the employees and to the DOLE at least one 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 one month pay or at least one-half month pay for every year of service, whichever is higher. Re-Hiring Effect Atlantic Gulf and Pacific Co. of Manila vs. NLRC (Monette) Facts: Petitioner corporation engaged in general construction work, reportedly incurred huge operating losses. To save itself, petitioner implemented a redundancy program wherein 177 employees occupying rank and file, managerial and staff positions were separated from employment. The employees, members of the AG&P United Rank and File Association, received all the benefits due them under the Labor Code. They also signed releases indicating their conformity with petitioner's redundancy program. More than a year after, petitioner was charged with unfair labor practice and illegal dismissal by private respondents. Held: Private respondent's contention that what the Court in an earlier case, involving the same parties, upheld was only the legality of the redundancy program and not the legality of its implementation, was untenable because the Court in said decision thoroughly passed upon the legality of respondent company's redundancy program. The Court even made an observation in said case that the program should have been more properly denominated as a "retrenchment" program because the reason for resorting to the dismissal by AG&P of its employees was economic in nature, i.e. to avoid or minimize business losses. The Court also rejected the complaining employees' claim that the program was a mere scheme to bust the local union, and instead ruled that the AG&P duly established its claim of company losses which was the basis of the questioned retrenchment program. Moreover, while it is true that the company hired or re-employed some of the dismissed workers, it has been shown that such action was made only as company projects became available and that it was done in pursuance of the company's policy of giving preference to its former workers in the rehiring of project employees. The rehiring or re-employment does not negate the imminence of losses, which prompted private respondents to retrench.". .

Liability Capitol Medical Center vs. Meris (Kristel) Facts: Dr. Meris was the industrial service unit chief of Capitol Medical Center. Dr. Meris received from Capitols president and chairman of the board, Dr. Thelma Navarette-Clemente (Dr. Clemente), a notice

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advising him of the managements decision to close or abolish the ISU and the consequent termination of his services as Chief. This was in view of the almost extinct demand for direct medical services by the private and semi-government corporations in providing health care for their employees. The termination of the services of Dr. Meris not having been premised on a just or authorized cause, he is entitled to either reinstatement or separation pay if reinstatement is no longer viable, and to backwages. Reinstatement, however, is not feasible in case of a strained employer-employee relationship or when the work or position formerly held by the dismissed employee no longer exists, as in the instant case. Dr. Meris is thus entitled to payment of separation pay at the rate of one (1) month salary for every year of his employment, with a fraction of at least six (6) months being considered as one(1) year, and full backwages from the time of his dismissal from April 30, 1992 until the expiration of his term as Chief of ISU or his mandatory retirement, whichever comes first. fide in character. And the burden of proving such falls upon the employer. It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in managements prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss. The determination to cease operations is a prerogative of management which the State does not usually interfere with, as no business or undertaking must be required to continue operating simply because it has to maintain its workers in employment, and such act would be tantamount to a taking of property without due process of law. As long as the companys exercise of the same is in good faith to advance its interest and not for the purpose of circumventing the rights of employees under the law or a valid agreement, such exercise will be upheld. Macadams Metal Engineering vs. Macadams Meat Engineering(Heidi) Facts: Spouses Geronimo and Lydia V. Sison, proprietors of GBS and MAME explained the closure of MAME and GBS was because Lydia V. Sison decided to retire from business when she became sickly. Her health did not improve despite proper medical attention. In the general meeting of the workers, she announced her plan to close shop e. The announcement in advance was intended to give the workers ample time to look for alternative employment. Accordingly, she declined to accept new projects and proceeded with the winding up of her business. Ruling: Explicit from Art. 283 is that closure or cessation of business operations is allowed even if the business is not undergoing economic losses. The owner, for any bona fide reason, can lawfully close shop at anytime. Just as no law forces anyone to go into business, no law can compel anybody to continue in it. It would indeed be stretching the intent and spirit of the law if we were to unjustly interfere with the managements prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss or simply to provide the workers continued employment. The employer need only comply with the following requirements for a valid cessation of business operations. (a) service of a written notice to the employees and to the DOLE at least one month before the intended date thereof; (b) the cessation of or withdrawal from business operations must be bona fide in character and (c) payment of termination pay equivalent to at least onehalf month pay for each year of service, or one month pay, whichever is higher. The records reveal that private respondents complied with the aforecited requirements. Finally, since private respondents cessation and closure of business was lawful, there was no illegal dismissal to speak of. This fact negated the obligation to pay backwages. Instead private respondents were required to give separation pay which they already did.

D. Closing of Business- 283 Right Espina vs. CA (Heidi) Facts: M.Y. San was previously engaged in the business of manufacturing biscuits and other related products. It informed the DOLE and Union of the closure or cessation of business operations as a result of the intended sale of the business and all the assets to Monde as the termination of the services of the employees. M.Y. San and the Union signed a MOA embodying the agreement that the existing CBA shall cease to be effective and shall in no way be binding upon the buyer, Monde, and that M.Y. San shall provide Monde a list of all its present employees who shall be given preference in employment by the latter. Just as no law forces anyone to go into business, no law can compel anybody to continue the same. The right to close the operations of an establishment or undertaking is explicitly recognized under the Labor Code as one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on terminations of employment embodied in the Labor Code. Clearly then, the right to close an establishment or undertaking may be justified on grounds other than business losses but it cannot be an unbridled prerogative to suit the whims of the employer. The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona

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Cattista vs. NLRC (Heidi) Facts: Victorias Milling Corp. decided to permanently stop and close its sugarcane operations in Hacienda Binanlutan "due to low sugar prices which affected the viability and profitability of said hacienda" and convert it instead into an ipil-ipil plantation. In view of such decision, management subsequently held a conference with all 13 field workers to explain to them the reason for this move, as well as the computation of their termination pay. In a letter, each of the 13 petitioners was formally informed of private respondent's decision to close and stop sugarcane operations and the reason for such closure. Petitioners received their termination pay or retirement pay under the pension plan, whichever was higher. Ruling: This requisites of a valid retrenchment are: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. Considering the losses suffered by private respondent, it is logical for it to implement a retrenchment program to prevent further losses. VMC's personnel reduction program was meant to reduce excessive labor costs in the company. Having determined that private respondent suffered losses and had to resort to retrenchment of its employees in Hacienda Binanlutan to prevent further losses, this Court holds that private respondent was within its rights in closing Hacienda Binanlutan and in terminating the service of petitioners. 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. Galaxie Steel Workers Union vs. NLRC (Heidi) Facts: Galaxie Steel Corporation is a corporation engaged in the business of manufacturing and sale of re-bars and steel billets which are used primarily in the construction of high-rise buildings. On account of serious business losses which occurred in 1997 up to mid-1999 totaling around P127,000,000.00, Galaxie decided to close down its business operations. Galaxie thus filed a written notice with the DOLE informing the latter of its intended closure and the consequent termination of its employees. And it posted the notice of closure on the corporate bulletin board. Ruling: The NLRCs finding on the legality of the closure should be upheld for it is supported by substantial evidence consisting of the audited financial statements showing that Galaxie continuously incurred losses from 1997 up to mid-1999, to wit: P65,753,480.65 in 1997, P48,429,785.89 in 1998, and P13,204,389.97 in 1999; and of the various demand notices of payments from creditor banks. Besides, the petitioners had not presented evidence to the contrary; nor did they establish that the closure was motivated by Galaxies anti-union stance. Respecting petitioners claim for separation pay is Article 283 of the Labor Code. In North Davao Mining Corporation v. NLRC, this Court held that Article 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 . . ." Where, the closure then is due to serious business losses, the Labor Code does not impose any obligation upon the employer to pay separation benefits. Employers are also accorded rights and privileges to assure their self-determination and independence and reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be broad and unlimited in scope, the State has the right to determine whether an employers privilege is exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an employer is the right to close an establishment or undertaking. The right to close the operation of an establishment or undertaking is explicitly recognized under the Labor Code as one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on termination of employment embodied in the Labor Code. As long as the companys 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. Clearly then, the right to close an establishment or undertaking may be justified on grounds other than business losses but it cannot be an unbridled prerogative to suit the whims of the employer. The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona fide in character. And the burden of proving such falls upon the employer. Capitol Medical Center vs. Meris Work is a necessity that has economic significance deserving legal protection. The social justice and protection to labor provisions in the Constitution dictate so. On the other hand, employers are also accorded rights and privileges to assure their selfdetermination and independence, and reasonable

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return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be broad and unlimited in scope, the State has the right to determine whether an employer's privilege is exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an employer is the right to close an establishment or undertaking. The right to close the operation of an establishment or undertaking is one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on termination of employment embodied in the Labor Code. Industrial Timber Corp vs. Ababon Extent/Degree of Partial Closure We need not belabor the issue of notice requirement for a suspension of operation of business under Art. 286. 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. The complete 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 was arrived at after a suspension of operation for several months precipitated by a slowdown in sales without any prospects of improving. JAT General Services vs. NLRC that several employees namely, decided not to work at the new site but just opted to be paid financial assistance offered by petitioner. Broadly speaking, there appears no complete dissolution of Cheniver's business undertaking but the relocation of petitioner's plant to Batangas, in our view, amounts to cessation of petitioner's business operations in Makati. It must be stressed that the phrase "closure or cessation of operation of an establishment or undertaking not due to serious business losses or reverses" under Article 283 of the Labor Code includes both the complete cessation of all business operations and the cessation of only part of a company's business. There is no doubt that petitioner has legitimate reason to relocate its plant because of the expiration of the lease contract on the premises it occupied. That is its prerogative. But even though the transfer was due to a reason beyond its control, Cheniver has to accord its employees some relief in the form of severance pay. Now, let it be noted that the termination of employment by reason of closure or cessation of business is authorized under Article 283 of the Labor Code. Consequently, Cheniver must pay his employees their termination pay in the amount corresponding to their length of service. Since the closure of petitioner's business is not on account of serious business losses, petitioner shall give private respondents separation pay equivalent to at least one (1) month or one-half (1/2) month pay for every year of service, whichever is higher. Cheniver's contention that private respondents resigned from their jobs, does not appear convincing. As public respondent observed, the subsequent transfer of petitioner to another place hardly accessible to its workers resulted in the latter's untimely separation from the service not to their own liking, hence, not construable as resignation. Resignation must be voluntary and made with the intention of relinquishing the office, accompanied with an act of relinquishment. Indeed, it would have been illogical for private respondents herein to resign and then file a complaint for illegal dismissal. Resignation is inconsistent with the filing of the said complaint. The phrase "closure or cessation of operations of establishment or undertaking" includes a partial or total closure or cessation. Ordinarily, the closing of a warehouse facility and the termination of the services of employees there assigned is a matter that is left to the determination of the employer in the good faith exercise of its management prerogatives. And the phrase "closure or cessation not due to serious business losses or financial reverses" recognizes the right of the employer to close or cease its business operations or undertaking even in the

Cheniver Deco Print vs. NLRC (Heidi) Facts: Cheniver operates a printing business. Cheniver informed its workers about the transfer of the company from its site in Makati to Batangas. Cheniver decided to relocate its business in view of the expiration of the lease contract on the premises it occupied in Makati and the refusal of the lessor to renew the same. Earlier, the local authorities also took action to force out Cheniver from Makati because of the alleged hazards petitioner's plant posed to the residents nearby. In view of the impending transfer, Cheniver gave its employees up to the end of June 1992 to inform management of their willingness to go with Cheniver, otherwise, it would hire replacements. Cheniver wrote its employees to report to the new location within 7 days, otherwise, they would be considered to have lost interest in their work and would be replaced. Five days later, the union advised Cheniver that its members are not willing to go along with the transfer to the new site. Nonetheless, Cheniver gave its workers additional time within which to report to the new work place. Later on, the labor federation informed petitioner that the employees decided to continue working for petitioner. However, not one reported for work at petitioner's new site. It appears

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absence of 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 has been ruled that an employer may adopt policies or changes or adjustments in the operations to insure profit to itself or protect the investments of its stockholders, and in the exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal or termination of its employees in the process. Espina vs. CA Requisite Mc-Shurn Corp. vs. Me-Shurn Workers Union (Heidi) Facts: The regular rank and file employees of MeShurn Corp. organized Me-Shurn Workers Union-FSM. The union had a pending application for registration BLR. 10 days later, corporation started placing on forced leave all the rank and file employees who were members of the unions bargaining unit. Thereafter the corporation declared that it will be temporarily lay off employees and cease operations, on account of its alleged inability to meet the export quota required by the BOI. Held: To justify the closure of a business and the termination of the services of the concerned employees, the law requires the employer to prove that it suffered substantial actual losses. The cessation of a companys operations shortly after the organization of a labor union, as well as the resumption of business barely a month after, gives credence to the employees claim that the closure was meant to discourage union membership and to interfere in union activities. These acts constitute unfair labor practices. Concededly, the determination to cease operations is a management prerogative that the State does not usually interfere in. Indeed, no business can be required to continue operating at a loss, simply to maintain the workers in employment. That would be a taking of property without due process of law. But where it is manifest that the closure is motivated not by a desire to avoid further losses, but to discourage the workers from organizing themselves into a union for more effective negotiations with management, the State is bound to intervene. corporation. Itr had a 3-year CBA covering from 1987 until 1990, with union. The parties formally commenced negotiations for the renewal of their CBA but the parties failed to reach an agreement. The union saturated petitioner's premises with streamers and picketed the hospital. The operations of the hospital having come to a grinding halt, the hospital management considered the union actions as tantamount to a strike. Despite the NCMB's call for a conciliation conference, nurses and nurse aides who were members of the union abandoned their respective department and joined the picket line a week later. Doctors began leaving the hospital and the number of patients dwindled. The last patient was consequently discharged. A "Notice of Temporary Suspension of Operation" was issued by the hospital and submitted to the local office of the NCMB. Similar notices were individually delivered to union members, but only 14 out of the 74 rank-and-file employees/union members acknowledged receipt thereof. Petitioner also alleged that the resident/consultant physicians abandoned the hospital because there were no more patients. The burden of proving that such a temporary suspension is bona fide falls upon the employer. In this instance, petitioner had to establish the fact of its precarious financial health, that its cessation of operation was really necessitated by its financial condition, and that said condition would probably be alleviated or improved, or its losses abated, by undertaking such suspension of operation. It is not enough to merely raise this issue nor to discuss it only in passing. It is a hornbook rule that employers who contemplate terminating the services of their workers must base their decisions on more than just flimsy excuses, considering that the dismissal of an employee from work involves not only the loss of his position but, what is more important, his means of livelihood. The same principle applies in temporary suspension of operations, as in this case, considering that it involves laying off employees for a period of six months. Undue interference with an employers judgment in the conduct of his business is uncalled for. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what is clearly a management prerogative. As long as the companys exercise of the same is in good faith and not for the purpose of defeating/circumventing the rights of the employees under the law or a valid agreement such exercise will be upheld. J.A.T vs. NLRC

Temporary Cessation of Operation- 286 Basis San Pedro Hospital of Digos vs. Secretary of Labor (Heidi) Facts: Pedro Hospital of Digos, Inc. is a charitable, nonstock, non-profit medical and educational training

While the closure of the hotel operations may have been temporary, the evidence belies any claim that the lay-off of respondents was merely temporary. On the contrary, there is substantial evidence that petitioners intended the

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termination to be permanent. Assuming arguendo, that said cessation of employment was merely temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of 6 months, pursuant to Art. 286. Mayon Hotel vs. Adona Basic is the rule in termination cases that the employer bears the burden of showing that the dismissal was for a just or authorized cause. Otherwise, the dismissal is deemed unjustified. Apropos this responsibility, the corporation should have presented clear and convincing evidence of imminent economic or business reversals as a form of affirmative defense in the proceedings. Mc-Shurn Corp. vs. Mc-Shurn Workers Union Pido vs. NLRC (Dianne) Facts: Federito B. Pido was an employee of Cherubim Security and General Services, Inc. He had an altercation with Richard Alcantara of the Ayala Security Force arising from Alcantaras statement that Pidos security license for his .38 caliber revolver service firearm and duty detail order had already expired. He was later on suspended following his argument with Alcantara, which eventually led to his illegal constructive dismissal. Held: The Supreme Court finds that, indeed, Pido was constructively dismissed. His prolonged suspension, owing to respondents neglect to conclude the investigation, had ripened to constructive dismissal. His filing of a complaint for constructive dismissal, along with a prayer for reinstatement, clearly indicates that he did not abandon his work. Verily, a floating status requires the dire exigency of the employer's bona fide suspension of operation of a business or undertaking. In security services, this happens when the security agencys clients which do not renew their contracts are more than those that do and the new ones that the agency gets. Also, in instances when contracts for security services stipulate that the client may request the agency for the replacement of the guards assigned to it even for want of cause, the replaced security guard may be placed on temporary "off-detail" if there are no available posts under respondents existing contracts. When a security guard is placed on a "floating status," he does not receive any salary or financial benefit provided by law. Due to the grim economic consequences to the employee, the employer should bear the burden of proving that there are no posts available to which the employee temporarily out of work can be assigned.

Effect on Employer-Employee Relationship If a legitimate, valid and legal suspension of operation does not terminate but merely suspends the employee-employer relationship, with more reason will an invalid and illegal suspension of operations, as in this case, not affect the employment relationship. San Pedro Hospital vs. Digos

E. Installation of Labor Savings Device Abapo vs. CA (Dianne) Facts: SMC conducted a modernization program wherein it brought into the Mandaue plant high-speed machines to be used in the manufacture of its beer. As a consequence, several functions of its employees were declared redundant. Eventually, it led to the termination of the services of the SMC employees at the Mandaue Brewery. Held: The installation of labor-saving devices by SMC at the Mandaue plant was a proper ground for terminating employment. The Court of Appeals did not commit any grave abuse of discretion in dismissing the petition for non-compliance with Rule 46, Section 3. For as explicitly provided therein, failure to comply with any of the requirements shall be sufficient ground for the dismissal of the petition. Anent the delay of seven days in the filing with the Court of Appeals of the petition, the petitioners admitted that there was indeed such delay. In a similar case involving the same issue the validity of the termination of SMC employees at the Mandaue Brewery the Supreme Court, through Mr. Justice Vicente V. Mendoza, held that the installation of labor-saving devices by SMC at the Mandaue plant was a proper ground for terminating employment. The quitclaims and releases, signed by the employees concerned as reasonable settlements, are binding upon the parties.

DISEASE- 284 The requirement for a medical certificate cannot be dispensed with; otherwise it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy in the protection of labor. Sy vs. CA

G. Special case of business transfers Nature of Labor Contract Sundowner Devt Corp vs. Drilon (Dianne) Facts: Hotel Mabuhay, Inc. leased the premises belonging to Santiago Syjuco, Inc. However, due to non-payment of rentals, a case for ejectment was filed by Syjuco against Mabuhay in the Metropolitan Trial Court of Manila. Mabuhay offered to amicably settle the case by surrendering the premises to Syjuco and to sell its assets and personal property to any interested party. Mabuhay

F. Floating Status

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offered to sell its assets and personal properties in the premises to Sundowner to which it agreed. A deed of assignment of said assets and personal properties was executed by Mabuhay in favor of Sundowner. Thereafter, National Union of Workers in Hotel, Restaurant and Allied Services (NUWHRAIN) picketed the leased premises, barricaded the entrance to the leased premises and denied Sundowner's officers, employees and guests free access to and egress from said premises. Thus, Sundowner wrote a letter-complaint to Syjuco, followed by a complaint for damages with preliminary injunction and/or temporary restraining order filed with the Regional Trial Court of Manila. Held: The absorption of the employees of Mabuhay may not be imposed on Sundowner. It is undisputed that when Mabuhay surrendered the leased premises to Syjuco and asked Syjuco to offer same to other lessees, it was Syjuco who found Sundowner and persuaded it to lease said premises. Mabuhay had nothing to do with the negotiation and consummation of the lease contract between Sundowner and Syjuco. Sundowner has no liability whatsoever to the employees of Mabuhay, and its responsibility if at all, is only to consider them for reemployment in the operation of the business in the same premises. There can be no implied acceptance of the employees of Mabuhay by petitioner and acceptance of statutory wrong, as it is expressly provided in the agreement that petitioner has no commitment or duty to absorb them. The rule is that unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the parties. A labor contract merely creates an action in personam and does not create any real right which should be respected by third parties. This conclusion draws its force from the right of an employer to select his employees and to decide when to engage them as protected under our Constitution, and the same can only be restricted by law through the exercise of police power. As a general rule, there is no law requiring a bona fide purchaser of assets of an on-going concern to absorb in its employ the employees of the latter. However, although the purchaser of the assets or enterprise is not legally bound to absorb in its employ the employees of the seller of such assets or enterprise, the parties are liable to the employees if the transaction between the parties is colored or clothed with bad faith. In General Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Therefore statutory due process should be differentiated from failure to comply with constitutional due process. Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects employees from being unjustly terminated without just cause after notice and hearing. Agabon vs. NLRC

Essence of Due Process Solid Development Corp. Workers Assn. vs. Solid Development Corp. (Dianne) Facts: Edgar Villena and Jerry Colcol were employees of Solid Development Corporation. Villena was charged with disrespect to a superior officer and/or impolite/discourteous manner. He was also required to submit a written explanation within 12 hours from receipt of the report. In addition, the report also mentioned that Villena frequently violated company rules, incurred absences without official leave and slept while on duty. Subsequently, he was dismissed for serious misconduct, loss of confidence and gross habitual neglect of duty. Meanwhile, Colcol was also served an infraction report where he was charged with insubordination and poor work performance. He was also required to submit a written explanation within 12 hours from receipt of the report. Colcol was eventually dismissed for insubordination and poor work performance. Hence, Villena and Colcol filed separate complaints for illegal dismissal with prayer for reinstatement and monetary claims. They claimed that they were dismissed without just cause and without due process. Held: The Supreme Court found that the dismissal of Villena and Colcol from the service was in accordance with the law. In separate infraction reports, they were both apprised of the particular acts or omissions constituting the charges against them. They were also required to submit their written explanation within 12 hours from receipt of the reports. Yet, neither of them complied. Had they found the 12-hour period too short, they should have requested for an extension of time. Further, notices of termination were also sent to them informing them of the basis of their dismissal. In fine, petitioners were given due process before they were dismissed. Even if no hearing was conducted, the requirement of due process had been met since they were accorded a chance to explain their side of the controversy.

H. Procedural due process- Nature and Requirements 277 (b); Book VI, Rule 1, Sec. 2(d); Book VI, Rule 1, Sec. 2(d) 1. Requirements

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 21

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be heard. On the matter of due process, well-settled is the dictum that the twin requirements of notice and hearing constitute the essential elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employer's decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. Valiao vs. CA (Dianne) Facts: Rene Valiao was an employee of West Negros College. He was re-assigned from one position to another which was due to his tardiness and absences, as reflected in the summary of tardiness and absences report, which showed him to have been absent or late for work from a minimum of seven (7) to a maximum of seventy-five (75) minutes for the period March to October 31, 1991, and to have reported late almost every day for the period November to December 1991. As such, he received a suspension order without pay, and eventually, a notice of termination was sent to him informing him of his termination from the service for serious misconduct and gross and habitual neglect of duty. Held: Valiaos dismissal from employment is valid and justified. For an employees dismissal to be valid, (a) the dismissal must be for a valid cause and (b) the employee must be afforded due process. The Court of Appeals held that "the records reveal that petitioner was afforded the twin requirements of notice and hearing and was likewise given the opportunity to defend himself before the investigating committee." There is no reason to set aside these factual findings of the Court of Appeals as they are supported by evidence on record. The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial-type hearing is not at all times and in all instances essential, as the due process requirements are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy at hand. What is frowned upon is the absolute lack of notice and hearing.

Central Pangasinan Elec. Coop vs. Macaraeg (Dianne) Facts: Geronima Macaraeg and Maribeth de Vera were employees of Central Pangasinan Electric Cooperative. De Vera admitted that she encashed several checks issued by her sister from the money collected from Centrals customers, which were then returned due to insufficiency of funds. Macaraeg was then the cashier who also took part in the illicit transactions. A memorandum was then given to them placing them under preventive suspension and requiring them to explain in writing within fortyeight (48) hours why they misappropriated cooperative funds. A hearing was also set, the results of which eventually led to their termination for serious misconduct, and breach of trust and confidence reposed on them by management. Held: There exists a valid reason to dismiss both employees. Article 282(c) of the Labor Code allows an employer to dismiss employees for willful breach of trust or loss of confidence. Proof beyond reasonable doubt of their misconduct is not required, it being sufficient that there is some basis for the same or that the employer has reasonable ground to believe that they are responsible for the misconduct and their participation therein rendered them unworthy of the trust and confidence demanded of their position. There is no doubt that Central observed procedural due process in dismissing Macaraeg and De Vera. In separate memoranda dated February 4, 1999 and signed by the General Manager, they were both apprised of the particular acts or omissions constituting the charges against them. They gave their own "answer/explanation" to the charges. They participated in the investigation conducted at petitioners board room on February 13, 1999 at 11:30 a.m. They were represented by counsel during the investigation. Finally, notices were sent to them on March 19, 1999, informing them of the basis of their termination. In fine, they were given due process before they were dismissed. Time and again, it is stressed that due process is simply an opportunity to

Carag vs. NLRC (Dianne) Facts: National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union (MACLU), on behalf of all of MAC's rank and file employees, filed a complaint against MAC for illegal dismissal brought about by its illegal closure of business. Held: The manner in which the case was decided by the Labor Arbiter left much to be desired in terms of respect for the right of private respondents to due process. In this case, Carag was not issued summons, not accorded a conciliatory conference, not ordered to submit a position paper, not accorded a hearing, not given an opportunity to present his evidence, and not notified that the case was submitted for resolution. Thus, we hold that Arbiter Ortiguerra's Decision is void as against Carag for utter absence of due process. It was error for the NLRC and the Court of Appeals to uphold Arbiter Ortiguerra's decision as against Carag.

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 22

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The essence of due process is that a party be afforded a reasonable opportunity to be heard and to submit any evidence he may have in support of his defense. Where, as in this case, sufficient opportunity to be heard either through oral arguments or position paper and other pleadings is not accorded a party to a case, there is undoubtedly a denial of due process. King of Kings Transport Inc. vs. Mamac (Monina) Facts: Mamac was employed as a bus conductor. He was terminated form work because of irregularities (fraud) he caused like declaring sold tickets as returned tickets causing the bus company to lose income. Mamac received a letter then terminating him from his work. The lower courts affirmed the dismissal but ordered the bus company to pay full backwages for violation of the twin notice requirement and 13th month pay. Held: Notice requirements were not followed by the bus company. The respondent was not issued a written notice charging him of committing an infraction. The law is clear on the matter. A verbal appraisal of the charges against an employee does not comply with the first notice requirement. In addition, no hearing was also conducted. Therefore as held in the case of Agabon vs. NLRC, noncompliace with the due process requirements entitles the employee to receive nominal damages. To clarify, the following should be considered in terminating the services of employees: (1) The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against the employees. (2) After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the management. During the hearing or conference, the employees are given the chance to defend themselves personally, with the assistance of a representative or counsel of their choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to an amicable settlement.

Right to Counsel Salaw vs. NLRC (Monina) Facts: Espero Santos Salawa was employed as a credit investigator-appraiser. His duties included inspecting, investigating, appraising, and identifying the companys foreclosed assets giving valuation to its real properties mortgaged to the respondents. The Criminal Investigation Service of the Philippine Constabulary extracted from the petitioner without the assistance of counsel a Sworn Statement which made it appear that petitioner in cahoots with a co-employee, sold 20 sewing machines and electric generators which had been foreclosed by the respondent bank and divided the proceeds thereof in equal shares. When petitioner signified his readiness to appear before the PDIC, private respondent sent him a letter stating that he is requested to come without counsel or representative. The petitioner was terminated for alleged serious misconduct or willful disobedience and fraud or willful breach of the trust reposed on him. Held: Salaw was denied the assistance of counsel hence violated due process of law. It is true that administrative and quasi-judicial bodies are not bound by the technical rules of procedure in the adjudication of cases. However, the right to counsel, a very basic requirement of substantive due process, has to be observed. Indeed, the right to counsel and to due process of law are two of the fundamental rights guaranteed by the constitution to any person under investigation, be the proceeding administrative, civil or criminal. Significantly, the dismissal of the petitioner from his employment was characterized by undue haste and the admission by petitioner which was extracted without counsel cannot be used as evidence against petitioner. Notice It is clear that there was an utter absence of opportunity to be heard at the arbitration level, as the procedure adopted by the Labor Arbiter virtually prevented private respondents from explaining matters fully and presenting their side of the controversy. They had no chance whatsoever to at least acquaint the Labor Arbiter with whatever defenses they might have to the charge that they illegally dismissed Carag. In fact, private respondents presented their position paper and documentary evidence only for the first time on appeal to the NLRC. Carag vs. NLRC

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 23

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(3) After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) grounds have been established to justify the severance of their employment. Collegio de San Juan de Letran Calamba vs. Villas (Monina) Facts: Belen Villas was employed as high school teacher. She applied for a study leave. It was granted but there were conditions imposed by the school where she was working that she needs to submit certification that she really studied. However, the first semester where she was on leave, her masteral studies did not push through and instead took up a course on the Old Testament. During the second semester, she already started his masteral studies. The President of the school where she was working alleged that her failure to enroll during the first semester was a violation of the conditions of the study leave. Hence, she was dismissed. Held: We affirm the findings of the Court of Appeals that there was no violation of the conditions of the study leave grant. Thus, respondent could not be charged with serious misconduct warranting her dismissal as a teacher in petitioner School. Petitioner has failed to convince us that the three alleged violations of the study leave grant constituted serious misconduct which justified the termination of respondents employment. Petitioner also failed to comply with the procedural requirements for a valid dismissal. As earlier noted, the law requires the employer to give the worker to be dismissed two written notices before terminating his employment. Considering that these notices are mandatory, the absence of one renders any management decision to terminate null and void. Petitioner failed to give respondent the first notice which should have informed the latter of the formers intention to dismiss her. The next letter from the petitioner, dated June 3, 1996, already informed respondent that she was considered resigned effective schoolyear 1996-1997. These letters did not comply with the requirements of the law that the first written notice must apprise the employee that his termination is being considered due to a certain act or omission. These letters merely required petitioner to submit proof of her studies and respondent could not have reasonably inferred from them that her dismissal was being considered by the petitioner. The fact that there was a hearing conducted by the grievance committee pursuant to the collective bargaining agreement did not work in petitioners favor because this was done after petitioner had informed respondent that she was already considered resigned from her teaching job. Besides, the rights of an employee to be informed of his proposed dismissal are personal to him and, therefore, the notice to the union was not notice to the employee. Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. Agabon vs. NLRC

Sta. Catalina College vs. NLRC (Monina) Facts: Hilaria was hired as an elementary teacher at the petitioner school in 1955 until 1970. In 1970, she applied for and was granted a 1 year leave of absence without pay on account of the illness of her mother. In the meantime, she was employed as a teacher at another school. In 1982, she applied anew at petitioner school. During the commencement exercise of petitioner school she was awarded a plaque of appreciation for 30 years of service. When she reached the compulsory retirement age of 65, petitioner school pegged her retirement benefits only from her service on 1982-1997. Hilaria then filed a complaint for non-payment of retirement benefits. Held: Hilaria abandoned her work. Hilaria cannot be credited for her services in 1955-1970 in the determination of her retirement benefits. For, after her one year leave of absence expired in 1971 without her requesting for extension thereof as in fact she had not been heard from until she resurfaced in 1982 when she reapplied with petitioner school, she abandoned her teaching position as in fact she was employed elsewhere in the interim and effectively relinquished the retirement benefits accumulated during the said period. Abandonment of work being a just cause for terminating the services of Hilaria, petitioner school was under no obligation to serve a written notice to her. Two Notice Rule Caingat vs. NLRC (Monina) Facts: Petitioner became the General Manager of Sta. Lucia Realty Development sister companies both organized to service the malls and subdivisions owned by Sta. Lucia. He was allowed to use 10% of the total payroll of Sta.Lucias sister company to defray operating expenses. However, the Finance Manager discovered that petitioner deposited company funds in the latters personal account and used the funds to pay his credit

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 24

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card purchases, trip abroads, etc. Without conducting an investigation, the sister company filed a complaint in court while petitioner filed with the Labor Arbiter a complaint for illegal dismissal. Held: Nonetheless, while dismissal may truly be justified by loss of confidence, we agree with the Labor Arbiter and NLRC that management failed to observe fully the procedural requirement of due process for the termination of petitioners employment. In this case, the respondents only sent the first notice, gleaned from the June 20, 1996 memorandum. There was no second notice. Neither the public notice in the Philippine Daily Inquirer, a newspaper of general circulation, nor the demand letter could constitute substantial compliance. What the public notice did was to inform the public that petitioner was already separated as of June 20, 1996, the same day he was suspended. never gave respondent Galay an opportunity to explain herself, hence denying her due process. In sum, we find that Galay was illegally dismissed, because petitioners failed to show adequately that a valid cause for terminating respondent exists, and because petitioners failed to comply with the twin requirement of notice and hearing. Genuino Ice Co. vs. Magpantay (Monina) Facts: Alfonso Magpantay (respondent) was employed as a machine operator with Genuino Ice Company, Inc. (petitioner) from March 1988 to December 1995. Respondent filed against petitioner a complaint for illegal dismissal. In his Position Paper, respondent alleged that he was dismissed from service effective immediately by virtue of a memorandum, after which he was not allowed anymore to enter the company premises. Respondent bewailed that his termination from employment was done without due process. Petitioner countered that he was not illegally dismissed, since the dismissal was based on a valid ground, i.e., he led an illegal strike at petitioners sister company, Genuino Agro Industrial Development Corporation, which lasted from November 18 to 22, 1995, resulting in big operation losses on the latter?s part. Held: Due to his refusal to report to the Cavite plant, petitioner reiterated its order transferring respondent in its Memorandum, where respondent was also warned that his failure to report to the Cavite plant will be considered as an absence without leave (AWOL) and insubordination. Respondent was required to comply with the order within 24 hours from receipt, otherwise, disciplinary action will be imposed on respondent. Respondent replied with a request that he remain in the Otis plant since a transfer to the Cavite plant will entail additional expenditure and travel time on his part. Petitioner again wrote respondent inviting him to appear before the Plant Level Investigation on December 11, 1995 for the latter to be able to clarify his reasons for refusing the transfer. Finally, petitioner issued its Memorandum informing respondent of its decision to terminate his services. Prior to the Memorandum, petitioner sent respondent several memoranda apprising him of the possible implications of his refusal to comply with the order of transfer. Thus, in its Memorandum dated November 24, 1995, petitioner notified respondent that his continued non-compliance with the order of transfer might bring about disciplinary action. Respondent replied to this memorandum, stating the reasons for his refusal. Petitioner sent another Memorandum asking respondent to appear for further clarification of his reasons for refusing the transfer. Despite the meeting, and since respondent, apparently, stubbornly refused to heed petitioners order, it was then that the Memorandum dated

Heavylift Manila vs. CA (Monina) Facts: Heavylift thru a letter signed by its Finance Manager informed respondent of her low performance rating and the negative feedback from her team members regarding her work attitude. The letter also notified her that she was being relieved of her other functions except the development of the new access program. Subsequently, respondent was terminated for alleged loss of confidence. Held: An employee who cannot get along with his coemployees is detrimental to the company for he can upset and strain the working environment. Without the necessary teamwork and synergy, the organization cannot function well. Thus, management has the prerogative to take the necessary action to correct the situation and protect its organization. When personal differences between employees and management affect the work environment, the peace of the company is affected. Thus, an employee's attitude problem is a valid ground for his termination. It is a situation analogous to loss of trust and confidence that must be duly proved by the employer. Similarly, compliance with the twin requirement of notice and hearing must also be proven by the employer. However, we are not convinced that in the present case, petitioners have shown sufficiently clear and convincing evidence to justify Galay's termination. In our view, neither does the February 23, 1999 letter constitute the required notice. The letter did not inform her of the specific acts complained of and their corresponding penalty. The law requires the employer to give the worker to be dismissed two written notices before terminating his employment, namely, (1) a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer's decision to dismiss him.[22] Additionally, the letter

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 25

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December 13, 1995 was issued to respondent informing him of the managements decision to terminate his services. Clearly, respondents right to due process was not violated. Hearing Magos vs. NLRC (Jon) Facts: Magos is a manager of PEPSI assigned in Surigao, Andanar a supplier in Surigao complained that mas Magos was supplying PEPSI products in the region despite the agreement, Magos countered it was necessary as sales were down. Magos was later terminated. What is most important is that before termination, an employee must be given the twin requirements of due process-proper notice and hearing. The essence of due process is that a party be afforded a reasonable opportunity to be heard and to submit any evidence he may have in support of his defense. Even though petitioner in this case never admitted the accusations of dishonesty against him, he impliedly acknowledged his insubordination as shown in his petition. La Carlota Planters Assn Inc. vs. NLRC(Jon) Facts: Compacion was hired as driver for La Carlota, but an accident happened later in his career which caused his dismissal. The law requires the employer to afford his employee ample opportunity to be heard. Thus, if after the said thirty-day period private respondent still did not give his explanation about the incident, this does not give petitioners an outright license to terminate private respondent. They should have again sent a notice of dismissal to private respondent stating the particular acts or omission constituting the grounds for dismissal, pursuant to Section 2, above, and adding therein, perhaps, an inquiry why he did not give the explanation required in the January 4, 1993 letter; and private respondent should again be allowed to answer and be heard, pursuant to Section 5 above; and thereafter, another notice about the decision of dismissal, should also be sent to private respondent, pursuant to Section 6 above. The phrase "ample opportunity" mentioned in the above-cited provision is meant every kind of assistance that management must accord to the employee to enable him to prepare adequately for his defense.

Caurdenetan Piece Workers Union vs. Laguesma (Jon) Facts: CPWU is union with 92 members all of which are cargadors and paid on piece rate basis. When they formed a union they were barred and were replaced with non-union members. Private respondent had been duly informed of the pendency of the illegal dismissal case, but it chose not to participate therein without any known justifiable cause. Due process is not violated where a person is given the opportunity to be heard, but chooses not to give his side of the

Lavador vs. J Marketing Corp(Jon) Facts: Lavador is a daily paid employee of J Marketing, she was later promoted, but when she was ate her new position she was charged with misappropriation was subsequently dismissed. Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought, a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss. From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed.

National Semi-Conductor Distribution vs. NLRC (Jon) Facts: Philip Santos is an employee of petitioner, which made a dishonest mark in his timecard by marking present on a day he is absent. He was later dismissed by petitioner due to dishonesty. The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side. 11 In the instant case, petitioner furnished private respondent notice as to the particular acts which constituted the ground for his dismissal. By requiring him to submit a written explanation within 48 hours from receipt of the notice, the company gave him the opportunity to be heard in his defense. Private respondent availed of this chance by submitting a written explanation.

Position Paper Shoppes Manila Inc. vs. NLRC (Jon) Facts: Buan and Torno are employees of Shoppes Manila.

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 26

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They were charged of stealing items of KAMISETA and subsequently suspended and dismissed. In order to effect a valid dismissal, the law requires that (a) there be just and valid cause as provided under Article 282 of the Labor Code;and (b) the employee be afforded an opportunity to be heard and to defend himself. The petitioner had failed to show that it had complied with the two-notice requirement: (a) a written notice containing a statement of the cause for the termination to afford the employee ample opportunity to be heard and defend himself with the assistance of his representative, if he so desires; (b) if the employer decides to terminate the services of the employee, the employer must notify him in writing of the decision to dismiss him, stating clearly the reason therefore. hatch stripping, a deck work. He refused the order on the ground that it was not related to his duties as Third Officer. Sadagnot alleged that when the order was issued, he was on watch standing duty and was doing nautical publications as required by standard maritime practice. He alleged that because of his refusal to obey the order, the Master made several negative reports against him. On 2 March 1996, respondents repatriated him to the Philippines. Held: Respondents failed to observe the necessary procedural safeguards. In termination cases, the employer must furnish the employee with two written notices before termination of employment can be legally effected: (a) a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought, and (b) the subsequent notice which informs the employee of the employer's decision to dismiss him. There is nothing in the records showing that respondents complied with the two-notice requirement. Effect of Failure- Substantive- Procedural Suico vs. NLRC (Ysan) Facts: Fernando, a PLDT managerial employee, sustained injuries when strikers blocked her way to the premises of PLDT. Suico et al. were implicated in said incident. Notices from PLDT management were sent asking for an explanation of the said incident. The notices stipulated that failure to give an explanation would constitute waiver to be heard on the matter. Suico et al. failed to explain and were terminated. Held: Apparently, PLDT complied with the two-notice requirement of due process. The first notices sent to Suico, et al. set out in detail the nature and circumstances of the violations imputed to them, required them to explain their side and expressly warned them of the possibility of their dismissal should their explanation be found wanting. The last notices informed Suico, et al. of the decision to terminate their employment and cited the evidence upon which the decision was based. These two notices would have sufficed had it not been for the existence of Systems Practice No. 94-016. Under Systems Practice No. 94-016, PLDT granted its employee the alternative of either filing a written answer to the charges or requesting for opportunity to be heard and defend himself with the assistance of his counsel or union representative, if he so desires. Suico, et al. exercised their option under Systems Practice No. 94-016 by requesting that a formal hearing be conducted and that they be given copies of sworn statements and other pertinent documents to enable them to prepare for the hearing. This option is part of their right to due process. PLDT is bound to comply with the Systems Practice. It should be emphasized, however, that, consistent with our ruling in Agabon, the procedural deficiency in the dismissal of Suico, et al. did not affect the validity or effectivity of the dismissal as the

CF Sharp Crew Management vs. Zialcita (Jon) Facts: Zialcita was assigned as clerk of CF sharp. In the course of his employment he misappropriated an amount sent by a seaman for his family. Due to the complaint of the seamans family he was given preventive suspension and was later dismissed. Trial-type hearings are not required in labor cases and these may be decided on verified position papers, with supporting documents and their affidavits. It is not necessary for the affiants to appear and testify and be cross-examined by the counsel for the adverse party. It is sufficient that the documents submitted by the parties have a bearing on the issue at hand and support the positions taken by them.

Cross Examination CF Sharp Crew Management Inc. vs. Espanola (Jon) Facts: C.F sharp became the manning agency of LCL in the Philippines replacing Rizal Shipping. Rizal on the otherhand filed a case for illegal recruitment against LCL and CF Sharp. Jurisprudence is replete with rulings that administrative bodies are not bound by the technical niceties of law and procedure and the rules obtaining in the courts of law. Hence, whatever merit C.F. Sharps argument might have in the context of ordinary civil actions, where the rules of evidence apply with greater rigidity, disappears when adduced in connection with labor cases.

FAILURE OF DUE PROCESS Sadagnot vs. Reinier Pacific International Shipping Inc (Ysan) Facts: Sadagnot alleged that while on board MV Baotrans, the vessel's Master ordered him to perform

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 27

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substantive bases thereof were never put in issue. In cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to hold that the dismissal was for just cause but to impose sanctions on the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. Where the dismissals are illegal, Article 279 mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement. Agabon vs. NLRC the new car plan were those of union officers Cerezo and de Guzman. Both refused to surrender their vehicles and were thus sent notices of termination. Held: Without a doubt, de Guzman and Cerezo in the present case deliberately disregarded or disobeyed a company policy. Their written explanations admitted their refusal to obey petitioners directive to return the vehicles. Their justification of their refusal to obey the lawful orders of their employer did not militate against their obvious disobedience. Consistent with San Miguel Corporation v. Ubaldo, there was no necessity for an actual hearing. Under the circumstances, they were nonetheless given adequate opportunity to answer the charge, which in fact they did. In arriving at the decision to dismiss them, Glaxo took into consideration the explanations they had offered. Verily, notice to the employee should merely embody the particular acts or omissions constituting the grounds for which the dismissal is sought. An employee may be dismissed only if the grounds mentioned in the pre-dismissal notice were the ones cited for the termination of employment. The employee should be appraised of the particular acts and omissions for which the dismissal is sought.

Alladin Transit Corp. vs. CA (Ysan) Facts: Roxas alleged that his sister had a quarrel with their personnel manager. As a result thereof, he was barred from entering the companys premises. He was then instructed to take a leave of absence for a month. He wrote a letter to the President of the company but he did not receive any reply. While he was on leave, he received a letter from their personnel manager asking him to shed light about the SSS contribution that he allegedly did not remit. Roxas merely said he tried to report to the office, but petitioner did not allow him. Roxas received another letter from the personnel department informing him of his preventive suspension for certain offenses. He alleged that he tried to answer the allegation and wrote a letter to the President of the company, but did not receive a reply. Held: In the case at bar, it was not proven by private respondent that it gave petitioner notice informing him of the cause of his impending dismissal. It did not narrate that it heard petitioners side, nor did it show that petitioner was given notice of his dismissal. The present rule is set forth in the Agabon v. NLRC, et al., namely, that where the dismissal is based on a just cause, the failure to give the required notice does not invalidate the same, but merely holds the employer liable for damages for violating said notice of requirement.

2. Other Procedural Matters Burden and Degree of Proof Burden LBC Domestic Franchise Co. vs. Florida (Ysan) Facts: While Florido was in the middle of a Team Leaders/Branch Managers' meeting, he was served with a memorandum from LBC's Board Chairman. He was being directed to go on vacation leave and consume all his remaining leave credits, and in the meantime, he shall turn over all his accountabilities to an officer of the company. Florido reluctantly complied with the order. Platon, upon the other hand, was summoned by the Chairman to explain the receipts prepared and signed by respondent for the liquidation of cash advances in connection with the purchase of the hams, as well as the receipts for the Fundador Brandy giveaways. Held: The Court agrees that the penalty of dismissal imposed upon respondent is disproportionate to the alleged infraction committed by the latter. In termination cases, the burden of proof rests upon the employer to show that the dismissal is for a valid and just cause. Failure to do so would necessarily mean that the dismissal was not justified, and, therefore, was illegal. It is sufficient to show by substantial evidence that the employee is guilty of misconduct which makes the latter unworthy of the trust and confidence demanded by his position.

Glaxxo-Wellcome Phils., Inc. vs. Nagkakaisang Empleyado ng Wellcome (Ysan) Facts: GLAXO-WELLCOME adopted a new Car Allocation Policy. Under the provisions of the said car plan, a prioritization schedule in the assignment of company vehicles is to be fixed based on the sales performance of the employees. Pursuant to the same, several company cars had to be re-assessed and reassigned in favor of other employees more qualified under the priority list. Incidentally, included among the vehicles that had to be re-allocated in accordance with the priority schedule of

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 28

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Degree Art. 282 (c) allows an employer to dismiss employees for willful breach of trust or loss of confidence. Proof beyond reasonable doubt of their misconduct is not required, it being sufficient that there is some basis for the same or that the employer has reasonable ground to believe that they are responsible for the misconduct and their participation therein rendered them unworthy of the trust and confidence demanded of their position. Central Pangasinan vs. Macaraeg consolation for his dismissal but the latter rejected it. Thus, it was only at this time that the respondent's cause of action accrued. Consequently, the respondent's filing of complaint for illegal dismissal on 1 September 1999 was well within the four-year prescriptive period. The four-year prescriptive period shall commence to run only upon the accrual of a cause of action of the worker. It is settled that in illegal dismissal cases, the cause of action accrues from the time the employment of the worker was unjustly terminated. Thus, the four-year prescriptive period shall be counted and computed from the date of the employee's dismissal up to the date of the filing of complaint for unlawful termination of employment.

Salvador vs. Phil. Mining Service Corp. (Ysan) Facts: PMSCs evidence disclose that Sawa, PMSCs Assistant Resident Manager for Administration, was on his way back to his office in the plant. He and his driver, Gresones, saw Salvador operating the companys payloader, scooping fine ore from the stockpile and loading it on his private cargo truck. Held: In the case at bar, PMSC has every right to dismiss Salvador, a managerial employee, for breach of trust and loss of confidence as a measure of self-preservation against acts patently inimical to its interests. Indeed, in cases of this nature, the fact that Salvador has been employed with the respondent for a long time, if to be considered at all, should be taken against him, as his act of pilferage reflects a regrettable lack of loyalty which he should have strengthened, instead of betrayed. We reiterate that proof beyond reasonable doubt of the employees misconduct or dishonesty is not required to justify loss of confidence. It is sufficient that there is substantial basis for the loss of trust. In the case at bar, respondent has proved by substantial evidence the charge of pilferage against petitioner.

Azcor Manufacturing vs. NLRC (Irah) Facts: Four months after his dismissal, Candido Capulso filed a complaint for constructive illegal dismissal and illegal detention of P50 per day against Azcor, et al. Capulso had to go on sick leave due to bronchial asthma which he contracted as a ceramics worker, but was not allowed to resume work afterwards. Azcor, et al. said that Capulso resigned. Held: To constitute resignation, it must be unconditional and with the intent to operate as such. Here, the fact that Capulso signified his desire to resume work and actively pursued his case for illegal dismissal negated any intent to relinquish his job. Moreover, Capulso's supposed resignation letters to Azcor and Filipinas Paso were identically worded, pre-drafted with blank spaces for dates of effectivity, and were written in English, a language Capulso was not conversant. SC held that the lapse of four months before Capulso instituted the complaint was understandable because he refrained from jeopardizing his chances to continue employment. Moreover, an action for reinstatement by reason of illegal dismissal is one based on an injury which may be brought within four (4) years from the time of dismissal pursuant to Art. 1146 of the Civil Code. The complaint was thus filed well within the prescriptive period.

Prescription Period Victory Liner Inc. vs. Race (Ysan) Facts: While traversing Tarlac, the bus he was driving was bumped by a Dagupan-bound bus. As a consequence thereof, Race suffered a fractured left leg and was rushed to the hospital. One month after his release from the said hospital, Race was confined again for further treatment of his fractured left leg at another hospital. His confinement therein lasted a month. Victory shouldered the doctor's professional fee and the operation, medication and hospital expenses of the Race in the hospitals. Thereafter, Race, still limping heavily, went to Victory's office to report for work. He was, however, informed by the petitioner that he was considered resigned from his job. Held: The respondent must be considered as unjustly terminated from work in January 1998 since this was the first time he was informed by the petitioner that he was deemed resigned from his work. During that same occasion, the petitioner, in fact, tried to convince the respondent to accept an amount of P50,000.00 as a

Atonio M. Morales (Irah) Facts: On Dec. 1995, Morales filed with Makati RTC a complaint for sum of money against Pablo Antonio. Frustrated at the snail's pace of his case, Morales filed a motion to dismiss his complaint without prejudice, which was granted by the RTC in Aug. 2001. On Sept. 2002, Morales filed anew a complaint for the collection of sum of money, this time with QC RTC. Antonio filed a motion to dismiss on the ground of prescription considering that actions based on oral contracts prescribe in six years. Held: Antonio's invocation of prescription is misplaced. While the case filed in the Makati RTC was later dismissed without prejudice, the dismissal sought was not for the purpose of voluntarily abandoning Morales's

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 29

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claim. On the contrary, Morales's intention was to expedite the enforcement of his rights. Understandably, he felt frustrated at the snail's pace at which his case was moving. His case remained pending before the CA for six long years. Prescription of an action refers to the time within which an action must be brought after the right of action has accrued. But it does not simply mean a mere lapse of time. Rather, there must be a categorical showing that due to plaintiff's negligence, inaction, lack of interest, or intent to abandon a lawful claim or cause of action, no action whatsoever was taken, thus allowing the statute of limitations to bar any subsequent suit. The prescriptive statutes serve to protect those who are diligent and vigilant, not those who sleep on their rights. The rationale behind the prescription of actions is to prevent fraudulent and stale claims from springing up at great distances of time, thus surprising the parties or their representatives when the facts have become obscure from the lapse of time or the defective memory or death or removal of the witnesses. a result of Chang's repentance. G. SANCTIONS AND REMEDIES 14.07 GENERAL RULE Nature and Remedies- Twin Remedies Marival Trading Inc. vs. NLRC (Irah) Facts: Vianney Abella, a chemist/quality controller at Marival Trading, filed a complaint for illegal dismissal against Marival, alleging that she was dismissed without just cause and due process. Abella was dismissed allegedly due to disrespectful insubordination and unprofessional conduct. Abella allegedly disrupted a staff meeting by banging folders and forcefully throwing her bag (allegedly because she was angry about the rearrangement of her table and things without her permission) and even refused to leave when asked to do so. Abella claimed that she merely went inside the room to retrieve her things and only accidentally dropped her bag and did not intend to disrupt the meeting. Held: For misconduct or improper behavior to be a just cause or dismissal, (a) it must be serious, (b) must relate to the performance of the employee's duties, and (c) must show that the employee has become unfit to continue working for the employer. In this case, the acts complained of, under the circumstances they were done, did not in any way pertain to Abella's duties as chemist/quality controller. Moreover, Abella did not make false and malicious statements against her superior. Her remarks were neither insulting nor offensive. Her acts did not constitute serious misconduct as to justify her dismissal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, and to the payment of 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. These remedies give life to the workers constitutional right to security of tenure. As regards backwages, it must be stressed that not every case of illegal dismissal will automatically entail its grant. While generally an order of reinstatement carries with it an award of backwages, the court may not only mitigate, but also absolve the employer from liability of backwages where good faith is evident. In this case, the employer believed that Abellas dismissal was based on a valid ground. This militates against the propriety of granting Abella backwages, even moral and exemplary damages, as to sanction Abellas unprofessional and disrespectful conduct.

Offer to reinstate Ranara vs. NLRC (Irah) Facts: Carlos Ranara, who had been working as a driver with Oro Union Construction Supply, filed a complaint for illegal dismissal and sought reinstatement with full back wages. Oro, et al. denied the charges, contending that it was Ranara who actually abandoned work when he stopped reporting. Subsequently, the employer, Chang, offered to re-employ Ranara. Held: Petitioner was illegally dismissed without even the politeness of a proper notice. Without cause and without any investigation, formal or otherwise, Ranara was simply told that he should not report back for work the following day. When he did so just the same, thinking that the secretary had only spoken in jest, he found that somebody else had been employed in his place. When he protested his replacement, he was even scolded for being "hard-headed" and not accepting his dismissal. The fact that his employer later made an offer to reemploy him did not cure the vice of his earlier arbitrary dismissal. The wrong had been committed and the harm done. Notably, it was only after the complaint had been filed that it occurred to Chang, in a belated gesture of good will, to invite Ranara back to work in his store. Chang's sincerity is suspect. We doubt if his offer would have been made if Ranara had not complained against him. At any rate, sincere or not, the offer of reinstatement could not correct the earlier illegal dismissal of the petitioner. Private respondents incurred liability under the Labor Code from the moment Ranara was illegally dismissed, and the liability did not abate as

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 30

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Pheschem Industrial Corp vs. NLRC (Irah) Facts: Pablito Moldez, an operator of Pheschem's payloader and bulldozer at its quarrying site in Leyte, filed a complaint for illegal suspension and dismissal against Pheschem. Moldez alleged that he was at first suspended from work without pay for 7 days, without being informed of its reason. His suspension was subsequently extended. He was assured to be rehired, but eight months had already passed with no word from Pheschem. Pheschem claimed that Moldez was dismissed due to grave and habitual neglect of duties (i.e. failure to inspect a bulldozer prior to its use) which resulted in damage to Pheschem's property and delay in its production. Held: Moldez was illegally dismissed. The legal consequences of an illegal dismissal are reinstatement of the employee without loss of seniority rights and other privileges, and payment of his full backwages, inclusive of allowances, and other benefits or their monetary equivalent. Clearly, the law intended reinstatement to be the general rule. It is only when reinstatement is no longer feasible that payment of separation pay is awarded to an illegally dismissed employee. delivered a child, which can hardly be considered a forbidden act or a dereliction of duty. Belga's failure to formally inform Tropical of her pregnancy cannot be considered as grave conduct directly connected to her work. With regard to the charge of disobeying a memorandum, such was given to Belga two days before she had given work thus making it physically impossible for her to report for work and explain her absence. An employee who was illegally dismissed from work is entitled to reinstatement without loss of seniority rights, and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

Nueva Ecija Electric Corp. vs. NLRC (Irah) Facts: For failure of NEECO's BOD to act on his termination, Eduardo Cairlan, a driver of NEECO, filed a complaint for illegal dismissal against NEECO. NEECO's general manager claimed that Cairlan was dismissed due to abandonment of work. NEECO alleged that Cairlan also worked for the Provincial Government of Nueva Ecija, which explains his repeated failure to report to work. Held: Cairlan was illegally dismissed. Where the dismissal is without just or authorized cause and there was no due process, Article 279 of the Labor Code mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement.

Great Southern Maritime Services Corp vs. Acuna (Irah) Facts: Respondents Acua, et al. filed with the POEA a complaint for illegal dismissal against Great Southern Maritime, et al. Acua, et al. alleged that they were deployed as croupiers (card dealers) for Ferry Casinos under a six-month contract. Before the expiration of their contracts, they were transferred back home since their services were no longer needed. Great Southern, et al. denied the charges and averred that Acua, et al. voluntarily resigned from employment. Held: Respondents Acua, et al. were illegally dismissed. They did not voluntarily quit their jobs. Rather, they were forced to resign or were summarily dismissed without just cause. Cabatulan vs. Buat (Anna) Facts: The respondent spouses Julio and Cecilia Cosmiano were engaged in the trucking business. They employed Cabatulan as operations manager and purchasing officer. The spouses and their children went on a world tour and entrusted the business operations to Cabatulan. An altercation ensued between Cabatulan and Alaan, Julios security aide, because of a disagreement in the purchase of some spare parts. Cabatulan was informed that respondent Julios brother, wanted to see him. Before proceeding to the meeting place, Cabatulan passed by the premises of J.C. Trucking but was refused admission by Alaan who was armed with an armalite rifle. Cabatulan was advised not to report for work in the meantime and await the arrival of the respondent spouses. Cabatulan agreed and immediately went home. Cabatulan was summoned to the Cosmiano residence and was told that his services were no longer needed in the business. Cabatulan was given a pre-drafted voluntary resignation letter which he refused to sign. Julio offered him 5k should he agree to sign the resignation letter. Cabatulan refused to sign the same. Issue: W/N Cabatulan is entitled to backwages and separation pay. Held: Yes. Employees who were illegally dismissed prior

Lakpue Drug Inc. vs. Belga (Irah) Facts: Ma. Lourdes Belga, an assistant cashier of Tropical Biological Phils., which is a subsidiary of Lakpue, filed a complaint for illegal dismissal against Lakpue, et al. Tropical claimed that it terminated the services of Belga due to: (1) concealment of her pregnancy which is tantamount to dishonesty, and (2) insubordination for refusing to comply with directives to report for work and to explain her absence. Held: Belga was illegally dismissed. Belga's absence for 16 days was justified considering that she had just

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 31

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to the effectivity of Rep. Act No. 6715 on March 21, 1989 were granted backwages up to three (3) years without deduction or qualification, while those illegally dismissed after, were granted full backwages inclusive of allowances and other benefits or their monetary equivalent from the time their actual compensation was withheld from them up to the time of their actual reinstatement. Under the existing law, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights. Though there are specific circumstances where reinstatement is not a practicable remedy, as when the relations between the employer and employee have been so severely strained that it is no longer fitting to order reinstatement or when the employee decides not to be reinstated. It must be stressed that the petitioner was charged by the respondent spouses with qualified theft and was even coerced into withdrawing the labor case against them. No other conclusion may be deduced other than the categorical fact that antagonism already caused a severe strain in the relationship between the respondent spouses and petitioner. Separation pay is the amount that an employee receives at the time of his severance from the service and is designed to provide the employee with the wherewithal during the period that he is seeking another employment. The grant of separation pay does not impede an award for backwages as the latter represents the amount of earnings lost by reason of unjustified dismissal. A more equitable settlement, therefore, would be an award of separation pay equivalent to at least one month pay for every year of service in addition to his full backwages, allowances and other benefits. Triad Security vs. Ortega (Anna) Facts: Respondents Ortega, et al. were formerly employed by Triad Security as security guards. Respondents filed a complaint for underpayment/nonpayment of salaries, overtime pay, premium pay for holiday and rest day, service incentive leave pay, holiday pay, and attorney's fees, illegal dismissal, illegal deductions, underpayment or nonpayment of allowance, separation pay, and claims for 13th month pay, moral and exemplary damages as well as night shift differential. Upon learning of the complaint, respondents' services were terminated without the benefit of notice and hearing. The records of the case reveal that the decision ordered the respondents to reinstate the complainants to their former job as security guards and decreed that respondents shall pay to the complainants further backwages as they accrue until the order of reinstatement is complied with. The respondents failed to comply with the order of reinstatement, hence, complainants' backwages accrued. Petitioners insist that their monetary obligation, as contained in the decision of the labor arbiter, had already been fully satisfied. They posit the argument that with respondents' receipt of their separation pay, they had opted not to seek reinstatement to their former jobs and elected instead to sever their employment with petitioner Triad Security. In fact, according to petitioners, respondents had already found new employments and to award them further backwages would be tantamount to unjust enrichment. Thus, petitioners maintain that there is no more basis to hold them liable for the accrued backwages stated in the 30 September 2002 computation. Issue: W/N petitioner is still liable for backwages Held: Yes. An illegally dismissed employee is entitled to two reliefs, namely: backwages and reinstatement. These are separate and distinct from each other. However, separation pay is granted where reinstatement is no longer feasible because of strained relations between the employee and the employer. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable and backwages. Backwages and separation pay are, therefore, distinct reliefs granted to one who was illegally dismissed from employment. The award of one does not preclude that of the other as this court had, in proper cases, ordered the payment of both. In this case, the labor arbiter ordered the reinstatement of respondents and the payment of their backwages until their actual reinstatement and in case reinstatement is no longer viable, the payment of separation pay. Under Article 223 of the Labor Code, "the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal." The same provision of the law gives the employer the option of either admitting the employee back to work under the same terms and conditions prevailing before his dismissal or separation from employment or the employer may choose to merely reinstate the employee to the payroll. It bears emphasizing that the law mandates the prompt reinstatement of the dismissed or separated employee. RATIONALE FOR THE REMEDIES Globe-Mackay Cable v. NLRC (Anna) Facts: In May 1982, private respondent Salazar was employed by Globe-Mackay as general systems analyst. Also employed by petitioner as manager for technical operations' support was Delfin Saldivar with whom private respondent was allegedly very close. It appeared in the course of investigation that Imelda Salazar violated company regulations by involving herself in transactions conflicting with the company's interests. Evidence showed that she signed as a witness to the articles of partnership between Yambao and Saldivar. It also appeared that she had full knowledge of the loss and whereabouts of the Fedders airconditioner but failed

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 32

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to inform her employer. Salazar was placed under preventive suspension for 1 month. Instead of submitting an explanation, private respondent filed a complaint against petitioner for illegal suspension, which she subsequently amended to include illegal dismissal, vacation and sick leave benefits, 13th month pay and damages, after petitioner notified her in writing that she was considered dismissed "in view of (her) inability to refute and disprove these findings." Held: By itself, preventive suspension does not signify that the company has adjudged the employee guilty of the charges she was asked to answer and explain. Such disciplinary measure is resorted to for the protection of the company's property pending investigation of any alleged malfeasance or misfeasance committed by the employee. However, her eventual separation from employment was not for cause. There being no evidence to show an authorized, much less a legal, cause for the dismissal of private respondent, she had every right, not only to be entitled to reinstatement, but as well, to full backwages. The intendment of the law in prescribing the twin remedies of reinstatement and payment of backwages is, in the former, to restore the dismissed employee to her status before she lost her job, for the dictionary meaning of the word "reinstate" is "to restore to a state, condition, position, etc. from which one had been removed" and in the latter, to give her back the income lost during the period of unemployment. Both remedies, looking to the past, would perforce make her "whole." there is an unfilled position more or less of a similar nature as the one previously occupied by the employee. In the case, reinstatement was erroneously ordered for the petitioner's shop was already closed, the machineries were dismantled and transferred to a bodega and some of the machineries were sold. The Court held that "there being no more positions in the machine shop to which the dismissed employee, mostly welders, drill press operators, lathemen, tinsmith and carpenters, could be returned, reinstatement is not possible . . ." Here, in the case at bar, there was no closure of shop notwithstanding that the respondent Republic Bank was almost at the brink of financial ruin. Despite the widespread restructuring and reorganization following the substantial change in the corporate structure of the former Republic Bank into the present Republic Planters Bank, to offset the impending financial collapse, the position previously held by the complainant Luna was not abolished, but is now held by the incumbent manager who replaced Luna. Although the position formerly held by the herein complainant is now held by another, there is every reason for the Republic Planters Bank to reinstate him because there is an "unfilled position more or less of a similar nature as the one previously occupied by the employee." And, Section 4, Rule 1, Book VI of the implementing Rules and Regulations of the Labor Code states, to wit: "An employee who is separated from work without just cause should be reinstated to his former position, unless such position no longer exists, at the time of his reinstatement, in which case he shall be given a substantially equivalent position in the same establishment without loss of seniority rights." Defined Union of Supervisors v. Secretary of Labor (Anna) Facts: SC rendered a decision ordering for Lunas reinstatement and backwages. Respondent Republic Bank sought reconsideration due to the fact that it was the old management who committed the unfair labor practice. Also, the bank suffered from the danger of financial collapse. As a necessary consequence of change of corporate personality (i.e. controlling stockholders, corporate name, board membership, etc.) of the old Republic Bank into the present Republic Planters Bank, a restructuring and reorganization of the management team of the Republic Planters Bank was effected. Issue: W/N the new management is bound to reinstate the employees. Held: In its generally accepted sense, reinstatement is a restoration to a state from which one has been removed or separated. It is the return to the position from which he was removed and assuming again the functions of the office already held. Reinstatement pre-supposes that the previous position from which one had been removed still exists, or that Reinstatement is the restoration to a state or condition from which one had been removed or separated. In providing foremost for the reinstatement of an illegally dismissed employee, the Labor Code not only recognizes the security of tenure granted by law to regular employees, but also gives substance and meaning to the protection accorded by the Constitution to labor. The law mandates the reinstatement of an illegally dismissed employee to his former position. (Pheschem Industrial vs. Moldez)

14.08 REINSTATEMENT

Employee Right Quijano v. Mercury Drug Corp (Anna). Facts:Petitioner Quijano was a warehouseman of respondent Mercury Drug. His services were terminated allegedly for disrespecting his superiors several times. The Labor Arbiter held that he was illegally dismissed and ordered for his reinstatement. Mercury Drug appealed with the NLRC which held that there was illegal dismissal. However, NLRC held that Mercury Drug should pay him separation pay in lieu of reinstatement because of strained relations.

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 33

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Issue: W/N petitioner should be reinstated. Held: YES. Reinstatement is the remedy that most effectively restores the right of an employee to his employment before he was unjustly deprived of his job. In giving an illegally dismissed employee the right to reinstatement, the law recognizes the fact that continued employment gives to a worker, especially to a lowly or menial laborer, an assurance of continuity in his source of income which a grant of separation pay could not provide. In the case at bar, we give primacy to the employee's right to reinstatement rather than the employer's claim that due to "strained relationship," his illegally dismissed employee should just be given separation pay. Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter of right. Over the years, however, the case law developed that where reinstatement is not feasible, expedient or practical, as where reinstatement would only exacerbate the tension and strained relations between the parties, or where the relationship between the employer and employee has been unduly strained by reason of their irreconcilable differences, particularly where the illegally dismissed employee held a managerial or key position in the company, it would be more prudent to order payment of separation pay instead of reinstatement. Some unscrupulous employers, however, have taken advantage of the overgrowth of this doctrine of "strained relations" by using it as a cover to get rid of its employees and thus defeat their right to job security. the time of dismissal until the court ruling that he was dismissed for a valid cause. Not all notice requirements are requirements of due process. Some are simply part of a procedure to be followed before a right granted to a party can be exercised. Others are simply an application of the Justinian precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe honesty and good faith toward one's fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the failure either of the employer or the employee to live up to this precept is to make him liable in damages, not to render his act (dismissal or resignation, as the case may be) void. The Constitution bids the State to "afford full protection to labor." But it is equally true that "the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. And it is oppression to compel the employer to continue in employment one who is guilty or to force the employer to remain in operation when it is not economically in his interest to do so. Supreme Steel Corp. v. Bardaje(Anna) Facts: Bardaje was petitioners warehouseman. He charged petitioner for illegal dismissal. The Labor Arbiter held petitioner guilty of illegal dismissal and ordered for respondents reinstatement. As the reinstatement aspect is immediately executory even pending appeal by the employer, respondents are to admit back to work complainant under the same terms and conditions prevailing prior to his dismissal or at its option, merely reinstated in the payroll. While the case was on appeal, petitioner opted to reinstate respondent in the payroll effective August 23, 2001, the date he actually reported back to work. However, starting June 2002, petitioner refused to pay respondent's salary. Consequently, on March 26, 2003 (while petitioners' appeal in the NLRC was pending), respondent filed a Manifestation and Motion praying that petitioner be immediately ordered to pay his salary from June 2002 up to the present. Without ruling on the motion, the NLRC rendered its July 10, 2003 Decision reversing the Decision of the Labor Arbiter, and ordering the dismissal of the complaint. The CA reversed the NLRC decision. Issue: W/N respondent should be reinstated. Held: Time and again, we have held that it is cruel and unjust to impose the drastic penalty of dismissal if not commensurate to the gravity of the misdeed. . . . [W]here a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe. It is not only because of the law's concern for the workingman. There is, in addition, his family to consider. Unemployment brings untold hardships and sorrows on those dependent on the wage-earner. The misery and pain attendant on the loss of jobs then could be avoided if there be

Rosario v. Victory Ricemill (Anna) Facts: Petitioner was truck driver of Victory Ricemill when his services were terminated for notorious acts of insubordination and attempt to kill a fellow employee. According to respondent, petitioner refused to drive for his employer's son. At one time, he was instructed to deliver bags of cement to Felix Hardware but delivered the same to one Eduardo Interior. And when respondent engaged the services of another driver, petitioner fought with the latter, injuring him and a co-employee who was pacifying petitioner. Issue: W/N there was illegal dismissal. Held: YES. Petitioner's actuations clearly constituted willful disobedience and serious misconduct justifying his dismissal under Art. 282 (a) of the Labor Code. However, respondent fell short of the two-notice requirement in dismissing an employee. Respondent furnished petitioner a written notice of his dismissal, but failed to furnish him written notice apprising him of the charges against him. At any rate, the omission does not render petitioner's dismissal invalid but merely ineffectual. Consequently, petitioner was deprived of the opportunity to respond thereto. The same can be remedied by payment of employee's full backwages from

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acceptance of the view that under all circumstances of this case, petitioners should not be deprived of their means of livelihood. Nor is this to condone what had been done by them For all this while, since private respondent considered them separated from the service, they had not been paid. Where a decision may be made to rest [on] informed judgment rather than rigid rules, all the equities of the case must be accorded their due weight. Under Article 223 of the Labor Code, an award or order of reinstatement is self-executory. The reinstatement aspect of the Labor Arbiter's decision, albeit under appeal, is immediately enforceable. Thus, when petitioner SSPC opted for respondent's payroll reinstatement, it should have paid his salary during the period of appeal before the NLRC. In this case, the Commission's failure, or refusal, to timely act on the matter is a serious oversight for which it should be admonished. While it is incumbent upon the party to take an active role in his case and not adopt a wait-and-see attitude, the NLRC as an adjudicating body has the corresponding obligation to act promptly on all incidents brought before it; otherwise, the law would readily be circumvented, causing untold hardships to the dismissed employee. Panuncillo v. CAP Philippines(Anna) Facts: Petitioner was an employee of CAP. She availed of an educational plan from her employer. Because of need, she sold the plan to Josefina. However, she did not transfer the plan in Josefina's name. She pledged it to another person who later sold the plan to another. THereafter, Josefina went to CAP to ask for help. After hearing petitioner's explanation, CAP decided to terminate petitioner. SC held that the dismissal was for a valid cause. Issue: W/N petitioner is entitled for reinstatement. Held: The order to reinstate is incompatible with a finding that the dismissal is for a valid cause. While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes neither oppression nor selfdestruction of the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Effect of failure to ask relief General Baptist v. NLRC (Alpe)

Facts: Basa was terminated as President of the college because of non-compliance with his conditions of employment. Petitioners question the decision of reinstatement because this was not raised in the pleadings. Held: In termination cases, the burden of proving the just cause of dismissing an employee rests on the employer, and his failure to do so would result in a finding that the dismissal is not justified. Basa's failure to specifically pray for the relief of reinstatement in a complaint which he personally prepared and signed using a standard form prepared by the NLRC Regional Arbitration, Branch No. XI, Davao City, is a procedural lapse which cannot put to naught a right which he is entitled under a substantive law. Technicalities have no room in labor cases, where the Rules of Court are applicable only in order to effectuate the objectives of the Labor Code and not to defeat them. Respondents omission to pray for reinstatement in his position paper before the labor arbiter cannot be considered as an implied waiver to be reinstated. It was a mere procedural lapse which should not affect his substantive right to reinstatement. It is a settled principle that technicalities have no place in labor cases as rules of procedure are designed primarily to give substance and meaning to the objectives of the Labor Code to accord protection to labor. Pheschem Industrial Corp. v. Moldez

Rules on Reinstatement Rationale Roquero v. PAL (Alpe) Facts: Roquero was caught red handed possessing shabu, in violation of the PAL Code of Discipline. He was dismissed from employment. He was found to be guilty of serious misconduct and has no right to be reinstated as ground equipment mechanic of PAL, even if he was instigated to take drugs.. Article 223 (3rd paragraph) of the Labor Code, as amended by Section 12 of Republic Act No. 6715, and Section 2 of the NLRC Interim Rules on Appeals under RA No. 6715, Amending the Labor Code, provide that an order of reinstatement by the Labor Arbiter is immediately executory even pending appeal. The rationale of the law has been explained in Aris (Phil.) Inc. vs. NLRC. "In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a dismissed or separated employee, the law itself has laid down a

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 35

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compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man .... These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability .... In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending appeal .... Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family." PNOC-EDC v. Abella (Alpe) Facts: Abella was terminated due to a company-wide reorganization pursuant to its Manpower Reduction Program. The SC ruled that his complaint for illegal dismissal cannot hold because of a compromise he executed, waiving [a]ll other claims, damages and causes of action arising out of the instant case. Reinstatement presupposes that the previous position from which one had been removed still exists, or that there is an unfilled position more or less of a similar nature as this previously occupied by the employee. 33 Accordingly, an employee who is separated from his employment on a false or nonexistent cause is entitled to be reinstated to his former position because the separation is illegal. If the position is no longer available for any other valid and justifiable reason, however, the reinstatement of the illegally dismissed employee to his former position would neither be fair nor just. The law itself can not exact compliance with what is impossible. Ad imposible tenetur. The employer's remedy is to reinstate the employee to a substantially equivalent position without loss of seniority rights as provided for above. strike, the award of separation pay of 1 month salary for each year of service, in lieu of reinstatement, is in order. SEC. 4. Reinstatement to former position. (a) An employee who is separated from work without just cause shall be reinstated to his former position, unless such position no longer exists at the time of his reinstatement, in which case he shall be given a substantially equivalent position in the same establishment without loss of seniority rights. The above-quoted rule enunciates reinstatement as the standard relief. However, in this case, seventeen (17) years have elapsed since respondents were illegally dismissed. In Association of Independent Unions in the Philippines v. NLRC, where more than 8 years have passed since the petitioners therein staged an illegal strike and were found to have been unlawfully terminated, an award of separation pay equivalent to 1 month pay for every year of service, in lieu of reinstatement, was deemed more practical and appropriate to all the parties concerned. Airphils Corp. v. Zamora (Alpe) Facts: Zamora was employed with Airphils as a Flight Deck Crew. After completing his training, he was not promoted to the position of captain. He then filed a Complaint with the Labor Arbiter and argued that the act of APC of withholding his promotion rendered his continued employment with it oppressive and unjust and that Airphils must be held liable for constructive dismissal. The SC held that Airphils is liable. The premise of the award of unpaid salary to respondent is that prior to the reversal by the NLRC of the decision of the Labor Arbiter, the order of reinstatement embodied therein was already the subject of an alias writ of execution even pending appeal. Although petitioner did not comply with this writ of execution, its intransigence made it liable nonetheless to the salaries of respondent pending appeal. There is logic in this reasoning of the NLRC. In Roquero v. Philippine Airlines, Inc., the SC resolved the same issue as follows: [T]echnicalities have no room in labor cases where the Rules of Court are applied only in a suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat them. Hence, even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period.

G & S Transport Corp. v. Infante (Alpe) Facts: Respondents were drivers of G & S, the exclusive taxi concessionaire in NAIA. They were terminated for an allegedly illegal strike. The SC ruled that the dismissal was illegal. If reinstatement is no longer possible, given the lapse of considerable time from the occurrence of the

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 36

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Exceptions Business Conditions The position of branch manager is one of trust and confidence and therefore the incumbent manager who has won the trust and confidence of the new management by reason of his capability and probity should not be dismissed in favor of one whose competence & integrity the management has not yet tested. Luna can still be reinstated because, although his previous position is now held by another, there is an unfilled position more or less of a similar nature as the one previously occupied. (Union of Supervisors vs. Sec. of Labor) situation where a peaceful relationship is not feasible. As the petitioner appears to have lost its trust in private respondent, who in turn is not seeking reinstatement, it would be an act of oppression to compel them to return to the status quo ante. We are aware that in any country where due process is strictly observed and where social justice is a compelling constitutional principle, the petitioner must follow the laws which protect workers and uphold their security of tenure. However, we cannot compel it to retain employees who commit violations of trust relationships. There is moreover, the petitioner's contention that Mrs. Querimit in effect waived her right and cannot insist on a literally strict interpretation of procedural due process because she refused to submit herself to an investigation. Commercial Motors Corp. v. NLRC (Alpe) Facts: Umlas was dismissed from Commercial Motors after being uncooperative and attempting to disrupt auditors investigating the loss of certain spare parts. The dismissal was declared to be illegal but reinstatement was not awarded. It would seem, however, that the circumstances of this case render inappropriate Umlas' reinstatement to his former position, as an item of relief. A more equitable disposition is that which this Court has more than once made in other cases of the same nature: the award, in lieu of reinstatement, of separation pay at the rate of one month's salary for every year of service, "so that . . . (the employee) can be spared the agony of having to work anew with . . . (the employer) under an atmosphere of antipathy and antagonism, and the . . . (latter) does not have to endure the continued service of . . . (the former) in whom it has lost confidence."

Espejo v. NLRC (Alpe) Facts: Espejo worked as general manager for CISP. He resigned but later withdrew his resignation. However, the Board considered him terminated and paid his unused vacation leave and transportation expenses. He was asking to be reinstated but this was denied. The SC affirmed the non-reinstatement. In such situation, Sec. 13, Book VI, of the Omnibus Rules Implementing the Labor Code provides that in the absence of a retirement plan, agreement or policy an employee may be retired upon reaching the age of sixty (60) years. Construing this provision, we held that an employee may retire, or may be retired by his employer, upon reaching sixty (60). Thus, an employee held to be illegally dismissed cannot be reinstated if he had already reached the age of sixty (60) years at the time of his second complaint (pressing for reinstatement) before the Labor Arbiter's Office. NLRC therefore did not err in denying the reinstatement of petitioner. All illegally dismissed employee who cannot be reinstated is granted separation pay and backwages. However considering that petitioner has already reached the statutory retirement age of sixty (60), we agree with NLRC that petitioner is entitled only to backwages.

STRAINED RELATIONS Pearl Buck Foundation v. NLRC (Alpe)

Facts: Querimit, a case worker, was terminated after borrowing money from the mother of one of her wards. The SC held that she should neither be reinstated nor given backwages because her violation was against the prudence required in her work in the foundation. There is likewise no basis for the NLRC ruling that Mrs. Querimit should be reinstated with backwages. The parties to a case should not be forced into a

Sentinel Security Agency v. NLRC (Eds) Facts: Pursuant to a renewal of a security services contract with Phil-Am Life with a request for the replacement of all security guards in Phil-Ams offices in certain cities, Sentinel Security Agency issued a Relief and Transfer Order replacing the complainants and reassigning them to other clients. But when they reported for work, they were not given new assignments, and instead were told that they would be replaced because [they] are already old. Issue: Was there an illegal dismissal? Held: Yes. The relief and transfer order per se did not sever thte employment between the Agency and the complainants, but still binds the Agency to provide them, upon their reaching the retirement age, retirement pay or whatever else is provided under the CBA or employment contract. There is also no abandonment, which requires a deliberate and unjust refusal of an employee to resume his work, coupled w/ a clear absence of any intention of

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 37

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returning to his or her work. That complainants did not pray for reinstatement is not sufficient proof of abandonment. They reported to the Agency for reassignment several times but were not given any. As a necessary consequence for the illegal dismissal, the complainants are entitled to reinstatement and backwages. Howeer, reinstatement is no longer feasible. The agency cannot reassign them to the Client, which has recruited new security guards; the complainants, on the other hand, refuse to accept other assignments. The latter do not pray for reinstatement; in fact, they refused to be reinstated. Such refusal is indicative of strained relations. Thus, separation pay is awarded in lieu of reinstatement. tranquility which is an ideal atmosphere in every workplace. The Cosmianos charged Cabatulan with qualified theft and even (tried to) coerce him into dropping the labor case against them. Therefore, antagonism is likely to have already caused a severe strain in the relationship between them. (Cabatulan v. Buat)

Sibal v. Notre Dame of Greater Manila (Edsa) Facts: Delia Sibal, a school nurse at the Notre Dame of Greater Manila, was ordered to work during the summer, though her contract does not require her to do so, and was also assigned to teach health during SY 1981-1982. For filing an LOA and not reporting to work that summer, she was not paid her vacation pay; neither was she compensated for the extra teaching job. The school director claimed that the summer was the best time to update the students clinical records, and that she was not entitled to extra compensation for teaching, which was part of her regular working program as a school nurse. He threatened to take drastic measures against her if she kept refusing to report for work the next summer. Sibal filed a complaint for non-payment of compensation and vacation pay, after which the school served Sibal with a letter of termination effective immediately. Issue: Was there strained relations as to make reinstatement with backwages impossible? Held: No. The alleged strained relations or irritant factors which the Labor Arbiter capitalized on in ordering separation pay instead had been totally elimintaed when, about a month after Sibals termination, teachers and personnel of the school, backed by the Faculty Association, moved for the ouster of the school director Fr. Garcia for serious charges under P.D. 176. The eventual replacement of Fr. Garcia all the more confirmed the discriminatory and oppressive treatment which he gave Sibal. No strained relations should arise from a valid and legal act of asserting ones right, for otherwise, an employee who shall assert his/her right could be easily separated from the service by merely paying his/her separation pay on the pretext that his/her relationship with his/her employer had already become strained Strained relations, in order that it may justify the award of separation pay in lieu of reinstatement with backwages, should be such, that they are so obnoxious to the person or business of the employer, and that the continuation of such employment has become inconsistent with peace and

Naga College Foundation Education Workers v. Bose (Eds) Facts: Petitioners filed a complaint with the NLRC for illegal dismissal, reinstatement, backwages and damages against Naga College Foundation, who in turn filed a complaint against the former for conducting an illegal strike. The Executive Labor Arbiter (ELA) ordered reinstatement of the employees. Pending appeal, the employees moved for execution, then entered into an agreement with NCF for reinstatement. However, NCF stopped paying accrued salaries after three installments. NLRC denied their motion for execution on the ground that they gave up first motion for execution by entering into the compromise agreement, and that they abandoned the benefits of the compromise agreement by resorting to the NLRC. Issue: Did the petitioners give up their claims for reinstatement? Held: No. There is no basis for the ruling of the NLRC. The subject of the compromise agreement was the reinstatement ordered by the ELA. The subject of the NLRC decision, which they sought to enforce in the motion for execution was also their reinstatement. Petitioners resorted to the NLRC because they were frustrated at the undue delay in the resolution of their motions by the ELA and turned to NLRC, hoping to obtain assistance. No supervening event rendering execution unjust can be considered. Petitioners did not occupy managerial or confidential positions which might be affected by any bad feeling resulting from the execution of the decision. And it was NCF who caused a strain in the relation of the parties. The principle of strained relations cannot be applied indiscriminately. Otherwise, reinstatement can never be possible simply because some hostility is invariably engendered between the parties as a result of litigation. That is human nature. No strained relations should arise from a valid and legal act of asserting ones right; otherwise an employee who shall assert his right could be easily separated from the service, b merely paying his separation pay on the pretext that his relationship with his employer had already become strained.

Bascon v. CA (Eds) Facts: The NAMA-MCCH labor union asked the Metro Cebu Community Hospital (MCCH) to renew their CBA, but the NLF opposed the same. MCCH decided to defer

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 38

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the CBA negotiations until there was a determination as to which union had the right to negotiate a new CBA. Union members and officers staged mass actions inside the MCCH premises. Despite DOLE certifications that NAMA-MCCH was not a registered labor org, the latter filed a notice of strike, which was denied. Upon being notified of the mass actions, MCCH issued a notice of investigation, then an order to desist from participating in the mass actions. Petitioners denied receiving said orders, and were subsequently terminated from employment. A complaint for illegal dismissal was filed. Issue: Was there illegal dismissal? Held: Yes. In order to be justly terminated, an ordinary striking worker must have participated in the commission of illegal acts during the strike. There must be proof of such illegal acts. Here, petitioenrs actual participation in the illegal strike was limited to wearing armbands and putting up placards which do not contain offensive words or symbols. Neither can be construed as illegal acts. They cannot also be considered as willful disobedience as they are not characterized by a perverse mental attitude on the part of petitioners in disobeying their employers order. Petitioners are entitled to reinstatement with full backwages. The doctrine of strained relations is inapplicable to a situation where the employee has no say in the operation of the employers business. Petitioners herein are nurse and nursing aide, respectively, and thus, have no prerogative in the operation of the business. 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 result in strained relations, and the phrase cannot be given an overarching interpretation, otherwise, an unjustly dismissed employee can never be reinstated. otherwise. It was also sufficiently proven that Gonzales reported for work after the final notice but was refused entry. But he is not entitled to reinstatement. In illegal dismissal cases, reinstatement to an illegally dismissed employees former position may be excused on the ground of strained relations. This may be invoked against employees whose positions demand trust and confidence, or whose differences with their employer are of such nature or degree as to preclude reinstatement. Here, Gonzales was Chief of Security, whose position is one of trust and confidence, he being in charge of the over-all security of the hotel. Thus, reinstatement is no longer possible. He must therefore be paid separation pay of 1 month for every year of service instead.

Acesite Corp. v. NLRC (Eds) Facts: Due to a severe stomach disorder, Leo Gonzales, the Chief of Security of the Manila Pavillion Hotel (now the Holiday Inn Manila), took a 4-day sick leave, then an emergency leave, then a 12-day vacation leave, thereby using up all leaves he was entitled to for the year. Before the expiration of the 12 day vacation leave, he filed for a 10-day emergency leave, which was not approved. He was told to report back for work, but he failed to do so. He was eventually issued a Notice of Termination for continuously disregarding several advices to report back to work. Issue: Was Gonzales illegally dismissed? Held: Yes. There is no proof that a telegram had indeed been sent to and received by Gonzales ordering him to report back to work. The medical certificate also proves that he was indisposed during the period in controversy, especially in the light that the same was issued by his rival in the political arena, Dr. Laureano Gonzales, Jr., who would not have helped him cover up his absences

BPI Employees Union v. BPI (Eds) Facts: For shouting at her Senior Manager, Zenaida Uy, former teller of BPI, was ordered to transfer to the Plaza Cervantes Branch to defuse the tense situation at the Escolta Branch. Uy refused, saying she would await the result of the grievance proceeding filed by her union, and that she could not transfer as there was no proper turnover of her accountabilities, which she could not do so since she had been barred from entering the bank premises. She asked to be considered on leave since then. She also alleged sexual harrassment on the part of her Senior Manager, and requested to be transferred to the Taft Ave. Branch to save on gas expenses. Instead, she was terminated for the shouting incident and refusal to tranfer to the Plaza Cervantes Branch. Issue: Is Uy entitled to reinstatement with backwages? Held: Yes. It has been almost a decade since the incident that led to Uys dismissal. The other involved parties have long been assigned in another area or are no longer connected with BPI. There now appears no basis for strained relations between the present management and Uy. Mere payment of severance pay, when reinstatement would no longer be beneficial to either pary in view of strained relations between them, is allowed. The principle of strained relations, however, cannot be applied indiscriminately. Otherwise, reinstatement can never be possible simply because some hostility is invariably engendered between the parties as a result of litigation. That is human nature. Besides, no strained relations should arise from a valid and legal act of asserting ones right; otherwise, an employee who shall assert his right could be easily separated from the service by merely paying his separation pay on the pretext that his relationship with his employer had already become strained. Mere allegation of strained relations to bar reinstatement is frowned upon. Sagum v. CA (Eds)

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 39

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Facts: Marilyn Sagum, the Officer-in-Charge for the Executive Director of the Institute of Integrated Electrical Engineers of the Phils., filed a complaint for illegal dismissal against IIEE and its officers. She was preventively suspended for 30 days, then terminated for gross negligence and loss of trust and confidence for alleged anomalies concerning the bidding of the printing of Part I of the Philippine Electrical Code. One company, DBR, was allegedly consistently being awarded majority of the printing contracts of IIEE. Sagums dismissal was subsequently declared illegal. Issue: Is Sagum entitled to reinstatement with backwages? Held: Yes. There are no hard facts upon which to base the application of the doctrine of strained relationship. Sagum is correct that mere persistency in argument does not amount to proof, and to deny an employees right to be reinstated on the basis of the mere consistency of the employers stand that the dismissal was for cause is to make a mockery of the right of reinstatement under Art. 279 of the Labor Code. The existence of strained relations is a factual finding and should be initially raised, argued and proven before the Labor Arbiter. The finding by the CA of strained relations does not have any basis on the records. Nowhere was this raised in private respondents pleadings before the Labor Arbiter and the NLRC. Moreover, the principle of strained relations cannot be applied indiscriminately. To protect labor's security of tenure, 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. Reyes, as evidenced by the subsequent judicial order releasing the articles seized during the search. The owner of said articles was Donato, Reyes brother. Employees illegally dismissed before March 21, 1989, are entitled to backwages up to 3 years without deduction or qualification, while those illegally dismissed after are granted full backwages inclusive of allowances and other benefits or their monetary equivalent from the time their actual compensation was withheld from them up to the time of their actual reinstatement. In addition to backwages, they are entitled to either reinstatement, if feasible, or separation pay, if reinstatement is no longer viable. Here, reinstatement is not warranted. Antagonism and imputations of criminal act caused a severe strain in the relationship between JDI and Reyes, not to mention the considerable length of time Reyes has been out of JDIs employ. A more equitabble disposition would be an award of separation pay equivalent to 1 months pay for every year of service, a fraction of at least 6 months being considered as one whole year. The three year period wherein backwages are awarded must be included in the computation of separation pay.

IMPLEMENTATION = OPTIONS AND RATIONALE Options and Rationale Jardine Davies v. NLRC (Eds) Facts: Upon reports by a private investigator that the Union 76 lubricating oil which was being exclusively distributed by Jardine Davies, Inc. was being illegally manufactured, blended, packed and distributed, and that such was being undertaken by JDIs sales rep, Virgilio Reyes, JDI secured a search warrant which led to the seizure of alleged fake items in Reyes apartment. Reyes was consequently dismissed for committing serious misconduct inimical to the interest of JDI. Reyes sued for illegal dismissal since the seized materials were actually legally claimed by Reyes younger brother, who was the legal tenant of the apartment. Issue: Was there illegal dismissal? Held: Yes. There was no factual basis for JDIs distrust of

Pioneer Texturizing vs.NLRC (Charms) Facts: Private respondent Lourdes A. de Jesus is petitioners' reviser/trimmer since 1980. As reviser/trimmer, de Jesus based her assigned work on a paper note posted by petitioners. The posted paper which contains the corresponding price for the work to be accomplished by a worker is identified by its P.O. Number. On August 15, 1992, de Jesus worked on P.O. No. 3853 by trimming the cloths' ribs. Three days later, de Jesus received from petitioners' personnel manager a memorandum requiring her to explain why no disciplinary action should be taken against her for dishonesty and tampering of official records and documents with the intention of cheating as P.O. No. 3853 allegedly required no trimming. In her handwritten explanation, de Jesus maintained that she merely committed a mistake in trimming P.O. No. 3853 as it has the same style and design as P.O. No. 3824 which has an attached price list for trimming the ribs and admitted that she may have been negligent in presuming that the same work was to be done with P.O. No. 3853, but not for dishonesty or tampering. Petitioners' personnel department, nonetheless, terminated her from employment and sent her a notice of termination dated September 18, 1992. Held: There was illegal dismissal. The SC found the imposition of the extreme penalty of dismissal against de Jesus as certainly harsh and grossly disproportionate to the negligence committed, especially where said employee holds a faithful and an untarnished twelveyear service record. While an employer has the inherent right to discipline its employees, we have always held

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 40

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that this right must always be exercised humanely, and the penalty it must impose should be commensurate to the offense involved and to the degree of its infraction. An award for reinstatement is self-executory. The provision of Article 223 is clear that an award for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. After receipt of the decision or resolution ordering the employee's reinstatement, the employer has the right to choose whether to re-admit the employee to work under the same terms and conditions prevailing prior to his dismissal or to reinstate the employee in the payroll. In either instance, the employer has to inform the employee of his choice. The notification is based on practical considerations for without notice, the employee has no way of knowing if he has to report for work or not. reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. As a consequence of this, petitioner as the employer was duty-bound to choose forthwith whether to readmit Tanpiengco or to reinstate him in the payroll and to inform Tanpiengco of its choice to enable the latter to act accordingly. Falling to exercise the options in the alternative, petitioner must pay the salary of Tanpiengco which automatically accrued from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the NLRC. In the instant case, for some inexplicable reasons, the NLRC failed to act on Tanpiengco's motion for the issuance of a writ to execute the Labor Arbiter's reinstatement order. The Commission's inaction is a serious oversight for which it should be admonished.

Intl. Container Services vs. NLRC (Charms) Facts: Petitioner employed private respondent Tanpiengco as a CFS Priority pursuant to a collective bargaining agreement with private respondent's labor union. Tanpiengco has since then become a regular employee. On 7 March 1990 Tanpiengco was assigned at Bodega I. When it was time for him to clean himself he took his T-shirt which was hanging from a post, tucked it at his waist and proceeded to the washroom. He was accosted by a security guard allegedly for behaving suspiciously. Tanpiengco was accused of taking a T-shirt marked "Gesim Corp." from one of the balikbayan boxes inside the container yard. According to petitioner, he admitted to the investigating officer that he took the "Gesim Corp." T-shirt valued at P100.00, but Tanpiengco insisted on his innocence claiming that he was coerced at knifepoint into admitting the theft. On 30 April 1990, after a brief suspension, Tanpiengco was dismissed for pilferage which petitioner considered as breach of trust, dishonesty and theft of property. Held: There was illegal dismissal and therefore should be reinstated. The Supreme Court in the 1997 Pioneer case has laid down the doctrine that henceforth an order or award for reinstatement is self-executory, meaning that it does not require a writ of execution much less a motion for its issuance, as maintained by petitioner. The provision of Art. 223 is clear that an award for

Kiamco vs. NLRC (Charms) Facts: Petitioner was hired by private respondents as a technician. All the three employment contracts signed by him stipulated that he was employed by private respondents to work in their Geothermal Agro-Industrial Demonstration Plant Project in Valencia, Negros Occidental. The last contract signed by petitioner fixed the term of his employment from 1 May 1993 to 30 November 1993. On October 20, 1993, petitioner received a Memorandum from private respondents demanding an explanation for administrative infractions, which he allegedly committed. Finding petitioner's explanation unsatisfactory, private respondents, on 28 October 1993, placed petitioner under preventive suspension from 1 November 1993 to 30 November 1993 pending further investigation. However, private respondents did not conduct any investigation contending that it was not necessary since petitioner had ceased to be an employee ipso facto upon the expiration of his employment contract on 30 November 1993. Petitioner reported back to work but was prevented from entering the company premises. Thus, petitioner filed before the NLRC a complaint for illegal suspension and dismissal with prayer for reinstatement and backwages. Held: The NLRC correctly labeled petitioner as a project employee. The fact that an employee is not a regular employee does not mean that his employer can dismiss him anytime, even illegally. The rights of an employee to reinstatement and to grant of back wages do not depend on the status of his employment prior to his dismissal but rather to the legality and validity of his termination. The Court found that private respondents not only failed to give a valid and justifiable reason to terminate Kiamco, but they also ignored the due process requirement of the law. Moreover, even if the employment contract signed by petitioner fixed the term of his employment, this did not give private respondents the unbridled authority to terminate petitioner upon the

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expiration thereof. Petitioner was specifically assigned to work in a particular project. Therefore, in the absence of any valid reason to terminate him, private respondents should have retained his services until the actual completion of the project. Private respondents, however, failed to show proof as to when the project was completed. Consequently, the Supreme Court modified the decision of the NLRC and ordered the reinstatement of petitioner and payment of his backwages. Equitable Banking vs. Sadac(Charms) Facts: Respondent Sadac was appointed Vice President of the Legal Department of petitioner Bank, and subsequently General Counsel thereof. On 26 June 1989, nine lawyers of petitioner Banks Legal Department, in a letter-petition to the Chairman of the Board of Directors, accused respondent Sadac of abusive conduct, inter alia, and ultimately, petitioned for a change in leadership of the department. On the ground of lack of confidence in respondent Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed respondent Sadac to deliver all materials in his custody in all cases in which the latter was appearing as its counsel of record. In reaction thereto, respondent Sadac requested for a full hearing and formal investigation but the same remained unheeded. On 9 November 1989, respondent Sadac filed a complaint for illegal dismissal with damages against petitioner Bank and individual members of the Board of Directors thereof. After learning of the filing of the complaint, petitioner Bank terminated the services of respondent Sadac. Finally, on 10 August 1989, respondent Sadac was removed from his office and ordered disentitled to any compensation and other benefits. In a previous SC decision, they held respondent Sadacs dismissal illegal. They said that the existence of the employer-employee relationship between petitioner Bank and respondent Sadac had been duly established bringing the case within the coverage of the Labor Code, hence, we did not permit petitioner Bank to rely on Sec. 26, Rule 138 of the Rules of Court, claiming that the association between the parties was one of a client-lawyer relationship, and, thus, it could terminate at any time the services of respondent Sadac. Moreover, they did not find that respondent Sadacs dismissal was grounded on any of the causes stated in Article 282 of the Labor Code. It was similarly found that petitioner Bank disregarded the procedural requirements in terminating respondent Sadacs employment as so required by Section 2 and Section 5, Rule XIV, Book V of the Implementing Rules of the Labor Code. Such decision became final and executory. Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution thereof. Likewise, petitioner Bank filed a Manifestation and Motion praying that the award in favor of respondent Sadac be computed and that after payment is made, petitioner Bank be ordered forever released from liability under said judgment. Per respondent Sadacs computation, the total amount of the monetary award is P6,030,456.59, representing his backwages and other benefits, including the general increases which he should have earned during the period of his illegal termination. Respondent Sadac theorized that he started with a monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice President of petitioner Banks Legal Department and later as its General Counsel in December 1981. As of November 1989, when he was dismissed illegally, his monthly compensation amounted to P29,365.00 or more than twice his original compensation. The difference, he posited, can be attributed to the annual salary increases which he received equivalent to 15 percent (15%) of his monthly salary. Petitioner Bank disputed respondent Sadacs computation. Per its computation, the amount of monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion of the latters general salary increases and other claimed benefits which, it maintained, were unsubstantiated. Held: Are annual general increases in basic salary deemed component in the computation of full backwages? The weight of authority leans in petitioner Banks favor and against respondent Sadacs claim for the inclusion of general increases in the computation of his backwages. The base figure to be used in the computation of backwages is pegged at the wage rate at the time of the employees dismissal, inclusive of regular allowances that the employee had been receiving such as the emergency living allowances and the 13th month pay mandated under the law. In several cases, the Court had the opportunity to elucidate on the reason for the grant of backwages. Backwages are granted on grounds of equity to workers for earnings lost due to their illegal dismissal from work. They are a reparation for the illegal dismissal of an employee based on earnings which the employee would have obtained, either by virtue of a lawful decree or order, as in the case of a wage increase under a wage order, or by rightful expectation, as in the case of ones salary or wage. The outstanding feature of backwages is thus the degree of assuredness to an employee that he would have had them as earnings had he not been illegally terminated from his employment. Petitioners claim, however, is based simply on expectancy or his assumption that, because in the past he had been consistently rated for his outstanding performance and his salary correspondingly increased, it is probable that he would similarly have been given high ratings and salary increases but for his transfer to another position in the company. As held by the Court of Appeals, however, the mere fact that petitioner had been previously granted salary increases by reason of his excellent performance does not necessarily guarantee that he would have performed in the same manner and, therefore, qualify for the said increase later.

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In short, there is no vested right to salary increases. That respondent Sadac may have received salary increases in the past only proves fact of receipt but does not establish a degree of assuredness that is inherent in backwages. St. Theresas School vs. NLRC (Charms) Facts: Petitioner Adoracion Roxas is the president of St. Theresa's School of Novaliches Foundation. She hired private respondent, Esther Reyes on a contract basis. When private respondent became ill, she went on a leave of absence with the approval by petitioner. When private respondent reported for work, she found out that her table, chair and other belongings were moved to a corner of their office and she has been replaced by the daughter of petitioner Adoracion Roxas. She instituted a complaint for unfair labor practice, illegal dismissal, etc. against herein petitioners before the Labor Arbiter. The Labor Arbiter declared private respondent's dismissal as illegal and ordered her reinstated and paid full backwages and damages. The NLRC reversed the decision of the Labor Arbiter, but awarded private respondent partial backwages. Held: The term "backwages" has been defined as that for earnings lost by a worker due to his illegal dismissal. Backwages are generally granted on grounds of equity. Payment thereof is a form of relief that restores the income lost by reason of such unlawful dismissal. It is not private compensation or damages, but is awarded in furtherance and effectuation of the public objectives of the Labor Code. Nor is it a redress of a private right but, rather, in the nature of a command to the employer to make public reparation for dismissing an employee either due to the former's unlawful act or bad faith. Jurisprudence is filled to the brim with cases wherein backwages were awarded to an employee illegally dismissed. But where, as in this case of a pitiful employee rendered hapless by her lawyer's inaction or ignorance, the dismissal has been adjudged valid and lawful, the challenged award of backwages is decidedly improper and contrary to law and jurisprudence. When the term "backwages" was used in the NLRC decision, what was actually meant was unpaid salaries, which pertain to compensation due the employee for services actually rendered before termination. Backwages, on the other hand, refer to his supposed earnings had he not been illegally dismissed. Unpaid salaries refer to those earned prior to dismissal whereas backwages refer to those earnings lost after illegal dismissal. Thus, reinstatement would always bring with it payment of backwages but not necessarily payment of unpaid salaries. Payment of unpaid salaries is only ordered if there are still salaries collectible from his employer by reason of services already rendered. (General Baptist Bible College vs. NLRC) Viernes vs. NLRC (Charms) Facts: Private respondent electric cooperative hired petitioners as meter readers from October 8 to 21, 1990. Despite the expiration of their employment contract, petitioners were allowed by the private respondent to work until January 2, 1991. On January 3, 1991, private respondent terminated petitioners' employment. Thus, petitioners separately filed complaints for illegal dismissal, underpayment of wages and claim for indemnity against private respondent. Petitioners contended that they were not apprentices but regular employees whose services were illegally and unjustly terminated in a manner that was whimsical and capricious. On the other hand, private respondent invoked Article 283 of the Labor Code. The Labor Arbiter dismissed the complaints. On appeal, the NLRC modified the Labor Arbiter's judgment and declared petitioners' dismissal illegal, ordered their reinstatement to their former position or to any equivalent position with payment of backwages limited to one year and deleted the award of indemnity and attorney's fees. Held: Petitioners alleged that the NLRC committed grave abuse of discretion in ordering their reinstatement to their former position on probationary basis, in limiting the backwages to one year and in deleting the award of indemnity and attorney's fees. The Supreme Court held that petitioners should be reinstated to their former position as meter readers, not on a probationary status, but as regular employees. It held that after October 31, 1990, the employment of petitioners is no longer on a fixed term basis. With the continuation of their employment beyond the original term, petitioners have become full-fledged regular employees. According to the Court, the fact that the petitioners were allowed to continue working after the expiration of their employment contract was evidence of the necessity and desirability of their service to private respondent's business. Moreover, the fact alone that petitioners have rendered service for a period of less than six months does not make their employment status as probationary. Considering that petitioners were already regular employees at the time of their illegal dismissal from employment, they were, therefore, entitled to be reinstated to their former position as regular employees, not merely probationary. Accordingly, the Court held that petitioners are entitled to full backwages, inclusive of allowances and to their other benefits or their monetary equivalent computed from the time their compensation was withheld from them up to the time of their actual reinstatement. Moreover, petitioners are entitled to indemnity for failure of private respondent to comply with the requisite notice in violation of petitioners' right to due process. The Court also awarded attorney's fees to the petitioners pursuant to the provisions of Article 111 of the Labor Code. Nature - Purpose Tomas Claudio Memorial College vs. NLRC (Charms)

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Facts: Sometime in 1983, private respondent Pedro Natividad started working with petitioner Tomas Claudio Memorial College (TCMC) in Morong, Rizal. In time, he was promoted as "Liaison Officer" of the school with the Department of Education, Culture and Sports (DECS) and with the Commission on Higher Education (CHED) with the rank of Assistant Registrar. On June 10, 1996, the private respondent was arrested by the Morong police authorities, without any warrant therefor, for violation of the Dangerous Drugs Act (Republic Act No. 6425). A criminal complaint was later filed against him. In the interim, the petitioner, through its president, Aladdin F. Trinidad, sent a Memorandum to the private respondent informing him that his employment was already terminated. The issue is whether the CA committed a grave abuse of discretion amounting to excess or lack of jurisdiction when it modified the decision of the NLRC and ordered the petitioner to pay backwages to the private respondent. The petitioner avers that the CA acted with grave abuse of discretion amounting to excess or lack of jurisdiction when the CA ordered the petitioner to pay backwages to the private respondent from June 13, 1996 until the judgment of the CA shall have become final and executory. This is because the private, respondent was detained from June 10, 1996 up to July 5, 1996, and from November 21, 1996 to February 17, 1997 for violations of the Dangerous Drugs Act. The petitioner asserts that it is absurd for the petitioner to pay backwages to the private respondent while the latter was in jail. The private respondent would thereby be enriching himself at the expense of the petitioner. The petitioner insists that backwages should not and cannot be awarded to the private respondent, since it would include that period of time when the latter was in jail. The petitioner relied on the declaration of this Court in the case of Cathedral School of Technology v. NLRC, where it held that when the employee's dismissal is for a just cause, there can be no backwages even if she was denied due process, otherwise she would be unjustly enriching herself at the expense of the employer. Held: Grant of backwages proper. The award of backwages is not conditioned on the employee's ability or inability to, in the interim, earn any income. While it may be true that on June 11, 1996, the private respondent was detained in Criminal Case No. 5137, the State Prosecutor found no probable cause for the detention of the private respondent and resolved to dismiss the case. The private respondent has not yet been convicted by final judgment in Criminal Case No. 5251. Indeed, he is presumed innocent until his guilt is proved beyond reasonable doubt. The payment of backwages is generally granted on the ground of equity. It is a form of relief that restores the income lost by reason of unlawful dismissal. The grant thereof is intended to restore the earnings that would have accrued to the dismissed employee during the period of dismissal until it is determined that the termination of employment is for a just cause. It is not a private compensation or damages, but is awarded in furtherance and effectuation of the public objective of the Labor Code. Nor is it a redress of a private right, but it is rather in the nature of a command to the employer to make public reparation for dismissing an employee either due to the formers unlawful act or bad faith. The award of backwages is not conditioned on the employees ability or inability to, in the interim, earn any income. Effect Failure to Claim Rolando Dela Cruz vs. NLRC (Charms) Facts: In a complaint filed before the NLRC, petitioner charged private respondent Emmanuel Lo with unfair labor practice, illegal dismissal, underpayment of salary, non-payment of overtime pay, legal holiday pay, premium pay for holiday and rest day, and non-payment of wages or commission and separation pay. On 7 August 1992, after appropriate proceedings, Labor Arbiter Dennis D. Juanon rendered a decision dismissing the complaint for lack of merit due to the absence of an employer-employee relationship between petitioner and private respondent. Petitioner seasonably appealed to the NLRC which in turn remanded the case to the Labor Arbiter. The Labor Arbiter Lagoc found that petitioner was an employee of private respondent and was illegally dismissed from the service, hence entitled to separation pay, but rejected the charge of unfair labor practice and dismissed, for lack of merit, petitioner's other monetary claims. Held: The issue is whether the NLRC acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it dismissed petitioner's claim for separation pay, back wages, allowances and damages. Both the labor arbiter and the NLRC concluded that petitioner was illegally dismissed. Conformably then with Article 279 of the Labor Code, he is entitled to an award of back wages since the Article expressly mandates that an employee who is unjustly dismissed from work shall be entitle to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time compensation was withheld up to the time of actual reinstatement. It is evident that the award of back wages resulting from the illegal dismissal of an employee is a substantive right. Thus, the failure to claim back wages in a complaint for illegal dismissal has been held to be a mere procedural lapse which cannot defeat a right granted under substantive law. Petitioner would have, likewise, been entitled to reinstatement as a consequence of his illegal dismissal from employment. However, by expressly asking for separation pay, he is deemed to have opted for

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separation pay in lieu of reinstatement. Corollary then to the foregoing is the matter of computing both the back wages and the separation pay due petitioner. To be reckoned for the former is the period of putative service. This pertains to that period from the date petitioner was dismissed from employment on 2 December 1990 until he could have been reinstated which, taking into account the appeals separately interposed by petitioner and private respondent from the decision of the labor arbiter, and the filing of this case, could have been done only after the finality of this decision affirming the finding of the labor arbiter and the NLRC that petitioner was illegally dismissed from his employment by private respondent. As regards separation pay, the same must be computed from the time petitioner was first employed by private respondent until the finality of this decision. Effect Failure to Order Aurora Land etc. vs. NLRC (Monette) Facts: Honorio Dagui was hired by the Tanjangcos to take charge of the maintenance and repair of the Tanjangco apartments and residential buildings in 1953 until 1982. Suddenly, the employer said "Wala ka nang trabaho mula ngayon," on the alleged ground that his work was unsatisfactory. Issue: (1) Whether Dagui is a regular employee (2) Whether or not he was illegally dismissed. Held: Yes to both. There are two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. The jobs assigned to private respondent as maintenance man, carpenter, plumber, electrician and mason were directly related to the business of petitioners as lessors of residential and apartment buildings. Dagui should likewise be considered a regular employee by the mere fact that he rendered service for the Tanjangcos for more than one year, that is, beginning 1953 until 1982. These twin requirements of notice and hearing were undeniably absent in the case at bar. Dagui was dismissed, without giving him any written notice informing the cause for his termination. Neither was there any hearing conducted in order to give Dagui the opportunity to be heard and defend himself. The Court, however, is bewildered why only an award for separation pay in lieu of reinstatement was made by both the Labor Arbiter and the NLRC. No backwages were awarded. It must be remembered that backwages and reinstatement are two reliefs that should be given to an illegally dismissed employee. They are separate and distinct from each other. In the event that reinstatement is no longer possible, as in this case, separation pay is awarded to the employee. The award of separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed employee is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2) backwages. It is true that private respondent did not appeal the award of the Labor Arbiter awarding separation pay sans backwages. While as a general rule a party who has not appealed is not entitled to affirmative relief other than the ones granted in the decision of the court below, law and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors affecting the lower court's jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors. In this case, the failure of the Labor Arbiter and the NLRC to award backwages to the private respondent, who is legally entitled thereto having been illegally dismissed, amounts to a "plain error" which we may rectify in this petition, although Dagui did not bring any appeal regarding the matter, in the interest of substantial justice. The Supreme Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. Rules of procedure are mere tools designed to facilitate the attainment of justice. Thus, substantive rights like the award of backwages resulting from illegal dismissal must not be prejudiced by a rigid and technical application of the rules. Period- Computation First. To be deducted from the back wages accruing to each of the laborers to be reinstated is the total amount of earnings obtained by him from other employment(s) from the date of dismissal to the date of reinstatement. Should the laborer decide that it is preferable not to return to work, the deduction should be made up to the time judgment becomes final. And these, for the reason that employees should not be permitted to enrich themselves at the expense of their employer. Besides, there is the "law's abhorrence for double compensation." Second. Likewise, in mitigation of the damages that the dismissed respondents are entitled to, account should be taken of whether in the exercise of due diligence respondents might have obtained income from suitable remunerative employment. We are prompted to give out this last reminder because it is really unjust that a discharged employee should, with folded arms, remain inactive in the expectation that a windfall would come to him. A contrary view would breed idleness; it is conducive to lack of initiative on the part of a laborer. Both bear the

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stamp of undesirability. As to the amount of backwages, the Court applies the precedent recently set in Mercury Drug. Co. vs. CIR of fixing the amount of backwages to a just and reasonable level without qualification or deduction so as to avoid protracted delay in the execution of the award for backwages due to extended hearings and unavoidable delays and difficulties encountered in determining the earnings of the laid-off employees ordered to be reinstated with backwages during the pendency of the case for purposes of deducting the same from the gross backwages awarded. Rationale- As has been noted, this formula of awarding reasonable net backwages without deduction or qualification relieves the employees from proving or disproving their earnings during their lay-off and the employers from submitting counterproofs, and obviates the twin evils of idleness on the part of the employee who would "with folded arms, remain inactive in the expectation that a windfall would come to him" and attrition and protracted delay in satisfying such award on the part of unscrupulous employers who have seized upon the further proceedings to determine the actual earnings of the wrongfully dismissed or laid-off employees to hold unduly extended hearings for each and every employee awarded backwages and thereby render practically nugatory such award and compel the employees to agree to unconscionable settlements of their backwages award in order to satisfy their dire need. Itogon-Suyoc vs. Sangilo1968 It should be noted that private respondent Dayao filed his ULP charge with reinstatement and back wages about two years and fifteen days after his separation on April 10, 1961. As aforestated, the shortest prescriptive period for the filing of all other actions for which the statute of limitations does not fix a period, is four years. The period of delay in instituting this ULP charge with claim for reinstatement and back wages, although within the prescriptive period, should be deducted from the liability of the employer to him for back wages. In order that the employee however should be relieved from proving his income during the period he was out of the service and the employer from submitting counter-proofs, which may delay the execution of the decision, the employer in the case at bar should be directed to pay private respondent Dayao back wages equivalent to one year, eleven months, and fifteen days without further disqualifications. (Mercury Drug vs. CIR 1974) arbitrary procedures (in the Mercury case, the period was based on the remainder of the 4 year prescriptive period), the minimum should have been fixed at 3 years pay-Monette TEEHANKEE, J., concurring opinion: (Mercury Drug rule) I particularly endorse the new formula reached by the Court in ordering that respondent be paid a fixed amount of back wages (equivalent to 1 year, 11 months and 15 days in the case at bar) "without further qualifications," that is to say, without having to determine and deduct earnings from the general award of back wages from date of unlawful dismissal until actual reinstatement heretofore customarily made in such unfair labor practice and reinstatement cases. Such general awards, as noted in the main opinion, generally led to long delays in the execution of the decision for back wages and reinstatement, due to protracted hearings and unavoidable delays and difficulties encountered in determining the earnings of the laid-off employees during the pendency of the case. As observed by the Court in another case, such general award for back wages tended to breed idleness on the part of a discharged employee who would "with folded arms, remain inactive in the expectation that a windfall would come to him" and therefore directed that "in mitigation of the damages that the dismissed respondents (employees) are entitled to, account should be taken of whether in the exercise of due diligence respondents might have obtained income from suitable remunerative employment. On the other hand, it is to be noted that unscrupulous employers have with unrelenting attrition against their unwanted employees who successfully obtained judgments For reinstatement with back wages seized upon the further proceedings in the industrial court (to determine the actual earnings of their wrongfully dismissed employees for purposes of deduction from the back wages award) to bold unduly protracted and extended hearings for each and every employee found entitled to back wages and thereby practically render nugatory such judgments and force the employees to agree to unconscionable settlements of their judgment award. This new principle formally adopted by the Court now in fixing the amount of back wages at a reasonable level without qualification and deduction so as to relieve the employees from proving their earnings during their layoffs and the employer from submitting counter-proofs, and thus obviate the twin evils of idleness on the part of the employees and attrition and undue delay in satisfying the award on the part of the employer is thus to be hailed as a realistic, reasonable and mutually beneficial solution. TEEHANKEE, J., dissenting opinion:(Mercury Drug rule) I dissent, however, from the specific result in the

*** Basically, Justice Teehankee concurs in the ruling that there shouldnt be a deduction of earnings elsewhere from the backwages awarded. However, he dissents as to the period of computation. He suggested that instead of

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judgment at bar of awarding respondent back wages only in an amount equivalent to 1 year, 11 months and 15 days - which is apparently premised arbitrarily on granting respondent back wages only for the remainder of the four-year prescriptive period after deducting the 2 years and 15 days delay incurred by respondent after his discharge in filing his complaint for unfair labor practice and reinstatement. The very same opinion found that such delay "is not an unreasonable period of time under the circumstances" and it should follow that such delay should in no manner prejudice the amount of the back wages award justly due respondent particularly, when it is considered that he pursued with vigor his complaint after its filing on April 25, 1963 and obtained favorable judgment in the industrial court within a year as per said court's decision of January 17, 1964 and its en banc resolution of February 25, 1964 denying petitioner's motion for reconsideration. I believe that some ground rules should be laid down in implementing the new formula now adopted of granting a fixed back wages award without further qualification and deduction of earnings during the lay-off so as to expedite the immediate execution of judgment in satisfaction of the award and for reinstatement of the wrongfully dismissed employee(s) (whose reinstatement, as stressed in East Asiatic Co., supra, should be immediately effected upon finality of the judgment without waiting for the computation and determination of the back wages). Normally, the trial of the case and resolution of the appeal should be given preference and terminated within a period of three years (one year for trial and decision in the industrial court and two years for briefs, etc., and decision in this Court). Hence, an award of back wages equivalent to three years (where the case is not terminated sooner) should serve as the base figure for such awards without deduction, subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances (e.g. oppression or dilatory appeals) on the employer's part. Here, where resolution of the case on appeal was delayed without fault of the parties but the facts and circumstances clearly show the lack of merit in the appeal taken by the employerpetitioner and its stubborn insistence on depriving respondent and his co-employees of the extra compensation for Sunday and holiday work justly due them, I submit that the minimum award to which respondent is entitled should be at the very least the equivalent of the proposed base figure of three years pay. Employers should be put on notice as a deterrent that if they pursue manifestly dilatory and unmeritorious appeals and thus delay satisfaction of the judgment justly due their employee(s), they run the risk of exemplary and punitive damages being assessed against them by way of an increased award of back wages to the wrongfully discharged employee(s) commensurate to the delay caused by the appeal process. Pines City Educational Center vs. NLRC (Monette) Facts: Private respondents were all employed as high school and college teachers on probationary basis by Pines City Educational Center. All the private respondents, except Roland Picart and Lucia Chan, signed contracts of employment with petitioner for a fixed duration. Due to the expiration of private respondents' contracts and their poor performance as teachers, they were notified of petitioners' decision not to renew their contracts anymore. Thus, a case for illegal dismissal was filed. Held: The Supreme Court made a distinction between employees who signed a fixed term of contract and those who did not. Insofar as the private respondents who knowingly and voluntarily agreed upon fixed periods of employment are concerned, their services were lawfully terminated by reason of the expiration of the periods of their respective contracts. Thus, there was no illegal dismissal. With respect to private respondents who did not sign any contract fixing the periods of their employment nor to have knowingly and voluntarily agreed upon fixed periods of employment, petitioners had the burden of proving that the termination of their services was legal. As probationary employees, they are likewise protected by the security of tenure provision of the Constitution. Consequently, they cannot be removed from their positions unless for cause. The petitioners contention that their evaluation of the teachers performance was poor was not presented by any written proofs or evidence. There is absolutely nothing in the record which will show that the complainants were afforded even an iota of chance to refute allegations that the complainants did not meet the reasonable standards and criteria set by the school. However, in ascertaining the total amount of backwages payable to them, we go back to the rule prior to the Mercury Drug rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom. We restate the underlying reason that employees should not be permitted to enrich themselves at the expense of their employer. In addition, the law abhors double compensation.

History of the different methods in the computation of backwages. a) The first labor relations law governing the award of backwages was Republic Act No. 875, the Industrial Peace Act. In accordance with these provisions, backpay (the same as backwages) could be awarded where, in the opinion of the Court of Industrial Relations (CIR), such was necessary to effectuate the policies of the Industrial Peace Act. Only in one case was backpay a matter of right, and that was, when an employer had declared a

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lockout without having first bargained collectively with his employees in accordance with the provisions of the Act. As the CIR was given wide discretion to grant or disallow payment of backpay (backwages) to an employee, it also had the implied power of mitigating (reducing) the backpay where backpay was allowed. Thus, in the exercise of its jurisdiction, the CIR increased or diminished the award of backpay, depending on several circumstances, among them, the good faith of the employer, the employee's employment in other establishments during the period of illegal dismissal, or the probability that the employee could have realized net earnings from outside employment if he had exercised due diligence to search for outside employment. In labor cases decided during the effectivity of R.A. No. 875, this Court acknowledged and upheld the CIR's authority to deduct any amount from the employee's backwages including the discretion to reduce such award of backwages by whatever earnings were obtained by the employee elsewhere during the period of his illegal dismissal. (See Itogon-Suyoc case). From this ruling came the burden of disposing of an illegal dismissal case on its merits and of determining whether or not the computation of the award of backwages is correct. b) Mercury Drug rule- In order not to unduly delay the disposition of illegal dismissal cases, this Court found occasion in the case of Mercury Drug Co., Inc., et al. v. CIR, et al. to rule that a fixed amount of backwages without further qualifications should be awarded to an illegally dismissed employee (hereinafter the Mercury Drug rule). This ruling was grounded upon considerations of expediency in the execution of the decision. Former Justice Claudio Teehankee approved of this formula expressing that such method of computation is a "realistic, reasonable and mutually beneficial solution" and "thus obviates the twin evils of idleness on the part of the employees and attrition and undue delay in satisfying the award on the part of the employer." However, Justice Teehankee dissented from the majority view that the employee in said case should be awarded backwages only for a period of 1 year, 11 months and 15 days which represented the remainder of the prescriptive period after deducting the period corresponding to the delay incurred by the employee in filing the complaint for unfair labor practice and reinstatement. c) 3 year backwages (Dissenting opinion of Justice Teehankee in Mercury Drug)- The proposal on the threeyear backwages was subsequently adopted in later cases, among them, Feati University Faculty Club (PAFLU) v. Feati University (1974) and others. d) Then came Presidential Decree No. 442 (the Labor Code of the Philippines). Its posture on the award of backwages, as amended, was expressed as follows: ART. 279. Security of Tenure. In case of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time of his reinstatement. (italics supplied)." Under the abovequoted provision, it became mandatory to award backwages to illegally dismissed regular employees. The law specifically declared that the award of backwages was to be computed from the time compensation was withheld from the employee up to the time of his reinstatement. This notwithstanding, the rule generally applied by the Court after the promulgation of the Mercury Drug case, and during the effectivity of P.D. No. 442 was still the Mercury Drug rule. A survey of cases from 1974 until 1989, when the amendatory law to P.D. No. 442, namely, R.A No. 6715 took effect, supports this conclusion. After the Labor Code (P.D. No. 442) had taken effect, the Court still followed the Mercury Drug rule to avoid the necessity of a hearing on earnings obtained elsewhere by the employee during the period of illegal dismissal. In an even later case (1987), the Court declared that the general principle is that an employee is entitled to receive as backwages all the amounts he may have received from the date of his dismissal up to the time of his reinstatement. However, in compliance with the jurisprudential policy of fixing the amount of backwages to a just and reasonable level, the award of backwages equivalent to three (3) years, without qualification or deduction, was nonetheless followed in said case. In sum, during the effectivity of P.D. 442, the Court enforced the Mercury Drug rule and, in effect, qualified the provision under P.D. No. 442 by limiting the award of backwages to three (3) years. e) On 21 March 1989, Republic Act No. 6715 took effect, amending the Labor Code. Article 279 thereof states in part: ART. 279. Security of Tenure. . . . An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation is withheld from him up to the time of his actual reinstatement." (italics supplied) In accordance with the above provision, an illegally dismissed employee is entitled to his full backwages from the time his compensation was withheld from him (which as a rule is from the time of his illegal dismissal) up to the time of his actual reinstatement. The Court deems it appropriate, however, to reconsider earlier rulings on the computation of backwages by now holding that comfortably with the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere

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during the period of his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must still earn a living to support himself and family, while full backwages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them under the Mercury Drug rule or the "deduction of earnings elsewhere" rule. Thus, a closer adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. In other words, the provision calling for "full backwages" to illegally dismissed employees is clear, plain and free from ambiguity and, therefore, must be applied without attempted or strained interpretation. Bustamante vs. NLRC- 1996 Romagos vs. Metro Cebu Water (Monette) Facts: Metro Cebu Water District (MCWD) dismissed Romagos for mental incapacity. Issue: Whether there was proper procedure and substantial basis for MCWD to declare Romagos mentally unfit to work and drop her from the rolls. Held: Dropping from the rolls due to mental incapacity is subject to the requirements of due process. Clearly, before an officer or employee may be dropped from the rolls for mental incapacity, the following elements and process must obtain: first, that it has been observed that the subject officer or employee has been behaving abnormally for an extended period; second, that it has been established through substantial evidence that such abnormal behavior manifests a continuing mental disorder and incapacity to work; third, that a written notice is issued by the subject's immediate supervisor, describing the former's continuing mental disorder and incapacity to work and citing the reports of his coworkers or immediate supervisor, as confirmed by the head of office; and finally, that another notice is issued by the appointing authority or head of office, informing the subject of his separation from the service due to mental incapacity. The procedure adopted by respondent in dropping petitioner from the rolls substantially complied with the two-notice requirement. Respondent issued to petitioner a letter, requiring her to undergo psychiatric evaluation. However, the factual bases relied upon by respondent in declaring petitioner mentally unfit to work appear inadequate as they failed to comply with the elements and processes of the law. First, respondent sufficiently established that petitioner suffers from a mental disorder. However, it did sufficiently proved that petitioner's mental condition has rendered her incapacitated to work as to justify her being dropped from the rolls .All that the 1989 and 1991 medical certifications established is that, during said periods, petitioner was diagnosed to be suffering from Major Depression. These certifications hardly prove that petitioner's behavior manifests a continuing mental disorder and incapacity to work. However, the award of backwages and other monetary benefits should not be limited to 5 years and must therefore be modified in line with the recent case of Civil Service Commission v. Gentallan. We held in said case that an illegally dismissed government employee who is later ordered reinstated is entitled to backwages and other monetary benefits from the time of her illegal dismissal up to her reinstatement. This is only fair and just because an employee who is reinstated after having been illegally dismissed is considered as not having left her office and should be given the corresponding compensation at the time of her reinstatement. We now turn to the second issue raised, whether the Labor Arbiter correctly awarded full backwages to Timbal. Del Monte cites a jurisprudential rule that an employer who acted in good faith in dismissing employees on the basis of a closed-shop provision may not be penalized even if the dismissal were illegal. Such a doctrine is admittedly supported by the early case of National Labor Union v. Zip Venetian Blind and the later decision in 1989 of Soriano v. Atienza, wherein the Court affirmed the disallowance of backwages or "financial assistance" in dismissals under the aforementioned circumstance. However, the Court now recognizes that this doctrine is inconsistent with Article 279 of the Labor Code, as amended by Republic Act No. 6715, which took effect just five (5) days after Soriano was promulgated. It is now provided in the Labor Code that "[a]n 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, where reinstatement is adjudged, the award of backwages and other benefits continues beyond the date of the labor arbiter's decision ordering reinstatement and extends up to the time said order of reinstatement is actually carried out. Rep. Act No. 6715 effectively mitigated previous jurisprudence which had limited the extent to which illegally dismissed employees could claim for backwages. It may appear that Article 279 of the Labor Code, as amended by Republic Act No. 6715, has made the employer bear a heavier burden than that pronounced in the Mercury Drug Rule, but

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perhaps Republic Act No. 6715 was enacted precisely for the employer to realize that the employee must be immediately restored to his former position, and to impress the idea that immediate reinstatement is tantamount to a cost-saving measure in terms of overhead expense plus incremental productivity to the company which lies in the hands of the employer. Del Monte vs. Saldiar (2007) Torres vs. NLRC (Jake) Facts: On January 5, 1989, respondent E & R security agency hired petitioner Chona P. Torres as a security guard. On November 10, 1989, petitioner received a letter from the agency informing her that she was re-assigned and required to report at the respondent's Manila office for further instructions.# On November 27, 1989, respondent agency terminated her services for abandonment when she failed to report for work in her new assignment. The Labor Arbiter declared the dismissal of the complainant not in accordance with law. Hence, respondent was ordered to immediately reinstate Complainant to her former position as security guard without prejudice to reassignment in the exigency of the service, with full backwages from the time she was placed under preventive suspension on October 27, 1989 up to the time of her reinstatement. Held: The amount of P 105,396.00 representing the sum total of the salary differentials and back wages awarded to petitioner has been garnished from the account of respondent agency with the Philippine National Bank (PNB) with no opposition or resistance and it is the ministerial duty of the Labor Arbiter to release the money to petitioner. and considering that they were illegally dismissed, the private respondents should be reinstated. Illegally dismissed employees are entitled to backwages plus other benefits computed from the time compensation was withheld up to the time of actual reinstatement. An illegally dismissed employee who, in contemplation of the law, never left his office, should be granted the compensation which rightfully belongs to him from the moment he was unduly deprived of it up to the time it was restored to him; the backwages to be awarded should not be diminished or reduced by earnings derived by the illegally dismissed employee elsewhere during the term of his illegal dismissal.

The respondent agency's contention that there has been a change in the situation of the parties making execution inequitable because petitioner accepted employment from another agency without resigning from it is patently without merit. In the recent ruling of the Court, we said that the rule enunciated in Pines City no longer controls. Now, the rule is that back wages awarded to an illegally dismissed employee shall not be diminished or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal.

Standard Electric vs. Standard Electric Employees Union (Jake) Facts: On July 31, 1995, Javier failed to report for work. He failed to notify the SEMC of the reason for his absences. On August 9, 1995, he was arrested and detained for the charge of rape upon complaint of his neighbor, Genalyn Barotilla. The SEMC denied Javiers request and issued a Memorandum terminating his employment for (a) having been absent without leave (AWOL) for more than fifteen days from July 31, 1995; and (b) for committing rape. Held: Respondent Javiers absence from August 9, 1995 cannot be deemed as an abandonment of his work. To constitute as such, two requisites must concur: first, the employee must have failed to report for work or must have been absent without valid or justifiable reason; and second, there must have been a clear intention on the part of the employee to sever the employer-employee relationship as manifested by some overt acts, with the second element being the more determinative factor. Abandonment as a just ground for dismissal requires clear, willful, deliberate, and unjustified refusal of the employee to resume his employment. Mere absence or failure to report for work, even after notice to return, is not tantamount to abandonment. Moreover, respondent Javiers acquittal for rape makes it more compelling to view the illegality of his dismissal. Respondent Javier is not entitled to any salary during the period of his detention. His entitlement to full backwages commenced from the time the petitioner refused his reinstatement. In the instant case, when respondent Javier was freed on May 24, 1996 by virtue of the judgment of acquittal dated May 17, 1996, he immediately proceeded to the petitioner but was not accepted back to work; hence, the reckoning point for the grant of backwages started therefrom.

Kay Products vs. CA (Jake) Facts: The employees alleged that they were illegally dismissed. They also asserted that in interfering with their right to self-organization by deceitfully transferring them to an employment agency, KPI thereby engaged in ULP. The complainants further contended that they were coerced and intimidated into signing letters of resignation. Held: As regular employees, the private respondents are entitled to security of tenure provided under the labor laws and may only be validly terminated from service upon compliance with the legal requisites for dismissal

Filipino Pre-Fabricated Buildings Systems vs. Puente (Jake) Facts: Respondent avers that he started working with

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Petitioner Filsystems, Inc., a corporation engaged in construction business, on June 12, 1989; that his work was not dependent on the completion or termination of any project; that since his work was not dependent on any project, his employment with the petitioner company was continuous and without interruption for the past ten years; that on October 1, 1999, he was dismissed from his employment allegedly because he was a project employee. Held: The contracts of employment of Puente attest to the fact that he was hired for specific projects. His employment was coterminous with the completion of the projects for which he had been hired. Those contracts expressly provided that his tenure of employment depended on the duration of any phase of the project or on the completion of the construction projects. Furthermore, petitioner regularly submitted to the labor department reports of the termination of services of project workers. Such compliance with the reportorial requirement confirms that respondent was a project employee. Without a valid cause, the employment of project employees cannot be terminated prior to expiration. Otherwise, they shall be entitled to reinstatement with full back wages. However, if the project or work is completed during the pendency of the ensuing suit for illegal dismissal, the employees shall be entitled only to full back wages from the date of the termination of their employment until the actual completion of the project or work. Intercontinental Broadcasting vs. Benedicto (Jake) Facts: In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio, the general manager then of petitioner, as marketing manager with a monthly compensation of P20,000 plus 1% commission from collections of all advertising contracts consummated. In a letter dated October 11, 1994 signed by Tomas Gomez III, at that time the president of petitioner, Benedicto was terminated from his position. The labor arbiter concluded that Benedicto was illegally dismissed. Held: These factual findings of the NLRC, confirmed by the CA, are binding on us since they are supported by substantial evidence. Benedicto was entitled to backwages only up to the time he reached 65 years old, the compulsory retirement age under the law. When Benedicto was illegally dismissed on October 11, 1994, he was already 64 years old. Since backwages are granted on grounds of equity for earnings lost by an employee due to his illegal dismissal, Benedicto was entitled to backwages only for the period he could have worked had he not been illegally dismissed. cost-cutting measures resulting in the termination from the service of their employees, including respondent. Held: The dismissal of respondent from the service is by reason of retrenchment, an authorized cause. But due process was not observed as the required notices were not sent to respondent and the DOLE one month prior to the effectivity of his termination. Thus, petitioners should be liable for violation of his right to due process and should pay him indemnity in the form of nominal damages, pursuant to our ruling in Agabon, which we fix at P20,000.00. We rule that the Court of Appeals erred in awarding him such backwages. Under Article 283, in case of retrenchment to prevent losses, respondent is entitled to an award of separation pay equivalent to one-half (1/2) months pay for every year of service (with a fraction of at least six months considered one whole year). Since he was employed by petitioners for four years, or from June 1, 1995 to December 30, 1998, with a monthly salary of P80,000.00, he should be paid P160,000.00 as separation pay.

Effect Inflation Lantion vs. NLRC (Jake) Facts: On 10 November 1983, petitioner Filomeno Lantion received a letter, dated 9 November 1983, terminating him as the Acting Vice-President and concurrently Executive Officer of the University effective 11 November 1983. Petitioner Clarita Lantion, wife of Filomeno, was terminated as Dean of the Institute of Business and Agricultural Administration and Concurrent Head of the Department of Business, Finance, and Management effective 1 June 1984. While petitioner Fuentes, Filomeno's sister-in-law, was terminated as Secretary to the Legal Office on 21 November 1983. On 25 March 1985, petitioners filed their Complaint against the University and its President, respondent Obed Jose Meneses, before the NLRC. Held: That retrenchment was proper, therefore, there can be no question. The conditions laid down, however, were not religiously followed. Petitioners were not rehired although they fall outside the exception provided. Their positions were not affected by the re-organizational changes envisioned in the retrenchment program. The position of Vice-President continued to exist. And as far as Filomeno and Clarita Lantion are concerned, their temporary appointment to other positions could not have affected their permanent status pursuant to the ruling in the First GAUF Case. Clarita's position was neither abolished. She was replaced by another faculty member. Reinstatement of petitioners with backwages is thus called for. In respect of the argument that the inflation that has supervened justifies the imposition of interest, this Court has held that the effects of extraordinary

TPI Cement Corp vs. Cajucom (Jake) Facts: As a result of the economic slowdown then experienced in this country, petitioners implemented

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inflation are not to be applied without an agreement between the parties and without an official declaration thereof by competent authorities. 14. 10. FINANCIAL ASSISTANCE Allowed Financial Assistance PLDT vs. NLRC (Jake) Facts: Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was accused by two complainants of having demanded and received from them the total amount of P3,800.00 in consideration of her promise to facilitate approval of their applications for telephone installation. Investigated and heard, she was found guilty as charged and accordingly separated from the service. She went to the Ministry of Labor and Employment claiming she had been illegally removed. After consideration of the evidence and arguments of the parties, the company was sustained and the complaint was dismissed for lack of merit but private respondent was awarded separation pay. Held: We hold that the grant of separation pay in the case at bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during all of her 10 years of service with the company. If regarded as a justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all undesirables. We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. one of her students, Redentor Salonga, who attested to the veracity of the former's assertion, maintaining that he was responsible, not only for the collection of the contributions, but for the canvass of the price of the religious items as well. Moreover, petitioner pleaded that she never misappropriated the money collected and whatever was left of it, after initial purchases were made, were immediately returned to the student-leaders for proper reimbursement to the students concerned. Held: If there is one person more knowledgeable of respondent's policy against illegal exactions from students, it would be petitioner Salavarria. The records show that she had been meted put a two-week suspension in 1988 for having solicited contributions without the requisite school approval with a final warning that commission of a similar offense shall warrant the imposition of a more severe penalty. Hence, regardless of who initiated the collections, the fact that the same was approved or indorsed by petitioner, made her "in effect the author of the project." Petitioner's infraction of a school policy warrants her dismissal. But we find that petitioner's infraction of the school policy neither amounted to serious misconduct nor reflected that of a morally depraved person as may warrant the denial of separation pay to her. We rule that the NLRC correctly awarded to petitioner the amount of P45,000.00 as "severance pay" which is synonymous with "separation pay." As a general rule, an employee who is dismissed for cause is not entitled to any financial assistance. However, equity considerations provide an exception. In PLDT v. NLRC, equity has been defined as justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of positive law, for equity finds no room for application where there is law. Further, it was held that the grant of separation pay is not merely based on equity but on the provisions of the Constitution regarding the promotion of social justice and protection of the rights of the workers.

Salavarria vs. Letran College (Jake) Facts: Petitioner contended that her dismissal was arbitrarily carried out, having been effected without just cause, on the premise that the solicitation of funds necessary to purchase the religious articles was initiated by the students and that her participation therein was merely limited to approving the same. In support of this claim, petitioner relied principally on a letter written by

Gustilo vs. Wyeth Philippines (Kristel) Facts: Alan D. Gustilo, petitioner, was employed by Wyeth Philippines, Inc., respondent company, as a pharmaceutical territory manager. Petitioner's employment records show that respondent company, on various dates, reprimanded and suspended him for habitually neglecting to submit his periodic reports. Separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, . . . an offense involving moral turpitude . . ., the employer may not be required to give the dismissed

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 52

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employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. Pinero vs. NLRC (Kristel) Facts: Dumaguete Cathedral College, Inc., an educational institution, is the employer of the faculty and staff members comprising the labor union DUCACOFSANAFTEU.The union staged a strike. The strike was declared illegal and the dismissal of the union members was ordered by the lower courts. An employee who is dismissed for cause is generally not entitled to any financial assistance. Equity considerations, however, provide an exception. Equity has been defined as justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of positive law, for equity finds no room for application where there is law. Although meriting termination of employment, Piero's infraction is not so reprehensible nor unscrupulous as to warrant complete disregard of his long years of service. Moreover, he has no previous derogatory records. Weighed on the scales of justice, conscience and reason tip in favor of granting financial assistance to support him in the twilight of his life after long years of service. that it would appear that he had served the company well, since even the company said that the reason it refused his application for optional retirement was that it still needed his services; that he denies receiving the telegram asking him to report back to work; but that considering his age and health, he preferred to stay home rather than risk further working in a ship at sea. In our view, with these special circumstances, we can call upon the same "social and compassionate justice" cited in several cases allowing financial assistance. These circumstances indubitably merit equitable concessions, via the principle of "compassionate justice" for the working class. Pangasinan Electric Coop vs. NLRC (Kristel) Facts: Lito Cagampan was the Acting Power Use Coordinator of petitioner Central Pangasinan Electric Cooperative, Inc. (CENPELCO). It appeared that Cagampan knowingly entered into an unauthorized contract for the installation of a transformer, and that he was not authorized to accept payment. Hence, Cagampan was found guilty of violating CENPELCO's Code of Ethics and Discipline, namely: (1) unauthorized acceptance of payments for new connection; (2) dishonest or unauthorized activity whether for personal gain or not; and (3) defrauding others by using the name of the company. He was dismissed from service. Section 7, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code provides that when the employee is dismissed for any of the just causes under Article 282 13 of the Labor Code, he shall not be entitled to termination pay without prejudice to applicable collective bargaining agreement or voluntary employer policy or practice. 14 Separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. 15 Separation pay in such case is granted to stand as a "measure of social justice." If the cause for the termination of employment cannot be considered as one of mere inefficiency or incompetence but an act that constitutes an utter disregard for the interest of the employer or a palpable breach of trust in him, the grant by the Court of separation benefits is hardly justifiable. In this case, private respondent was found by the Labor Arbiter and the NLRC to have been validly dismissed for violations of company rules, and certain acts tantamount to serious misconduct. Such findings, if supported by substantial evidence, are accorded respect and even finality by this Court. Although long years of service might generally be considered for the award of separation benefits or some form of financial assistance to mitigate the effects of termination, this case is not the appropriate instance for generosity under the Labor Code nor under our prior decisions. The fact that private

Eastern Shipping Lines vs. Sedan (Kristel) Facts: Petitioners hired on a per-voyage basis private respondent Dioscoro Sedan as 3rd marine engineer and oiler in one of the vessels owned by petitioners. Sedan sent a letter to petitioners applying for optional retirement, citing as reason the death of his only daughter, hence the retirement benefits he would receive would ease his financial burden.This was not granted despite several demands. The rule is that financial assistance is allowed only in instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Financial assistance may be allowed as a measure of social justice and exceptional circumstances, and as an equitable concession. In this instance, our attention has been called to the following circumstances : that private respondent joined the company when he was a young man of 25 years and stayed on until he was 48 years old; that he had given to the company the best years of his youth, working on board ship for almost 24 years; that in those years there was not a single report of him transgressing any of the company rules and regulations; that he applied for optional retirement under the company's non-contributory plan when his daughter died and for his own health reasons; and

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 53

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respondent served petitioner for more than twenty years with no negative record prior to his dismissal, in our view of this case, does not call for such award of benefits, since his violation reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employee's length of service is to be regarded as a justification for moderating the penalty of dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of undesirables. Not Allowed Phil. Construction Corp vs. NLRC (Kristel) Facts: Domingo Manreza was hired by the CDCP in 1972, as a janitor and later promoted to Leadsman, having the main duty of removing and/or changing damaged flexbeams on the expressway. On May 24, 1983, the North Luzon Expressway (NLE) Security Services Investigation and Intelligence Unit discovered NLE flexbeams in the house of Alfonso Eusebio in Sipat, Plaridel, Bulacan, and also in the house of Nene Enriquez. Both declared that the items were deposited there by Manreza and his companions. The company found him guilty of stealing or unauthorized taking of company property, a violation of Section 7 (a) (10) of the CDCP Code of Employee Discipline. It placed the complainant under preventive suspension for thirty (30) days, and thereafter terminated his employment It is true that in some earlier cases, We held that employees dismissed for cause are nevertheless entitled to separation pay on the ground of social and compassionate justice (Firestone Tire & Rubber Co. of the Philippines vs. Lariosa, 148 SCRA 187; Soco vs. Mercantile Corp. of Davao, 148 SCRA 526; Filipro, Inc. vs. NLRC, 145 SCRA 123), that doctrine was abandoned by this Court in the recent case of Philippine Long Distance Telephone Co. vs. NLRC and Marilyn Bucay, G.R. No. 80609, August 23, 1988, where We held that: ". . . henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. (Emphasis supplied.) . . . "The policy of social justice is not intended to countenance wrong doing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be the refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character." Since Manreza was found guilty of dishonesty for having stolen company property and was dismissed for cause, he is not entitled to separation pay. Eastern Paper Mills vs. NLRC (Kristel) Facts: Petitioner, after due notice, investigation, and hearing, dismissed the private respondent Eduardo Malabanan, an accounts payable clerk, for having physically assaulted and verbally abused, within full view and hearing of the other employees, a superior officer, Mariano Lopingco, who was then the personnel and administrative manager of the company. The reason for the assault was private respondent's resentment at being suspected of having stolen an ash tray from Lopingco's office and being questioned about the matter by the security office. An award of separation pay to an employee who was dismissed for a valid cause (in this case, for serious misconduct) is legally indefensible. It contravenes Rule 1, Sec. 7, Book VI of the Omnibus Rules Implementing the Labor Code. The only cases when separation pay shall be paid, although the employee was lawfully dismissed, are when the cause of termination was not attributable to the employee's fault but due to: (1) the installation of labor-saving devices, (2) redundancy, (3) retrenchment, (4) cessation of the employer's business, or (5) when the employee is suffering from a disease and his continued employment is prohibited by law or is prejudicial to his health and to the health of his co-employees. (Articles 283 and 284, Labor Code.)

Chua vs. NLRC (Kristel) Facts: Union of Filipro Employees, of which petitioner Benito D. Chua was a member, declared a strike against the private respondent company, Nestle Philippines, Inc. During the strike, several of the striking employees threw stones at the trucks entering and leaving the company premises. One truck. whose driver was rendered unconscious by a stone hitting him on the head, rammed a private vehicle and crashed into a beauty parlor resulting in the death of three (3) persons and extensive damage to private property. Petitioner received a notice

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 54

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of dismissal from private respondent for having participated in the illegal strike. We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than punishing the erring employee for his offense . . . . In the case at bar, petitioner's participation in the unlawful and violent strike, which strike resulted in multiple deaths and extensive property damage, constituted serious misconduct on his part; accordingly, the award of "financial assistance" was bereft of basis and would moreover render the finding by the Labor Arbiter and the NLRC of just or authorized cause for termination of petitioner's services merely illusory. Consequently, SDPI served formal notices of termination to all the employees of the plantation. Simultaneously, a letter to DOLE, respecting the terminations was sent by SDPI. Separation pay for the employees was computed pursuant to the provisions of the CBA between SDPI and NFL, in relation to the Labor Code of the Philippines. Meanwhile, the NFL requested SDPI that the separation pay benefits for its members be segregated from regular workdays, vacation leave, unused sick leave and other benefits. However, each of the petitioners received his separation pay equivalent to one-half month pay for every year of service, and other benefits which were all lumped in one Metrobank check. The petitioners simultaneously executed individual "Release and Quitclaim" following the explanation to them by executive labor of the nature and legal effects of the said quitclaims. Article 283 of the Labor Code provides that employees who are dismissed due to closures that are not due to business insolvency should be paid separation pay equivalent to 1-month pay or to at least 1/2 month pay for every year of service, whichever is higher. A fraction of at least 6 months shall be considered 1 whole year, thus: Pursuant to the CBA, permanent or temporary lay-off workers affected would be entitled to termination pay as provided by the Labor Code. The parties did not incorporate in the CBA a specific provision providing that employees terminated from employment due to the closure of business operations would be entitled to separation pay equivalent to one-month pay for every year of service. The parties opted to be bound by the provisions of the Labor Code and not by company policy. The employees of the private respondent who were members of the NFL ratified the CBA which had been in force and effect for 3 years before the closure of the plantation, without the NFL initiating the revision thereof. It bears stressing that a CBA refers to the negotiated contract between the legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in the bargaining unit. During the negotiations, the parties, management and union meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement. Had the dailypaid rank-and-file employees deemed the same to be a diminution of their benefits, they should have rejected the CBA. The petitioners never assailed the CBA as prejudicial to them or for having been in violation of Article 100 of the Labor Code. Unless annulled, the CBA, as a contract governing the employer and the employees respecting the terms of employment, should prevail. Etcuban vs. Sulpico Liner (Heidi)

14.11 SEPARATION PAY When Alternative Although Vital, who was illegally dismissed, is entitled to reinstatement, antagonism has caused a severe strain in their relationship. A more equitable disposition would be an award of separation pay equivalent to at least one month or one month pay for every year of service, whichever is higher; in addition to his full backwages, allowances, and other benefits. (Coca-cola Bottlers Phils. vs. Vital)

National Federation of Labor vs. CA (Heidi) Facts: SDPI was given the right to manage, administer, develop, cultivate, and improve the rubber plantations of ARCI as an agro-industrial development project, specifically for planting rubber trees, processing of and marketing of its products and providing technical expertise. NFL was the duly registered bargaining agent of the daily-and-monthly-paid rank-and-file employees of SDPI in a rubber plantation. SDPI and NFL executed CBA in which they agreed that in case of permanent or temporary lay-off, workers affected would be entitled to termination pay as provided by the Labor Code. During the effectivity of the FMA between ARCI and SDPI, the Comprehensive Agrarian Reform Law (CARL) took effect. SDPI decided to terminate the FMA with ARCI and cease operation of the rubber plantation.

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 55

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Facts: Ectuban was employed by the Sulpicio Lines on January 30, 1978 until his dismissal on June 10, 1994 for loss of trust and confidence. At the time of his dismissal, Ectuban was the Chief Purser of the M/V Surigao Princess receiving a monthly salary of P5,000.00. Sometime in 1994, the newly designated jefe de viaje of the ship, in a surprise examination, discovered irregularities in the issuance of passage tickets. Consequently, Ectuban received a memorandum of even date relative to the irregularity in the "alleged involvement in anomaly of ticket issuance," instructing him to forthwith report to the main office and to explain in writing why no disciplinary action should be meted on him or to submit himself to an investigation. The memorandum warned Ectuban that his failure to comply with the aforementioned instructions would be construed as a waiver of his right to be heard. It also informed him of his immediate preventive suspension until further notice. Barely a week after the petitioner's preventive suspension and pending his administrative investigation, he filed a complaint against the respondent for illegal dismissal, non-payment of overtime pay, 13th month pay and other monetary benefits with the regional arbitrator. In the instant case, this Court holds that there was sufficient basis for petitioner to lose trust and confidence in private respondent so as to justify his termination. Anent the petitioner's request for separation pay, the Court is constrained to deny the same. Well-settled is the rule that separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Inasmuch as reason for which the petitioner was validly separated involves his integrity, which is especially required for the position of purser, he is not worthy of compassion as to deserve at least separation pay for his length of service. grant of separation pay. It is well to note that there is no provision in the Labor Code which grants separation pay to employees who voluntarily resign. Under the Code, separation pay may be awarded only in cases when the termination of employment is due to: (a) installation of labor saving devices, (b) redundancy, (c) retrenchment, (d) closing or cessation of business operations, (e) disease of an employee and his continued employment is prejudicial to himself or his co-employees, or (f) when an employee is illegally dismissed but reinstatement is no longer feasible. In Hinatuan Mining Corporation and/or the Manager v. NLRC and Margo Batister, we held that while it is true that under the Labor Code, an employee who voluntarily resigns may not be granted separation pay, as in fact, the general rule is that an employee who voluntarily resigns is not entitled to separation pay, however, there is an exception, that is, when it is stipulated in the employment contract or CBA or such payment is authorized by the employer's practice or policy, as in this case. As aptly held by the Labor Arbiter, the NLRC and the Court of Appeals, it is very clear from the CBA that when an employee or worker voluntarily resigns due to, among others, "separation from the company without cause," such as voluntary resignation, then he is entitled to a separation pay. Moreover, records show that petitioners granted the employees mentioned earlier their separation pay upon their separation by reason of their retirement. Under the Labor Code, retirement is not also a ground for the grant of separation pay. If petitioners could be liberal to those employees who retired, there is no reason why they should not also extend such liberality to respondent considering that she served petitioner for 21 years. Our ruling in Philippine National Construction vs. NLRC finds application here, thus: "In the interpretation of an employer's program providing for separation benefits, all doubts should be construed in favor of labor. After all, workers are the intended beneficiaries of such program and our Constitution mandates a clear bias in favor of the working class."

Hanford Phil. vs. Joseph (Heidi) Facts: On July 17, 1978, Hanford hired Shirley Joseph as a sewer. On Aug. 10, 1998, respondent voluntarily tendered her resignation effective September 17, 1998, 2 which petitioner accepted the following day. Hanford then paid Joseph her last salary, 13th month pay and the cash conversion of her unused vacation and sick leave. On Nov. 19, 1998, 4 Joseph sent a letter to Hanford requesting payment of her separation pay pursuant to CBA which provides that Hanford shall give termination pay to those who voluntarily resigned due to the following reasons: reduction of personnel; employees or workers who may be separated without cause; and those whose services are terminated due to suspension or cessation of operation.. Hanford denied Joseph's request on the ground that under the Labor Code, voluntary resignation is not one of the grounds which justifies the

When not allowed North Davao Mining Corp vs. NLRC (Heidi) Facts: North Davao was incorporated in 1974 as a 100% privately-owned company. Later, PNB became part owner thereof as a result of a conversion into equity of a portion of loans obtained by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to and equity in North Davao in favor of the national government which later turned them over to petitioner Asset Privatization Trust (APT).

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 56

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North Davao completely ceased operations in May 31, 1992 due to serious business reverses. When it ceased operations, its remaining employees were separated and given the equivalent of 12.5 days' pay for every year of service, computed on their basic monthly pay, in addition to the commutation to cash of their unused vacation and sick leaves. However, it appears that, during the life of the petitioner corporation, from the beginning of its operations in 1981 until its closure in 1992, it had been giving separation pay equivalent to 30 days' pay for every year of service. Moreover, inasmuch as the region where North Davao operated was plagued by insurgency and other peace and order problems, the employees had to collect their salaries at a bank in Tagum, Davao Del Norte, some 58 kilometers from their workplace and about 2 1/2 hours' travel time by public transportation; this arrangement lasted from 1981 up to 1990. 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 . . .". Where, however, the closure was due to business losses as in the instant case, in which the aggregate losses amounted to over P20 billion the Labor Code does not impose any obligation upon the employer to pay separation benefits, for obvious reasons. However, respondents tenaciously insist on the award of separation pay, anchoring their claim solely on petitioner North Davao's long-standing policy of giving separation pay benefits equivalent to 30-days' pay, which policy had been in force in the years prior to its closure. Respondents contend that, by denying the same separation benefits to private respondents and the others similarly situated, petitioners discriminated against them. In the case of North Davao, it gave 30-days' separation pay to its employees when it was still a going concern even if it was already losing heavily. As a going concern, its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise completely ceases operations, i.e., upon its death as a going business concern, its vital lifeblood its cashflow literally dries up. Therefore, the fact that less separation benefits were granted when the company finally met its business death cannot be characterized as discrimination. Such action was dictated not by a discriminatory management option but by its complete inability to continue its business life due to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land. As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses. In the case before us, the basis for the claim of the additional separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the facts and circumstances of the present case, the grant of a lesser amount of separation pay to private respondent was done, not by reason of discrimination, but rather, out of sheer financial bankruptcy a fact that is not controlled by management prerogatives. Stated differently, the total cessation of operation due to mind-boggling losses was a supervening fact that prevented the company from continuing to grant the more generous amount of separation pay. The fact that North Davao at the point of its forced closure voluntarily paid any separation benefits at all although not required by law and 12.5-days' worth at that, should have elicited admiration instead of condemnation. But to require it to continue being generous when it is no longer in a position to do so would certainly be unduly oppressive, unfair and most revolting to the conscience. The law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. Computation Millares vs. NLRC (Heidi) Facts: Petitioners numbering 116 occupied technical, managerial and even a Vice Presidential positions in the mill site of respondent Paper Industries Corporation of the Philippines (PICOP) in Surigao del Sur. They were retrenched by respondent when it suffered a major financial setback brought about by the joint impact of restrictive government regulations on logging and the economic crisis. Accordingly, petitioners were given separation pay. Believing that the allowances they regularly received on a monthly basis during their employment should have been included in the computation thereof, they lodged a complaint for separation pay differentials. In case of retrenchment to prevent losses, Art. 283 of the the Labor Code imposes on the employer an obligation to grant to the affected employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. Since the law speaks of "pay," the question arises, "What exactly does the term connote?" We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined therein but "wage." Both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 57

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same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. When an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's "wages," we divide the discussion on the following "customarily furnished;" "board, lodging or other facilities;" and, "fair and reasonable value as determined by the Secretary of Labor." "Customary" is founded on long-established and constant practice connoting regularity. The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a factor worth considering. In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee concerned transfers to the company premises and his housing allowance is discontinued. On the other hand, the transportation allowance is in the form of advances for actual transportation expenses subject to liquidation given only to employees who have personal cars. The subject allowances do not form part of petitioners wages. Separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or to a retrenched employee should be computed based not only on the basic salary but also on the regular allowances that the employee had been receiving. But in view of the previous discussion that the disputed allowances were not regularly received by petitioners herein, there was no reason at all for petitioners to resort to the above cases. Effect of Acceptance Anino vs. NLRC (Heidi) Facts: Complainants-petitioners are employees of Hinatuan Mining Corporation (HMC) holding supervisory positions who organized the Hinatuan Mining Supervisory Union (HIMSU). HMC, in the guise of retrenchment, dismissed complainants-petitioners who are active leaders of the union. Complainants-petitioners then filed a complaint for illegal dismissal, unfair labor practice and damages against HMC. HMC in opposition avers that the validity of the retrenchment was not in issue in the complaint filed by petitioners; that it merely exercised its management prerogative when it resorted to retrenchment as a means of preventing losses, a measure fully explained to all its employees; and that the waivers/quitclaims freely and voluntarily executed by petitioners constituted valid contracts since they were awarded benefits far greater than those provided by law. In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the employer. In the case at bar, respondent corporation did not submit an iota of evidence to show losses in its business operations and the economic havoc it would sustain imminently. Anent the issue on the quitclaims, the Supreme Court cited the recognized and accepted doctrine that a dismissed employee who has accepted separation pay is not necessarily estopped from challenging the validity of his dismissal. Waivers and quitclaims are generally looked upon with disfavor. It cited the case of AFP Mutual Benefit Association, Inc. vs. AFP-MBAIEU which ruled that such quitclaims are against public policy and, therefore, null and void.

LIABILITY OF CORPORATE OFFICERS Liability Rule Unless they have exceeded their authority, corporate officers are as a GR, not personally liable for their official acts, because a corp, by legal fiction, has a separate and distinct personality. However, this fictional veil may be pierced whenever the corp personality is used as a means of perpetrating fraud or other illegal acts. (Bogo-Medellin vs. NLRC)

NYK Intl vs. NLRC (Heidi) Facts: Publico was a sewer of NYK. On May 7, 1997, Publico went home early despite refusal of petitioner because she was not feeling well. The next day, she notified petitioner that she was still recovering from her sickness. On May 9, 1997, however, Publico was refused entry for work and later informed of her dismissal. What the Court finds apropos is our disquisition in A.C. Ransom Labor Union-CCLU v. NLRC, which held that since a corporation is an artificial person, it must have an officer who can be presumed to be the employer, being the "person acting in the interest of the employer." In other words the corporation, in the technical sense only, is the employer. In a subsequent case, we ordered the corporate officers of the employer corporation to pay jointly and solidarily the private respondents' monetary award. More recently, a corporation and its president were directed by this Court to jointly and severally reinstate the illegally dismissed employees to their former positions and to pay the monetary awards. In this case Cathy Ng, admittedly, is the manager of NYK. Conformably with our ruling in A. C. Ransom,

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 58

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she falls within the meaning of an "employer" as contemplated by the Labor Code, who may be held jointly and severally liable for the obligations of the corporation to its dismissed employees. Pursuant to prevailing jurisprudence, Cathy Ng, in her capacity as manager and responsible officer of NYK, cannot be exonerated from her joint and several liability in the payment of monetary award to private respondent. WON Tan acted with malice/bad faith in ordering Timbals suspension is a question of fact submitted by the parties to the labor arbiter for resolution. The labor arbiter didnt make any such finding, nor did he hold Tan liable, either jointly or severally, with the company for the monetary award. Therefore, the alias writ of execution for said award should be directed only against the company and not against Tan, even though the latter was the General Manager, Tans real and personal property should not be burdened by such award. (Tan vs. Timbol) Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their official acts, because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders and members. However, this fictional veil may be pierced whenever the corporate personality is used as a means of perpetuating fraud or an illegal act, evading an existing obligation, or confusing a legitimate issue. In cases of illegal dismissal, corporate directors and officers are solidarily liable with the corporation, where terminations of employment are done with malice or in bad faith. Here, bad faith or malice was not proven. (Acesite Corp. vs. NLRC) dismissal with prayer for damages and attorney's fees. She claimed that respondent told her to tender her resignation as she was not the person whom Scandinavian Airline System (SAS) was looking for to handle the position of Sales Manager but that she refused, hence, she was terminated. The Supreme Court held that the respondent was illegally dismissed. Indeed, petitioner was deprived of due process and denied "basic precepts of fairness" when she was terminated. Her resultant sufferings thus entitle her to an award of moral damages. To warrant award of moral damages, it must be shown that the dismissal of the employee was attended to by bad faith, or constituted an act opposite to labor, or was done in a manner contrary to morals, good customs or public policy. Award of moral and exemplary damages for an illegally dismissed employee is proper where the employee had been harassed and arbitrarily terminated by the employer. In determining the amount of moral damages recoverable, however, the business, social and financial position of the offended party and the business or financial position of the offender are taken into account. Given petitioner's business position or standing before and at the time of termination and petitioner's business and financial position, this Court reduces the amount of moral damages awarded to P500,000.00 which it finds reasonable. The amount of exemplary damages awarded is accordingly reduced too to P250,000.00.

14.12 DAMAGES Moral/Exemplary Villas is not entitled to moral and exemplary damages and atty.s fees because there is no showing that bad faith and malice attended her dismissal. Moral damages are recoverable only where the dismissal is attended by bad faith or fraud, or constitutes an act oppressive to labor, or is done contrary to morals, good customs or public policy. A dismissal may be contrary to law, but by itself alone, it does not necessarily establish bad faith. (Collegio de San Juan de Letran-Calamba vs. Villas)

Asia Pacific Chartering vs. Farolan (Heidi) Facts: APC terminated the employment of Farolan on ground of loss of trust and confidence in her managerial and marketing capabilities due to the company's alleged dismal performance during her term of office as SAS Sales Manager. Thus, Farolan filed a complaint for illegal

Viernes vs NLRC (Dianne) Facts: Private respondent electric cooperative hired petitioners as meter readers from October 8 to 21, 1990. Despite the expiration of their employment contract, petitioners were allowed by the private respondent to work until January 2, 1991. On January 3, 1991, private respondent terminated petitioners' employment. Thus, petitioners separately filed complaints for illegal dismissal, underpayment of wages and claim for indemnity against private respondent. Petitioners contended that they were not apprentices but regular employees whose services were illegally and unjustly terminated in a manner that was whimsical and capricious. On the other hand, private respondent invoked Article 283 of the Labor Code. The Labor Arbiter dismissed the complaints. On appeal, the NLRC modified the Labor Arbiter's judgment and declared petitioners' dismissal illegal, ordered their reinstatement to their former position or to any equivalent position with payment of backwages limited to one year and deleted the award of indemnity and attorney's fees. Hence, this petition for certiorari. Petitioners alleged that the NLRC committed grave abuse of discretion in ordering their reinstatement to their former position on probationary basis, in limiting the backwages to one year and in deleting the award of indemnity and attorney's fees.

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 59

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Held: The Supreme Court held that petitioners should be reinstated to their former position as meter readers, not on a probationary status, but as regular employees. It held that after October 31, 1990, the employment of petitioners is no longer on a fixed term basis. With the continuation of their employment beyond the original term, petitioners have become full-fledged regular employees. According to the Court, the fact that the petitioners were allowed to continue working after the expiration of their employment contract was evidence of the necessity and desirability of their service to private respondent's business. Moreover, the fact alone that petitioners have rendered service for a period of less than six months does not make their employment status as probationary. Considering that petitioners were already regular employees at the time of their illegal dismissal from employment, they were, therefore, entitled to be reinstated to their former position as regular employees, not merely probationary. Accordingly, the Court held that petitioners are entitled to full backwages, inclusive of allowances and to their other benefits or their monetary equivalent computed from the time their compensation was withheld from them up to the time of their actual reinstatement. Moreover, petitioners are entitled to indemnity for failure of private respondent to comply with the requisite notice in violation of petitioners' right to due process. The Court also awarded attorney's fees to the petitioners pursuant to the provisions of Article 111 of the Labor Code. An employer becomes liable to pay indemnity to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The indemnity is in the form of nominal damages intended not to penalize the employer but to vindicate or recognize the employee's right to procedural due process which was violated by the employer. Under Article 2221 of the Civil Code, nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Held: The Supreme Court affirmed the appealed decision. Petitioner's action was recovery of damages based on a quasi-delict or tort, not adjudication of a labor dispute to which jurisdiction of labor tribunals is limited. Petitioner is actually suing shipmates Garate and Asis for gross negligence, and the said shipmates have no employer-employee relations with Capt. Tolosa. While labor arbiters and the NLRC have jurisdiction to award not only relief provided by labor laws, but also damages under the Civil Code, these relief must still be based on an action that has reasonable causal connection with matters. As a rule, labor arbiters and the National Labor Relations Commission have no power or authority to grant reliefs from claims that do not arise from employer-employee relations. They have no jurisdiction over torts that have no reasonable causal connection to any of the claims provided for in the Labor Code, other labor statutes, or collective bargaining agreements. It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the employer-employee relation is merely incidental, and in which the cause of action proceeds from a different source of obligation such as a tort. Since petitioner's claim for damages is predicated on a quasi-delict or tort that has no reasonable causal connection with any of the claims provided for in Article 217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies with the regular courts not with the NLRC or the labor arbiters. It must be noted that a worker's loss of earning capacity and blacklisting are not to be equated with wages, overtime compensation or separation pay, and other labor benefits that are generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting from a quasi-delict or a similar cause within the realm of civil law. "Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection with any of the claims provided for in the article in order to be cognizable by the labor arbiter. Only if there is such a connection with the other claims can the claim for damages be considered as arising from employeremployee relations." In the present case, petitioner's claim for damages is not related to any other claim under Article 217, other labor statutes, or collective bargaining agreements. Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or specify a claim or relief. This provision is only a safety and health standard under Book IV of the same Code. The enforcement of this labor standard rests with the labor secretary. Thus, claims for an employer's violation thereof are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor standard provided for in Article 161 by suing for damages

Tolosa vs. NLRC (Dianne) Facts: Petitioner was the widow of Capt. Virgilio Tolosa who was hired by Qwana-Kaiun, through its manning agent, Asia Bulk, to be the master of the Vessel named M/V Lady Dona. While in command of the vessel, Capt. Tolosa contracted a fever and in the succeeding 12 days, his health rapidly deteriorated resulting in his death. When petitioner filed a complaint with the POEA, transferred to the DOLE, NLRC, the Labor Arbiter ruled in her favor. The NLRC, affirmed by the Court of Appeals, however, ruled that the labor commission had no jurisdiction over the subject matter filed by petitioner. Hence, this appeal.

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 60

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before the labor arbiter. Maquiling vs Philippine Tuberculosis Society (Dianne) Facts: On 16 April 1968, petitioner Dr. Maquiling was employed by respondent Philippine Tuberculosis Society, Inc. (PTS). On 8 June 1991, Dr. Maquiling, then earning a monthly salary of thirteen thousand nine hundred pesos (P13,900.00) was dismissed from service as Deputy Executive Director after serving PTS for twenty-three (23) years. Dr. Maquiling filed a complaint against PTS for reinstatement or, in the alternative, for payment of full backwages and separation pay in accordance with Article 279 of the Labor Code, as well as moral damages in the amount of five hundred thousand pesos (P500,000.00) and exemplary damages in the amount of one hundred thousand pesos (P100,000.00). Held: After careful perusal of the factual backdrop of the case, the Supreme Court ruled that Dr. Maquiling was indeed validly dismissed for just cause. However, PTS was remiss in its duty to observe procedural due process in effecting the dismissal of Dr. Maquiling. Where the dismissal is for just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer. The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. It may be also argued that actual or compensatory damages may be recovered in employment termination cases. Actual or compensatory damages are not available as a matter of right to an employee dismissed for just cause but denied statutory due process. The award must be based on clear factual and legal bases and correspond to such pecuniary loss suffered by the employee as duly proven. Evidently, there is less degree of discretion to award actual or compensatory damages. Neither will an award for moral damages nor exemplary damages prosper. The instant controversy fails to show that the dismissal of the employee was attended by bad faith, fraud, or was done in a manner contrary to morals, good customs or public policy, or that the employer committed an act oppressive to labor to warrant an award for moral damages. Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner to warrant an award for exemplary damages. Hence, Dr. Maquiling shall only be entitled to an award for nominal damages. This Court has consistently accorded the working class a right to recover damages for dismissals tainted with bad faith. The award of such damages is based not on the Labor Code but on Article 2220 of the Civil Code. Indeed, moral damages are recoverable when the dismissal of an employee 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. Exemplary damages may be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner. Bad faith on the part of petitioners may be gleaned from the fact that they transferred the private respondents to two employment agencies just so they could evade their legal responsibility as employers to accord them the status and benefits of regular employees under the Labor Code. The dismissal, no doubt, was effected in a wanton, oppressive or malevolent manner as the private respondents were deprived of due process. Thus, the amount of P10,000.00 as moral damages and P5,000.00 as exemplary damages are hereby awarded to each private respondent. (Kay Products vs. CA) Gonzales is not entitled to moral and exemplary damages. Moral damages are recoverable only where the dismissal of the employees was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy. Exemplary damages on the other hand may be awarded only if the dismissal was effected in a wanton, oppressive or malevolent manner. Such were not sufficiently proven. (Acesite Corp. vs. NLRC)

Sagum vs CA (Dianne) Facts: The instant case arose from the complaint of petitioner for illegal dismissal against private respondents Institute of Integrated Electrical Engineers of the Philippines, Inc. (IIEE), Engrs. Edward L. Mendoza, Amador C. Calado, Jr., Antonio S. Herrera, Jr., and Fe M. Barrientos. Petitioner Marilyn T. Sagum is another hapless employee whose dismissal was ruled to be illegal but, without her reinstatement forthcoming, is still on the outside looking in. Held: The Supreme Court rejected petitioner's claim for moral and exemplary damages. In the case at bar, we are not convinced that private respondents acted in a wanton or oppressive manner. The measures undertaken were relevant to the company-wide audit and investigation conducted within the institute. The suspension of petitioner without prior investigation is akin to

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 61

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preventive suspension which was necessary pending investigation of company records which she had access to. Nor can the posting of security guards inside the petitioner's room while the on-the-spot accounting was being conducted and the inspection of her bag and personal effects in the presence of her subordinates be characterized as oppressive. Despite the presence of security guards, petitioner did not even allege that there was use of force, abusive language or any species of violence. Lastly, we do not find the articles published in private respondent institute's publication, The Electrical Engineer, to be malicious as they were fact-based. The award of moral and exemplary damages is proper when an illegally dismissed employee had been harassed and arbitrarily terminated by the employer, as when the latter committed an antisocial and oppressive abuse of its right to investigate and dismiss an employee. The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes good faith. It is not enough that one merely suffered sleepless nights, mental anguish or serious anxiety as the result of the actuations of the other party. latter under the Labor Code and its Implementing Rules. The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.

Nominal Damages Central Luzon Conference Corporation of SeventhDay Adventist Church vs CA (Dianne) Facts: Respondent Federico Cabanit was a sales representative of petitioner Central Luzon Conference Corporation of Seventh-Day Adventist Church, Inc. After six months, he became its regular employee, assigned to the accounting department. Promoted, he became branch manager from 1981 to 1990, and auditor from 1990 to 1996. On June 11, 1997, respondent Cabanit was informed that he erred in recording US$40 and was later suspended from July 1-31, 1997 but the suspension was rescinded and he was assigned as general auditor. Subsequently, he was required to appear before petitioner corporation's office and its Executive Committee pursuant to two letters. He was placed under preventive suspension on October 16, 1997 and required to explain in 15 days why he should not be dismissed due to irregularities committed. He requested copies of pertinent documents to enable him to explain his side but petitioner corporation allegedly did not oblige. On November 18, 1997, petitioner corporation, through an EXECOM meeting, adopted a resolution terminating his employment effective October 16, 1997. Held: Considering the prevailing circumstances in the case at bar, the Supreme Court deemed it proper to fix the nominal damages at P30,000.00. It was believed that this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the

Section 15. Retirement ART. 287. Retirement. - Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employees retirement benefits under any collective bargaining and other agreements shall not be less than those provided therein. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves. Retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers are exempted from the coverage of this provision. Violation of this provision is hereby declared unlawful and subject to the penal provisions under Article 288 of this Code. Book VI, Rule II, Omnibus Rules Rule II Retirement Benefits SECTION 1. General Statement on coverage. This rule shall apply to all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those specifically exempted under Section 2 hereof. As used herein, the term Act shall refer to Rep. Act No. 7641 which took effect on Jan. 7, 1993. SEC. 2. Exemptions. This rule shall not apply to the following employees:

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2.1 Employees of the National Government and its political subdivisions, including GOCCs if they are covered by the Civil Service Law and its regulations. 2.2 Domestic helpers and persons in the personal service of another. (Deleted by D.O. No. 20, series of 1994) 2.3 Employees of retail, service and agricultural establishment or operations regularly employing not more than ten (10) employees. As used in this subsection: a) Retail establishment is one principally engaged in the sale of goods to end-users for personal or household use. It shall lose its retail character qualified for exemption if it is engaged in both retail and wholesale of goods. b) Service establishment is one principally engaged in the sale of service to individuals for their own or household use and is generally recognized as such. c) Agricultural establishment/operations refers to an employer which is engaged in agriculture. This term refers to all farming activities in all its branches and it includes, among others, the cultivations and tillage of the soil, production, cultivation, growing and harvesting of any agricultural or horticultural commodities, dairying, raising of livestock or poultry, the culture of fish and other aquatic products in farms or ponds, and any activities performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, but does not include the manufacture and/or processing of sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products. SEC. 3. Retirement under CBA/contract. 3.1 Any employee may retire or be retired by his employer upon reaching the retirement age established in the CBA or other applicable employment contract or retirement plan subject to the provisions of Section 5 hereof on the payment of retirement benefits. 3.2 In case of retirement under this section, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any CBA and other agreements: Provided, however, That an employees retirement benefits under any CBA and other agreements shall not be less than those provided under this Rule, and Provided, further, That if such benefits are less, the employer shall pay the difference b/w the amount due the employer under this Rule and that provided under the collective/individual agreement or retirement plan. 3.3 Where both the employer and the employee contribute to a retirement fund in accordance with an individual/collective agreement or other applicable employment contract, the employers total contribution thereto shall not be less than the total retirement benefits to which the employee would have been entitled had there been no such retirement fund. In case the employers contribution is less than the retirement benefits provided under this Rule, the employer shall pay the deficiency. SEC. 4. Optional, compulsory retirement. 4.1 Optional retirement. - In the absence of a retirement plan or other applicable agreement providing for retirement benefits of employees in an establishment, an employee may retire upon reaching the age of sixty (60) years or more if he has served for at least five (5) years in said establishment. 4.2 Compulsory retirement. Where there is no such plan or agreement referred to in the immediately preceding subsection, an employee shall be retired upon reaching the age of sixty-five (65) years. 4.3 Upon retirement of an employee, whether optional or compulsory, his services may be continued or extended on a case to case basis upon agreement of the employer and employee. 4.4 Service requirement. - The minimum length of service in an establishment or an with an employer of at least 5 years required for entitlement to retirement pay shall include authorized absences and vacations, regular holidays and mandatory fulfillment of a military or civic duty. SEC. 5. Retirement benefits. 5.1 In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half () month salary for every year of service, a fraction of at least 6 months being considered as one whole year. 5.2 Components of One-half () Month Salary- For the purpose of determining the minimum retirement pay due an employee under this Rule, the term one-half month salary shall include all the ff.: a) 15 days salary of the employee based on his latest salary rate. As used herein, the term salary includes all remunerations paid by an employer to his employees for services rendered during normal working days and hours, whether such payments are fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of food, lodging, or other facilities customarily furnished by the employer to his employees. The term does not include cost of living allowance, profit-sharing payments and other monetary benefits which are not considered as part of or integrated into the regular salary of the employees. b) The cash equivalent of not more than five (5) days of service incentive leave. c) One-twelfth of the 13th month pay due the employee. d) All other benefits that the employer and employee may agree upon that should be included in the computation of the employees retirement pay. 5.3 One-half month salary of employees who are paid by results. For covered workers who are paid by results and do not have a fixed monthly rate, the basis for determination of the salary for 15 days shall be their average daily salary (ADS), subject to the provisions of Rule VII-A, Book III of the Rules Implementing the Labor Code on the payment of wages of workers who

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 63

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are paid by results. The ADS is the average salary for the last twelve (12) months reckoned from the date of their retirement, divided by the number of actual working days in that particular period. SEC. 6. Exemption from tax. The retirement pay provided in the Act may be exempted from tax if the requirements set by the BIR under Sec. 2(b) item (1) of Revenue Regulations No. 12-86 dated Aug. 1, 1986 are met, to wit: Pensions, retirement and separation pay.- Pensions, retirement and separation pay constitute compensation subject to withholding, except the following: a) Retirement benefits received by officials and employees of private firms under a reasonable private benefit plan maintained by the employer, if the following requirements are met: i) The benefit plan must be approved by the BIR; ii) The retiring official or employee must have been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of retirement; and iii) The retiring official/employee shall not have previously availed of the privilege under the retirement benefit plan of the same or another employer. SEC. 7. Penal Provision. It shall be unlawful for any person or entity to circumvent or render ineffective the provisions of the Act. Violations thereof shall be subject to the penal provisions provided under Art. 288 of the Labor Code of the Philippines. SEC. 8. Relations to agreements and regulations. Nothing in this Rule shall justify an employer from withdrawing or reducing any benefits, supplements or payments as provided in existing laws, individual/collective agreements or employment practices or policies. All rules and regulations, policy issuances or orders contrary or inconsistent with these rules are hereby repealed or modified accordingly. SEC. 9. Effectivity. This rule took effect on January 7, 1993 when the Act went into force. Rule II-A (Dep. Order No. 9 dated May 4, 1998) SEC. 1 Coverage. This Rule shall apply to all underground mine employees as contemplated under RA No. 8558. For these purpose, an underground mine employee refers to any person employed to extract mineral deposits underground or to work in excavations or workings such as shads, winzes, tunnels, drifts, crosscuts, raises, working places whether abandoned or in use beneath the earths surface for the purpose of searching for and extracting mineral deposits. As used herein, the terms employee, employees, or covered workers shall mean underground mine employee/s. The term Act refers to RA 7641 as amended by RA 8558. SEC. 2. Optional Retirement and Compulsory Retirement 2.1 Optional retirement. - In the absence of a retirement plan or other applicable agreement providing for retirement benefits of underground mine employees in the establishment, any such employee may retire upon reaching the age of sixty (50) years or more if he has served for at least five (5) years as underground mine employee or in underground mine of the establishment. 2.2 Compulsory retirement. Where there is no such plan or agreement referred to in the immediately preceding subsection, an underground mine employee shall be retired upon reaching the age of sixty-five (65) years. 2.3 Service requirement. - The minimum length of at least 5 years required for entitlement to retirement pay shall include authorized absences and vacations, holidays and mandatory fulfillment of a military or civic duty. SEC. 3. Retirement under CBA/contract. 3.1 Any underground mine employee may retire or be retired by his employer upon reaching the retirement age established in the CBA or other applicable employment contract, subject to the provisions of Section 4 hereof on the payment of retirement benefits. 3.2 In case of retirement under this section, the underground mine employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any CBA and other agreements: Provided, however, That the said employees retirement benefits under any CBA and other agreements shall not be less than those provided under this Rule, and Provided, further, That if such benefits are less, the employer shall pay the difference b/w the amount due the employer under this Rule and that provided under the CBA or other applicable employment contract. 3.3 Where both the employer and the employee contribute to a retirement fund in accordance with CBA or other applicable employment contract, the employers total contribution thereto shall not be less than the total retirement benefits to which the employee would have been entitled had there been no such retirement fund. In case the employers contribution is less than the retirement benefits provided under this Rule, the employer shall pay the deficiency. SEC. 4. Retirement benefits. 4.1 In the absence of an applicable employment contract, an underground mine employee who retires pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half () month salary for every year of service, a fraction of at least 6 months being considered as one whole year. 4.2 Components of One-half () Month Salary- For the purpose of determining the minimum retirement pay due an employee under this Rule, the term one-half month salary shall include all the ff.: a) 15 days salary of the employee based on his latest salary rate. As used herein, the term salary includes all remunerations paid by an employer to his employees for services rendered during normal working days and

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 64

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hours, whether such payments are fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of food, lodging, or other facilities customarily furnished by the employer to his employees. The term does not include cost of living allowance, profit-sharing payments and other monetary benefits which are not considered as part of or integrated into the regular salary of the employees. b) The cash equivalent of five (5) days of service incentive leave. c) One-twelfth of the 13th month pay due the employee. d) All other benefits that the employer and employee may agree upon that should be included in the computation of the employees retirement pay. 4.3 One-half month salary of employees who are paid by results. For covered workers who are paid by results and do not have a fixed monthly rate, the basis for determination of the salary for 15 days shall be their average daily salary (ADS), subject to the provisions of Rule VII-A, Book III of the Rules Implementing the Labor Code on the payment of wages of workers who are paid by results. The ADS is the twelve (12) month of their retirement, of actual working period. SEC. 5. Exemption from tax. The retirement pay provided in the Act may be exempted consistent with the requirements set by the BIR. SEC. 6. Penal Provision. It shall be unlawful for any person or entity to circumvent or render ineffective the provisions of the Act. Violations thereof shall be subject to the penal provisions provided under Art. 288 of the Labor Code of the Philippines. SEC. 8. Relations to agreements and regulations. Nothing in this Rule shall justify an employer from withdrawing or reducing any benefits, supplements or payments as provided in existing laws, individual/collective agreements or employment practices or policies. All rules and regulations, policy issuances or orders contrary or inconsistent with these rules are hereby repealed or modified accordingly. SEC. 9. Effectivity. This rule took effect on March 2, 1998 when the RA 8558 went into force. bargaining agreement or other applicable employment contract. "In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employee's retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein. "In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. "Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves. "An underground mining employee upon reaching the age of fifty (50) years or more, but not beyond sixty (60) years which is hereby declared the compulsory retirement age for underground mine workers, who has served at least five (5) years as underground mine worker, may retire and shall be entitled to all the retirement benefits provided for in this Article. "Retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers are exempted from the coverage of this provision. "Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under Article 288 of this Code. "Nothing in this Article shall deprive any employee of benefits to which he may be entitled under existing laws or company policies or practices." SECTION 2. This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national papers of general circulation, whichever comes earlier. Approved: February 26, 1998 Published in Malaya and Manila Times on March 7, 1998. 15.01 Retirement REPUBLIC ACT NO. 8558 AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES BY REDUCING THE RETIREMENT AGE OF UNDERGROUND MINE WORKERS FROM SIXTY (60) TO FIFTY (50) SECTION 1.Article 287 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is hereby amended to read as follows: "ART. 287.Retirement. Any employee may be retired upon reaching the retirement age established in the collective Definition Ariola vs Philex Mining Corp. (Dianne) Facts: Petitioners Roberto Ariola, Franco Mallare, Benjamin Biete and Hermogenes Mamayson ("petitioners") are former supervisors of respondent Philex Mining Corporation ("Philex"). In 1992, Philex sustained financial losses in its operations. To save costs, Philex adopted several measures including reducing personnel through early voluntary retirement and retrenchment programs. A workforce audit showed that

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Philex had 310 "excess positions." Philex re-assigned some of the employees belonging to this group while others took early retirement, leaving 241 positions for retrenchment. On 29 April 1993, Philex and the labor union representing the rank-and-file employees signed a Memorandum of Agreement ("rank-and-file's MOA") prescribing the criteria for retrenchment. The following day, 30 April 1993, the union representing the supervisory employees also signed a Memorandum of Agreement ("supervisors' MOA") with Philex similarly prescribing the criteria for retrenchment. On 14 May 1993, Philex informed the Department of Labor and Employment ("DOLE"), Cordillera Administrative Region, Baguio City, of its plan to retrench 241 employees. On 1 June 1993, petitioners, with six other supervisors and 49 rank-and-file employees, received from Philex termination notices informing them of their retrenchment under their respective MOAs effective 30 June 1993. Philex paid them separation pay. All of them signed Deeds of Release and Quitclaim in Philex's favor. Held: Petitioners' retrenchment was illegal. Article 283 of the Labor Code governs retrenchment to prevent losses. Petitioners are thus entitled to reinstatement with full backwages. However, the amounts petitioners received as net separation pay should be deducted from their backwages. If reinstatement is no longer possible because the positions petitioners held no longer exist, Philex shall pay backwages as computed above plus, in lieu of reinstatement, separation pay equal to one-half month pay for every year of service. In the present case, Philex's financial condition before and at the time of petitioners' retrenchment justified petitioners' retrenchment. An independent auditor confirmed Philex's claim of financial losses, finding that Philex suffered an operational loss of P33,743,000 in 1992. This ballooned to P283,173,000 in 1993, beyond Philex's projected loss of P187 million. Thus, Philex could ill afford to experiment with other cost-cutting measures before resorting to retrenchment as the situation called for immediate and drastic action. By themselves, the vouchers in question, which allegedly evidence receipt of retirement gratuities, do not suffice brief exchange of letters between petitioner and respondent followed. Petitioner emphatically insisted that the compulsory retirement under the plan was tantamount to a dismissal and pleaded with respondent to be allowed to work until the age of 60 because this was the minimum age at which she could qualify for SSS pension. But respondent stood pat on its decision to retire her, citing "company policy." Held: Retirement plans allowing employers to retire employees who are less than the compulsory retirement age of 65 are not per se repugnant to the constitutional guaranty of security of tenure. Article 287 of the Labor Code provides: ART. 287. Retirement Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. . . . By its express language, the Labor Code permits employers and employees to fix the applicable retirement age at below 60 years. However, after reviewing the assailed decision together with the rules and regulations of respondent's retirement plan, we find that the plan runs afoul of the constitutional guaranty of security of tenure contained in Article XIII, also known as the provision on Social Justice and Human Rights. At this point, reinstatement is out of the question. Petitioner is now 71 years old and therefore well over the statutory compulsory retirement age. For this reason, we grant her separation pay in lieu of reinstatement. It is also for this reason that we modify the award of backwages in her favor, to be computed from the time of her illegal dismissal on November 18, 1993 up to her compulsory retirement age. Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age agrees to sever his or her employment with the former. As already stated, an employer is free to impose a retirement age less than 65 for as long as it has the employees' consent. Stated conversely, employees are free to accept the employer's offer to lower the retirement age if they feel they can get a better deal with the retirement plan presented by the employer. Thus, having terminated petitioner solely on the basis of a provision of a retirement plan which was not freely assented to by her, respondent was guilty of illegal dismissal.

Jaculbe vs Silliman University (Dianne) Facts: Sometime in 1958, petitioner began working for respondent's university medical center as a nurse. In a letter dated December 3, 1992, respondent, through its Human Resources Development Office, informed petitioner that she was approaching her 35th year of service with the university and was due for automatic retirement on November 18, 1993, at which time she would be 57 years old. This was pursuant to respondent's retirement plan for its employees which provided that its members could be automatically retired "upon reaching the age of 65 or after 35 years of uninterrupted service to the university." Respondent required certain documents in connection with petitioner's impending retirement. A

Types Gerlach vs Reuters Limited (Dianne) Facts: On February 15, 1982, respondent Reuters Limited, Phils. (Reuters), a company engaged in news dissemination with offices worldwide, hired Marilyn Odchimar Gerlach, petitioner, as its local correspondent. On October 1, 1983, respondent Reuters implemented a

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local Retirement Benefit Plan (Plan) for its Philippinehired employees. The Plan is funded by the company, but an employee-participant may volunteer to contribute a percentage of his basic monthly salary to the fund. Petitioner was automatically covered by the Plan by reason of her age and length of service. However, she opted not to contribute to the fund. She worked in Reuters Philippines up to December 23, 1983. On January 23, 1984, respondent assigned petitioner as a journalist to Reuters Singapore. Before leaving, Rachel Addison, Reuters' Eastern Region Staff Manager, apprised her of the details of her forthcoming assignment, specifically that her home base will always be the Philippines. On March 1, 1991, petitioner received her retirement benefits under the Plan in the amount of P79,228.04, which amount was determined by the trustee bank (Bank of the Philippine Island) in accordance with the provisions of the Plan. The computation was based on her notional salary. However, she questioned the amount she received as well as her entitlement to a disturbance grant, contending that her retirement benefits must be computed on the basis of her actual salary abroad, not on her notional salary. Eventually, petitioner filed with the Office of the Labor Arbiter, NCR, a money claim against respondent. Held: We agree with the Court of Appeals that petitioner's retirement benefits must be based on her notional Philippine salary. It is very clear that from the very start of her first assignment overseas, respondent apprised her that the company's contribution to the Plan is based on her notional Philippine salary. In fact, under the Plan, the company's contribution to the fund is 10% of the basic monthly salary of each participant. Respondent also informed petitioner of the amount of her notional Philippine salary whenever she was transferred to her next overseas assignment or when there were increases in her salary, both actual and notional. Significantly, respondent was able to prove that it has been its practice worldwide that the notional salary of an employee is its basis in computing its contribution to the retirement plan for a local employee detailed abroad. It follows that the amount of retirement benefits of a retiring employee assigned abroad is based on his notional salary. There are three kinds of retirement schemes. The first type is compulsory and contributory in character. The second type is one set up by agreement between the employer and the employees in collective bargaining agreements or other agreements between them. The third type is one that is voluntarily given by the employer, expressly as in an announced company policy or impliedly as in a failure to contest the employee's claim for retirement benefits. It is this third type of retirement scheme which covers respondent's Plan. Article 287 of the Labor Code reads: "Article 287. Retirement. Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements." The first paragraph of the above provisions deals with the retirement age of an employee established in (a) a collective bargaining agreement or (b) other applicable employment contract. The second paragraph deals with the retirement benefits to be received by a retiring employee which he may have earned under (a) an existing law, (b) a collective bargaining or (c) other agreements. In Llora Motors, Inc. vs. Drilon, it was held that Article 287 does not in itself purport to impose any obligation upon employers to set up a retirement scheme for their employees over and above that already established under existing laws, like the Social Security Act. Nonetheless, Section 14(a), Rule 1 of the Rules and Regulations Implementing Book VI of the Labor Code, provides: "Sec. 14. Retirement benefits. (a) An employee who is retired pursuant to a bona fide retirement plan or in accordance with the applicable individual or collective agreement or established employer policy shall be entitled to all the retirement benefits provided therein . . ." Thus, in the instant case, respondent based petitioner's retirement benefits on its Plan and established policy, which is in accord with the above provision. Consequently, petitioner's theory that the computation of her retirement benefits should be based on her basic annual salary while stationed abroad is untenable. Basis Aquino vs. NLRC (Monina) Facts: The petitioners services were terminated on the ground of retrenchment, and they received separation pay double that required by the Labor Code. Thereafter, they demanded retirement benefits, invoking the retirement plan of the company which they said was contractual rather than statutory. Issue: Having received the separation pay, were the petitioners still entitled to the retirement benefits? Held: Yes. Separation pay is required in the cases enumerated in Articles 283 and 284 of the Labor Code, which include retrenchment, and is computed at least one month salary or at the rate of one-half month salary for every year of service, whichever is higher. We have held that it is a statutory right designed to provide the employee with the wherewithal during the period that he is looking for another employment. Retirement benefits, where not mandated by law, may be granted by agreement of the employees and their employer or as a voluntary act on the part of the employer. Retirement benefits are intended to help the employee enjoy the remaining years of his

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life, lessening the burden of worrying for his financial support, and are a form of reward for his loyalty and service to the employer. If there is no provision contained in the collective bargaining agreement to the effect that benefits received under the Termination Pay Law shall preclude the employee from receiving other benefits from the agreement, then said employee is entitled to the benefits embodied in the agreement in addition to whatever benefits are mandated by statute. In the case at bar, there is no such provision. We cannot presume that it forms an implicit part of either the CBA or the law. Separation pay arising from a forced termination of employment and benefits given as a contractual right due to many years of faithful service are not necessarily antagonistic to each other, especially where there are strong equitable considerations as in this case. Gamogamo vs. PNOC Shipping and Transport Corp (Monina) Facts: Gamogamo was first employed with DOH (as dentist) for 14 years. Afterwhich he was hired by LUSTEVECO, a private domestic corporation. Subsequently, PNOC acquired and took over the shipping business of LUSTEVECO. When a manpower reduction was implemented, petitioner requested to be included in the retrenchment schedule. It was turned down. When he was about to retire petitioner filed a complaint for the full payment of his retirement benefits and for an accumulated service of 32 years to the government. Issue: whether, for the purpose of computing an employees retirement pay, prior service rendered in a government agency can be tacked in and added to the creditable service later acquired in a government-owned and controlled corporation without the original charter Held: No. Since the retirement pay solely comes from PNOCs funds, it is but natural that PNOC shall disregard petitioners length of service in another company for the computation of his retirement benefits. We cannot uphold petitioners contention that his 14 years of service with the DOH should be considered because his last 2 employers were GOCCs and fall under the Civil Service Law. In addition, the totalization principle in RA 7699 cannot be availed of because it is resorted to only when retiree does not qualify for benefits in either or both the SSS and GSIS. Here, petitioner is qualified to receive benefits granted by the GSIS by his employment in DOH. 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. 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. Retirement (benefits) result from voluntary agreement between the employees and the employer whereby the former, after reaching a certain age, agrees to sever his employment with the latter. Creditable service referred to in the retirement plan is the retirees continuous years of service with the company. Since retirement pay solely comes from company funds in this case, it is but natural that it should disregard Gamogamos service in another company for the computation of his retirement benefits.

Interpretation Lopez vs. National Steel Corp (Monina) Facts: National Steel Corporation embarked on 2 massive projects, the 5-year expansion program and the Integrated Steel Mill Project. Consequently, corporation employed employees and of them was Divina Lopez. When the corporation suffered losses, issued a memo announcing retrenchment and one of the affected employees was Lopez. Issues: whether Lopez is entitled to retirement benefits even though at the time of the retrenchment she has not yet reached the mandatory retirement age; whether the retirement plan expressly prohibits the payment of retirement benefits to employees terminated for cause Held: No. E. Resignations and Terminations. No retirement benefits are payable in instances of resignations or terminations for a cause; provided, however, that an employee who resigns voluntarily after he has qualified for optional early retirement under Art. IV, B 2, or 3 shall be deemed to have opted to avail of such early retirement and paid the applicable and corresponding retirement pay/benefit provided therein. All terminations other than for cause will be governed by the applicable provision of the Labor Code of the Philippines. Although the CBA is silent as regards the grant or denial of retirement benefits to retrenched employees, the retirement plan is succinct in denying such benefits. The provisions of the NSC's retirement plan which petitioner admitted applies to her, ostensibly, does not give petitioner the right to her claimed benefits. With the inclusion of the provision abovementioned in the retirement plan, the NSC explicitly disallows payment of retirement benefits in case of retrenchment. There is, thus, no necessity of expressly providing that retirement pay and retrenchment pay are mutually exclusive. The retirement plan is a binding agreement, not being contrary to law, morals, good customs, public order or public policy and must, therefore, be upheld. While it is our duty to prevent the exploitation of employees, it also behooves us to protect the sanctity of contracts that do

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not contravene our law. Retirement laws are to be liberally construed in favor of the persons intended to be benefited. However, such interpretation cannot be made here, in light of clear lack of consensual and statutory basis of the grant of retirement benefits to the petitioners. No provision in the CBA authorizes the grant to petitioners of retirement benefits in addition to their retrenchment pay, and there is no reason to invalidate their Releases and Quitclaims. Age MAI Phils. vs. NLRC (Monina) Facts: Mai Philippines dismissed its Custom Engineering Manager Rodolfo Nolasco. This dismissal was held to be illegal and it was declared that Nolasco be reinstated. Given such facts, it is worthy to note that the company failed to comply to such judgment by arguing that there is no substantially equivalent position anymore and instead offered to give separation pay in accordance with law. It is also noteworthy that at the time of the filing of the second complaint Nolasco was already 60 years old. Issue: whether or not Nolasco is entitled to retirement benefits Held: No. Yet a serious mistake, amounting to grave abuse of discretion, may be ascribed to the Commission; and that is, its refusal, or neglect to consider the fact again quite plain from the record and to which MAI had adverted more than once that the matter of Nolasco's reinstatement had become moot and academic at the time that he filed his second action before the labor arbiters' office against MAI on August 16, 1982; for as of that day, he had already reached the age of 60 years, which is the retirement age fixed by the Labor Code. Nolasco reached the compulsory retirement age of 60 years set by the Labor Code; and Nolasco's claim that under MAI's retirement plans, specifically cited by him, the retirement age is 65 is wrong, because by the terms of those very same retirement plans invoked by him, the retirement age of 65 applied only to employees in the U.S.A. and Puerto Rico. Rationale Producers Bank vs. NLRC (Monina) Facts: At the time the controversy started, petitioner was placed by the Central Bank under a conservator for protecting its assets. It appears that when the private respondents sought the implementation of Section I, Article XI of the CBA regarding the retirement plan and Section 4, Article X thereof, pertaining to uniform allowance, the acting conservator of the petitioner expressed her objection to such plan, resulting in an impasse between the petitioner bank and the private respondent union. The deadlock continued for at least six months when the private respondent, to resolve the issue, decided to file a case against the petitioner for unfair labor practice and for flagrant violation of the CBA provisions. Issue: whether the CBA can still be implemented Held: Prescinding from the rationalization that a conservator cannot rescind a valid and existing contract and that the CBA is the law between the contracting parties, it is obvious that the conservator had no authority whatsoever to disallow the implementation of Quitclaims, they are no longer entitled to retirement benefits.

Salomon vs. Association of International Shipping Lines (Monina) Facts: When the Association of International Shipping Lines Inc. suffered substantial losses, it adopted an organizational streamlining program that resulted in retrenchment or termination from service of 17 workers. Petitioners then filed with the Labor Arbiter a complaint for payment of retirement benefits because they alleged that what each received was a separation pay and not retirement benefits. Issue: whether the grant of retirement benefits to petitioners as shown in their quitclaims precludes their availment of retirement benefits pursuant to the CBA Held: A perusal of the provision of petitioners' CBA on retirement readily shows that the same is optional on the employees who have served private respondent company for at least 15 years. It is a fact that petitioners were involuntarily separated from service and thus, under the law should be given separation pay. Private respondent thus, under the law should give separation pay. Private respondent company in its notice of termination to petitioners stated that the latter would receive their separation pay. The same however, did not materialize as petitioners questioned the propriety of their retrenchment before the NCMB. As a result of said complaint, petitioners instead of receiving their separation pay, only received their retirement benefits plus other benefits which represent the totality of their claims from private respondent company. The NLRC and the Labor Arbiter ruled that the amount received by petitioners as shown in their quitclaims represent all the retirement benefits due them. The Court will not disturb this finding for upon review of the said quitclaims, it is apparent that the amount is representative of all the claims of petitioners. While it is axiomatic that retirement laws are liberally construed in favor of the persons intended to be benefited, however, such interpretation cannot be made in this case in light of the clear lack of consensual and statutory basis of the grant of retirement benefits to petitioner. Here, petitioners were separated from the service for cause. Consequently, pursuant to the CBA, what each actually received is a separation pay. Accordingly and considering their Releases and

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Article XI, Section 1 and Article X, Section 4 of the CBA, especially considering that the ideals of social justice and protection of labor are guaranteed not only by the Labor Code, but more importantly by the fundamental law of the land. It bears repeating that apart from the nonimpairment clause, what is also well-settled, to the point of being trite, is the principle that when the conflicting interests of labor and capital are weighed on the scales of social justice, the dominant influence of the latter must be counter-balanced by the sympathy and compassion the law must accord the under-privileged worker. Issue: Petitioner asserts since the employees have retired, as a consequence of which no employee-employer relationship exists anymore between it and the employees, private respondent no longer had the personality to file the complaint for them. Held: Petitioner's contention in untenable. 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. The very essence of retirement is the termination of the employer-employee relationship. Hence, the retirement of an employee does not, in itself, affect his employment status especially when it involves all rights and benefits due to him, since these must be protected as though there had been no interruption of service. It must be borne in mind that the retirement scheme was part of the employment package and the benefits to be derived therefrom constituted, as it were, a continuing consideration for services rendered, as well as an effective inducement for remaining with the corporation. It is 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 his loyalty. When the retired employees were requesting that their retirement benefits be granted, they were not pleading for generosity but were merely demanding that their rights, as embodied in the CBA, be recognized. Thus, when an employee has retired but his benefits under the law or the CBA have not yet been given, he still retains, for the purpose of prosecuting his claims, the status of an employee entitled to the protection of the Labor Code, one of which is the protection of the labor union. Petitioner filed for optional retirement upon reaching the age of 60. However, the basis in computing his retirement benefits is his latest salary rate of P10,919.22 as the commissions he received are in the form of profit-sharing payments specifically excluded by the foregoing rules. As correctly ruled by public respondent NLRC, the "overriding commissions" paid to him by Universal Robina Corp. could not have been 'sales commissions' in the same sense that Philippine Duplicators paid its salesmen sales commissions. Unit Managers are not salesmen; they do not effect any sale of article at all. Therefore, any commission which they receive is certainly not the basic salary which measures the standard or amount of work of complainant as Unit Manager. Accordingly, the additional payments made to petitioner were not in fact sales commissions but rather partook of the nature of profit-sharing business. In fine, the commissions which petitioner received were not part of his salary structure but were profit-sharing payments and had no clear, direct or necessary relation to the amount of work he actually performed. The collection made by the salesmen from the sale transactions was the profit of private respondent from which petitioner had a share in the form of a commission. It may be argued that petitioner may have exerted efforts in pushing the salesmen to close more sale transactions; however, it is not the criterion which would entitle him to a commission, but the actual sale transactions brought about by the individual efforts of the salesmen. Brion vs. South Phil. Union Mission (Monina) Facts: Brion became a member of respondent church 7th Day Adventist Church (SDA) sometime in 1949 until 1983 when he retired. As was the practice of SDA, Brion was provided a monthly amount of retirement benefit. Sometime, Brion got into an argument with another pastor of SDA culminating in the establishment of a new religious group and enticing other SDA members to join. As such, he was excommunicated. Issue: Must the conditions for eligibility for retirement be met only at the time of retirement or are these conditions continuing ones which must be complied with even after one has retired? Held: The Court found for petitioner Brion, under the SDA's retirement plan, its benefits are designed for those who have devoted their lives to the work of the SDA, and these benefits shall terminate with the death of the beneficiary except in the presence of an eligible surviving spouse and/or children. However, the SDA insisted that an employee must devote his life to the work of the SDA even after retirement in order to continue enjoying retirement benefits. This negated the very concept of retirement, and the Court cannot give its imprimatur for retirement, must be met at the time of retirement at which juncture the right to retirement benefits, if the employee is eligible, vests on him. Here, Brion was adjudged by the SDA in 1983 to be qualified for retirement, such that when it began paying Brion retirement benefits in said

Eligibility Reyes vs. NLRC (Monina) Facts: Rogelio Reyes was employed as salesman at Universal Robinas Corporation Grocery Division. He eventually retired. Reyes did not agree with the computation of the company and hence filed a complaint. Issue: whether or not the average monthly sales commission should be included in the computation of his retirement benefits and 13th month pay Held: No

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year, it must have been convinced that Brion had devoted his life to the work of the SDA. Brion's excommunication and "disfellowship" was misplaced considering that he had already a vested right to receive the retirement benefits and the same is not a ground for termination of the retirement. It has been held that "pension and retirement plans create a contractual obligation in which the promise to pay benefits is made in consideration of the continued faithful service of the employee for the requisite period. In other words, before a right to retirement benefits or pension vests in an employee, he must have met the stated conditions of eligibility with respect to the nature of employment, age, and length of service. This is a condition precedent to his acquisition of rights. We rule that the conditions of eligibility for retirement must be met at the time of retirement at which juncture the right to retirement benefits or pension, if the employee is eligible, vests in him. Where two constructions of a retirement plan are possible, one of which requires the retiree to devote his life to the service of the church even after retirement, and the other of which sanctions the severance by the retiree of his employment thereto at retirement, this Court will not hesitate to adopt the latter interpretation. Ground Termination Cainta Catholic School v. Cainta Catholic School Employees Union (Oreo) Facts: A CBA was entered into by the school and the union on March of 1986, After the election of union officers the school retired some of its official who rendered atleast 20 years of service as stated in the CBA. The union filed a notice of strike and subsequently picketed in front of the school. We are impelled to reverse the Court of Appeals and affirm the validity of the termination of employment of Llagas and Javier, arising as it did from a management prerogative granted by the mutuallynegotiated CBA between the School and the Union. Pursuant to the existing CBA, 25 the School has the option to retire an employee upon reaching the age limit of sixty (60) or after having rendered at least twenty (20) years of service to the School, the last three (3) years of which must be continuous. Retirement is a different specie of termination of employment from dismissal for just or authorized causes under Articles 282 and 283 of the Labor Code. While in all three cases, the employee to be terminated may be unwilling to part from service, there are eminently higher standards to be met by the employer validly exercising the prerogative to dismiss for just or authorized causes. In those two instances, it is indispensable that the employer establish the existence of just or authorized causes for dismissal as spelled out in the Labor Code. Retirement, on the other hand, is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter after reaching a certain age agrees and/or consents to sever his employment with the former. The CBA in the case at bar contains no such infirmities which must be stricken down. There is no essential difference between the CBA provision in this case and those we affirmed in Pantranco and Progressive. Twenty years is a more than ideal length of service an employee can render to one employer. 15.02 ACCRUAL OF BENEFITS Accrual Cruz vs. Phil. Global Communications (Oreo) Facts: PGC is in the business of telex and telegram. In the years 1993 and 1994 it suffered substantial business losses which forced it to adopt a streamlining program that caused the closing of some of its branches and laying off some of its workers among them is Cruz. Cruz however despite receiving separation pay asks for his retirement benefits. Petitioners are entitled only to either the separation pay provided under Article 283 of the Labor Code, as amended, or retirement benefits prescribed by the Retirement Plan, whichever is higher. Under Article 283 of the Labor Code, as amended, affected employees, in case of retrenchment or cessation of operations, are always given termination or separation pay equivalent to one month pay or at least month pay for every year of service, whichever is higher. Under Section 4, Article VI 12 of respondents Retirement Plan, the employees are entitled to a retirement pay equivalent to one and a half (1 ) months pay for every year of service computed on the basis of their basic monthly salary at the time of retirement. Here, respondent opted to pay petitioners separation benefits computed under the Retirement Plan, the same being higher than what Article 283 of the Labor Code, as amended, provides. As we held in Cipriano and Aquino, the employees right to payment of retirement benefits and/or separation pay is governed by the Retirement Plan of the parties. Under the Retirement Plan before us, petitioners are not entitled to both separation pay and retirement benefits.

Llora Motors vs. Drilon (Oreo) Facts: Alviar began working for Llora motors as a truck driver in which his salary is computed on a per trip basis plus ECOLA. Upon reaching 65 he stopped working. He now files a case for the collection of his retirement

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benefits and ECOLA underpayments. Llora in its answer contend that Alviar abandoned his work. What needs to be stressed, however, is that Section 14 of Implementing Rule I, like Article 287 of the Labor Code, does not purport to require "termination pay" to be paid to an employee who may want to retire but for whom no additional retirement plan had been set up by prior agreement with the employer. Thus, Section 14 itself speaks of an employee "who is retired pursuant to a bona-fide retirement plan or in accordance with the applicable individual or collective agreement or established employer policy. What Section 14 of Implementing Rule I may be seen to be saying is that where termination pay is otherwise payable to an employee under an applicable provision of the Labor Code, and an additional or consensual retirement plan exists, then payments under such retirement plan may be credited against the termination pay that is due, subject, however, to certain conditions. These conditions are: (a) that payments under the additional retirement plan cannot have the effect of reducing the amount of termination pay due and payable to less than one-half (1/2) month's salary for every year of service; and (b) the employee cannot be made to contribute to the termination pay that he is entitled to receive under some provision of the Labor Code; in other words, the employee is entitled to the full amount of his termination pay plus at least the return of his own contributions to the additional retirement plan. expressly as in an announced company policy or impliedly as in a failure to contest the employee's claim for retirement benefits (Allied Investigation Bureau, Inc. v. Ople, 91 SCRA 265 [1979]). Respondent is not asking for retirement benefits due him under the Social Security Law. He does not claim that there is a collective bargaining agreement or other applicable, contract or an established company policy, granting him retirement benefits. The asymmetry in the law in granting separation pay to employees who have served the company for at least one year but denying retirement benefits to those who have reached retirement age in the absence of agreements granting the same, is for the legislature to remedy. 15.04 BENEFITS AND GRATUITY Gratuity pay is paid to the beneficiary for past services or favors rendered purely out of the generosity of the giver/grantor. Gratuity, therefore, is not intended to pay a worker for actual services rendered of for actual performance. It is a money, benefit or bounty given to the worker, the purpose of which is to reward employees who have rendered satisfactory service to the company. Retirement benefits, on the other hand 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 his loyalty to the employer. (Sta. Catalina College vs. NLRC)

15.03 PRIVATE PLAN Employer Obligation GVM Security & Protective Agency vs. NLRC (Oreo) Facts: Dulce an employee of GVM resigned after 28 years of service. After being paid his cash deposit he executed a quitclaim. He now files for monetary claims including his retirement benefits. GVM on the other hand denies having such liability. As stressed in Llora Motors, Inc., Article 287 does not in itself purport to impose any obligation upon employers to set up a retirement scheme for their employees over and above that already established under existing laws, like the Social Security Act. There are three kinds of retirement schemes. The first type is compulsory and contributory in character. The second type is one set up by agreement between the employer and the employees in collective bargaining agreements or other agreements between them (Llora Motors, Inc. v. Drilon, supra). The third type is one that is voluntarily given by the employer,

Irah Burog, Ysan Castillo, Charms Haw, Monina Lagman, Alpe Macalalad, Kristel Macatangay, Monette Mesa, Dianne Miano, Jake Ng, Edlyn Santiago, Jon Santos, Heidi Soria, Anna Tetangco 72