Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

The petition must be dismissed. This Court is convinced that the pressure and influence exerted by the petitioner on his colleague to change a failing grade to a passing one, as well as his misrepresentation that Santos is his nephew, constitute serious misconduct, which is a valid ground for dismissing an employee. 3 Petitioner asserts that he facilitated the request of Santos because he believed it was meritorious and that he did it in his capacity as teaching evaluator. We are not persuaded. As aptly observed by the NLRC, it became petitioner's personal crusade to help Santos, which he did not exhibit with the other students who failed. It further stated, "(a) teacher evaluator can, at best, advise a student as to how he can finish his course but certainly not to act as his lobbyist." 4 With respect to the issue of whether petitioner was afforded due process, we rule in the affirmative. Before an employee can be validly dismissed, the employee must be afforded due process and his dismissal must be for any of the causes specified in Article 282 of the Labor Code.
5

G.R. No. 114764 June 13, 1997 WILFREDO T. PADILLA, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION and SAN BEDA COLLEGE, respondents.

ROMERO, J.: This petition for certiorari seeks to set aside the decision of the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 10-03520-84, which reversed the decision of the Labor Arbiter, and its resolution denying petitioner's motion for reconsideration. The factual antecedents in this case are not disputed. Petitioner was a faculty member of the College of Arts and Sciences of San Beda College (SBC) from June 1980 up to his dismissal. Sometime in November 1983, petitioner approached co-professor Leopoldo Martinez in behalf of his alleged "nephew," a student by the name of Luis Santos, whom Martinez failed in History I. Petitioner apparently disagreed with the grading system of Professor Martinez and urged the latter to change the grade of Santos. On November 10, 1983, an urgent meeting was called to deliberate on Santos' case. However, prior to said meeting, petitioner initiated a "whispering campaign" among the faculty members and students who failed in the same subject against Martinez, the obvious purpose of which was to exert pressure and influence on the latter regarding the proposed changing of the grades. Petitioner admittedly approached the members of the Dean's Council 1 to lobby for the reconsideration of Santos' failing grade. 2 In several instances, he also acknowledged that Santos was not actually his nephew but he said so only to add weight to his request. On ground of serious misconduct, petitioner's services were terminated on July 23, 1984. In a complaint for illegal dismissal against SBC, Labor Arbiter Isabel T. Ortiguerra rendered a decision dated October 10, 1991, the dispositive portion of which reads thus: WHEREFORE, premises considered, judgment is hereby rendered declaring the respondent guilty of illegal dismissal and ordering it to reinstate the complainant to his former position of full time professor without loss of seniority rights and with full backwages computed from the time he was dismissed up to the time he will actually be reinstated but not to exceed 3 years. The claim for moral and exemplary damages are dismissed for lack of merit. SO ORDERED. This decision was, however, reversed on appeal by the NLRC in its decision dated July 26, 1993. His motion for reconsideration having been denied on February 23, 1994, petitioner filed the instant petition for certiorari.

Labor Arbiter Ortiguerra mentioned in her decision 6 that SBC failed to afford petitioner an impartial investigation, imputing to Father Odilardo Arceo, Dean of the College of Arts and Sciences, an "obvious predisposition" to dismiss him. This was, however, refuted by Fr. Arceo who declared in his sworn statement that he merely recommended the termination of petitioner's employment to the Fr. Rector of SBC who, after an official investigation, adopted his recommendation. Petitioner was indeed duly notified of the charges levelled against him. The records show that on June 7, 1984, he was officially informed that SBC was considering his dismissal on charges of serious misconduct, an investigation of which was scheduled on June 28, 1984. A postponement was requested and the hearing was moved to July 5, 1984. While the hearing was being conducted at the Fr. Rector's office, petitioner suddenly walked out just as Professor Martinez was about to commence giving his testimony. The essence of due process in administrative proceedings is the opportunity to explain one's side or a chance to seek reconsideration of the action or ruling complained of. 7 Thus, the Labor Code requires the employer to furnish the employee with a written notice containing a statement of the cause for termination and to afford said employee ample opportunity to be heard and to depend himself with the assistance of his representative, if he so desires. The employer is also required to notify the worker in writing of the decision to dismiss him, stating clearly the reasons therefore. 8 In the instant case, SBC amply complied with the abovementioned requisites. Petitioner also alleges that he was denied due process, as well as the thirty-day prior written notice when he was dismissed. He even cited in his memorandum the case of RCPI v. NLRC 9 to support his contentions. The aforementioned case, however, does not mention any thirty-day period. Petitioner erred in relying on the procedural requirement outlined in Article 283 of the Labor Code which applies only when termination of the employment is 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. WHEREFORE, in view of the foregoing, the petition is DISMISSED and the July 26, 1993 decision of respondent National Labor Relations Commission is AFFIRMED. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 81124-26 June 23, 1988 ABACAST SHIPPING AND MANAGEMENT AGENCY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), NELSON T. MODELO & ROGELIO M. RAPADAS, respondents.

respondents that justified the termination of their services even before the expiration of their contracts. For their part, the private respondents argue that the petitioner failed to substantiate their allegation that there was a valid ground to justify their removal. The shipmaster's report, they submit, is clearly biased, self-serving and, therefore, unreliable. We agree. The log book is a respectable record that can be relied upon to authenticate the charges filed and the procedure taken against the employees prior to their dismissal. Curiously, however, no entry from such log book was presented at all in this case. What was offered instead was the shipmaster's report, which was later claimed to be a collation of excerpts from such book. It would have been a simple matter, considering the ease of reproducing the same, to make photocopies of the pertinent pages of the log book to substantiate the petitioner's contention. Why this was not done is something that reasonably arouses the curiosity of this Court and suggests that there probably were no entries in the log book at all that could have proved the alleged offenses of the private respondents. At that, even if the shipmaster's report were to be admitted and considered, a close reading thereof will show that the private respondents have not committed any act that would justify the termination of their services before the expiration of the contracts. All the shipmaster says in his report is that he considered Nelson Modelo to 11 be hot-tempered and he was apprehensive the seaman might get into trouble. Such apprehension is, of course, not a ground for dismissal. Moreover, it contradicts his own statement that as shipmaster he could easily resolve differences between crew 12 members on board the vessel. As for Rogelio Rapadas, the report merely says that he often drank liquor with Modelo and when intoxicated the two would go ashore 13 together; but surely that is not an offense either. At any rate, there is no statement in the report that the two of them ever got into any serious trouble at any time in the course of their aborted employment. The Haverton case is not applicable here because the evidence submitted and admitted there consisted of entries from the log book itself. In the present case, the log book was not invoked and all that was presented was a supposed collation of entries from the said book. After considering the issues and arguments submitted by the parties, the Court feels that there is no justification to disturb the findings of the public respondents. As it has not been sufficiently shown by the petitioner through its evidence that the private respondents have been validly dismissed, the Court well affirm the findings of the public respondents, including the award of damages. WHEREFORE, the petition is DISMISSED with costs against the petitioner. Our temporary restraining order dated February 17, 1988, is hereby lifted. SO ORDERED

CRUZ, J.: The petitioner is challenging the decision of the National Labor Relations Commission sustaining the Philippine Overseas Employment Administration for holding that the private respondents have been illegally dismissed and are, therefore, entitled to 1 damages. The petitioner claims that in not considering the evidence submitted by it to justify the private respondents' dismissal, the public respondents committed grave abuse of discretion amounting to lack or excess of jurisdiction. Private respondents Nelson T. Modelo and Rogelio M. Rapadas were employed as third engineer and chief cook, respectively, on July 8, 1984, by the Dowa Line Co., 2 Ltd. of New York, through herein petitioner, a licensed manning agency. On March 14, 1985, before the expiration of their one-year contract, they were summarily 3 dismissed and repatriated to the Philippines. It appears that they made representations with the petitioner for the payment of their earned salaries and other 4 benefits due them but these claims were rejected by the petitioner. Instead, the petitioner filed a complaint with the POEA for disciplinary action against them on March 1, 1986, on the grounds of drunkenness and creating trouble on board and 5 outside the vessel where they were employed. The private respondents themselves filed their own complaint for collection of their 6 claims, which complaint was consolidated with the first case. Deciding the two cases together on September 18, 1986, the POEA ruled in favor of the private respondents on the ground of the insufficiency of the evidence to support the petitioner's allegation 7 that they had been validly dismissed. This decision was appealed to the NLRC, 8 which affirmed it in toto. In questioning the decision of the public respondents, the petitioner contends that 9 they should not have disregarded the shipmaster's report submitted by it in evidence to show that the private respondents had committed the offense imputed to them. This report detailed the various acts of intoxication and trouble-making committed by the private respondents that rendered them unfit for continued service in the vessel. The petitioner also argues that drunkenness and creating trouble on board and outside the vessel are included in the standard table of offenses of the POEA which are considered valid grounds for dismissal. Moreover, the shipmaster's report was a collation of excerpts from the log book which, as held in Haverton Shipping, Ltd. v. 10 NLRC should have been accorded the highest respect in ascertaining whether or not the action taken against the employees was valid. This report, according to the petitioner, was strong evidence of the troublesome nature of the two private

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

CONSTRAIN US TO IMPOSE DISCIPLINARY ACTION AGAINST YOU YOU CAN GET YOUR CASH ADVANCE FOR TRANSPORTATION PETITION FROM MRS. BAUTISTA TODAY. On May 8, 1984, Laplana in turn sent a telex message to Mrs. Arogo which reads as follows: I LOVE WORKING FOR OUR COMPANY HOWEVER I AM SORRY I CANNOT ACCEPT YOUR JOB OFFER IN MANIIA THANK YOU AND RETRENCH ME INSTEAD. MY BEST REGARDS. Thereafter, Laplana sent a letter to Mrs. Arogo on May 15, 1984, expatiating on her telex message and reiterating her request to be retrenched, as follows: Dear Mrs. Arogo:

G.R. No. 76645 July 23, 1991 PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, petitioner, vs. ALICIA LAPLANA, Hon. RICARDO ENCARNACION, and NATIONAL LABOR RELATIONS COMMISSION, respondents. D.P. Mercado & Associates for petitioner.

NARVASA, J.:p Alicia Laplana was the cashier of the Baguio City Branch Office of the Philippine Telegraph and Telephone Corporation (hereafter, simply PT & T). Sometime in March 1984, PT & T's treasurer, Mrs. Alicia A. Arogo, directed Laplana to transfer to the company's branch office at Laoag City. Laplana refused the reassignment and proposed instead that qualified clerks in the Baguio Branch be trained for the purpose. She set out her reasons therefor in her letter to Mrs. Arogo dated March 27, 1984, viz.: 1. I have established Baguio City as my permanent residence. Working in Laoag will involve additional expenses like for my board and lodgingly, fare, and other miscellaneous expenses. My salary alone will not be enough there will be no savings and my family will spend more on account of my transfer. 2. I will be away from my family. A far assignment would be a big sacrifice on my part keeping me away from my husband and family which might affect my efficiency. 3. Since I have been with PT & T for more than six years already, I have learned to work with my co-employees here more effectively. Working in another place with entirely different environment will require long adjustment period, thereby affecting performance of my job. On April 12, 1984, Mrs. Arogo reiterated her directive for Laplana's transfer to the Laoag Branch, this time in the form of a written Memorandum, informing Laplana that "effective April 16, 1984, you will be reassigned to Laoag branch assuming the same position of branch cashier," and ordering her "to turn over your accountabilities such as PCF, undeposited collections, used and unused official receipts, other accountable forms and files to Rose Caysido who will be in charge of cashiering in Baguio." Apparently Laplana was not allowed to resume her work as Cashier of the Baguio Branch when April 16, 1984 came. She thereupon wrote again to Mrs. Arogo advising that the directed transfer was unacceptable, reiterating the reasons already given by her in her first letter dated March 27, 1984. On April 30, 1984, Laplana received a telegram from Mrs. Arogo reading as follows: PLEASE REPORT TO MANILA ON MAY 2, 1984 FOR NEW JOB ASSIGNMENT IF YOU DON'T REPORT ON MAY 2, 1984, WE WILL CONSIDER THIS AS ABANDONMENT OF YOUR JOB AND THIS MIGHT

Thank you for the job in Manila. However, I cannot accept the said offer because I have established Baguio City as my permanent residence. Considering the high cost of living in Manila it will surely involve additional expenses on my part. My salary alone will not be enough to sustain my expenses. Furthermore, a far assignment will be a big sacrifice on my part keeping me away from my husband which might affect my health due to an entirely new environment and climate, thereby affecting my efficiency. In view of the above reasons, I hereby request management to retrench me. xxx xxx xxx Termination of Laplana's employment on account of retrenchment thereupon followed. On May 19, 1984, PT & T issued an "Employees's Service Report" which contained the following remarks regarding Laplana: "Services terminated due to retrenchment with corresponding termination pay effective May 16, 1984. " And on June 30, 1984, Mrs. Arogo sent a Memorandum to the company's Baguio Branch Manager embodying the computation of the separation and 13th month pay due to Laplana, together with a check for the amount thereof, P2,512.50 and a quitclaim deed, and instructing said manager to "have the quitclaim signed by Alicia Laplana before releasing the check and return all copies of said form . . . immediately." On July 4, 1984, Laplana signed the quitclaim and received the check representing her 13th month and separation pay. On October 9, 1984, Laplana filed with the Labor Arbiters' Office at Baguio City, thru the CLAO, a complaint against PT & T its "Baguio Northwestern Luzon Branch, Baguio City," and Paraluman Bautista, Area Manager. In her complaint, she set forth substantially the facts just narrated, and alleged, as right of action, that "when she insisted on her right of refusing to be transferred, the Defendants made good its warning by terminating her services on May 16, 1984 on alleged ground of "retrenchment," although the truth is, she was forced to be terminated and that there was no ground at all for the retrenchment;" that the company's "act of transferring is not only without any valid ground but also arbitrary and without any purpose but to harass and force . . . (her) to eventually resign." In answer, the defendants alleged that 1) Laplana "was being transferred to Laoag City because of increase in sales due to the additional installations of vodex line;"

2) in connection with her transfer, Laplana had been informed "that she would be given ten (10) days. relocation allowance and transportation expense from Baguio to Laoag City;" 3) the company "was exercising management prerogatives in transferring complainant . . . and there is no showing that this exercise was arbitrarily and whimsically done;" 4) Laplana's services were terminated on her explicit declaration that "she was willing to be retrenched rather than be assigned to Laoag City or Manila;" 5) in any event, the company had been actually suffering losses; in fact, in June, 1984, several employees "were retrenched because of losses incurred due to rising costs in wages, rentals, production supplies and other operational costs." Upon the issues thus raised, judgment was rendered on March 28, 1985 by the Labor Arbiter in Laplana's favor. 1 The Arbiter's verdict was made to rest essentially on the following pronouncements (made avowedly in reliance on the doctrine laid down by this Court in Helmut Dosch v. NLRC and Northwest Airlines, Inc., G.R. No. 51182, July 5, 1983 2 ), to wit: Transferring an employee from one place to another is not by itself unlawful. It is within the inherent right of an employer to transfer or assign an employee in the pursuit of its legitimate business interests. However, this right is not absolute. Transfer becomes unlawful where it is motivated by discrimination or in bad faith, or is effected as a form of punishment or demonition without sufficient cause. The transfer of the complainant from Baguio City to Laoag City or to Manila is patently a demotion and a form of punishment without just cause and would cause untold suffering on the part of the complainant. ... With these premises in mind, the Arbiter ruled "that the complainant was illegally dismissed . . . (and her) acceptance of separation pay . . . cannot cure the illegality of her dismissed because it was forced upon her she was compelled to accept the lesser evil," and that there was "no evidence to show that the complainant was retrenched to prevent losses," but that on the contrary, "it is continuously expanding and improving its facilities, and hiring new employees." Accordingly, he ordered 1) PT & T "to reinstate immediately the complainant, Alicia R. Laplana, to her former position or equivalent position without loss of seniority rights and benefits earned with full backwages and benefits less P2,512.50, the amount she received as separation, from the time her compensation was suspended until reinstated;" 2) the dismissal of the claim for moral and exemplary damages for lack of merit; and 3) the dismissal of the case against Mrs. Paraluman Bautista also for lack of merit. The National Labor Relations Commission affirmed the Arbiter's judgment and dismissed the respondents' appeal, by Resolution dated August 5, 1986. 3

There can be no quarrel with the Arbiter's formulation of the general principle governing an employer's prerogative to transfer his employees from place to place or from one position to another. The Arbiter acknowledges "the inherent right of an employer to transfer or assign an employee in the pursuit of its legitimate business interests" subject only to the condition that it be not "motivated by discrimination or (made) in bad faith, or . . . effected as a form of punishment or demotion without sufficient cause." This is a principle uniformly adhered to by this Court. 4 The case law on the matter is succinctly set out by a noted commentator on Labor Relations Law as follows: 5 . . . Except as limited by special laws, the employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers, and the discipline, dismissal and recall of workers. This flows from the established rule that labor law does not authorize the substitution of the judgment of the employer in the conduct of his business and does not deprive the employer of the right to select or dismiss his employees for any cause, except in cases of unlawful discrimination (NLU v. Insular-Yebana Tobacco Corp., 2 SCRA 924, 931; Republic Savings Bank v. CIR, 21 SCRA 226, 235). . . . The employer has the prerogative of making transfers and reassignment of employees to meet the requirements of the business. Thus, where the rotation of employees from the day shift to the night shift was a standard operating procedure of management, an employee who had been on the day shift for some time may be transferred to the night shift (Castillo v. CIR, 39 SCRA 81). Similarly, transfers effected pursuant to a company policy to transfer employees from one theater to other theaters operated by the employer, in order to prevent connivance among them, was sustained (Cinema, Stage and Radio Entertainment Free Workers v. CIR, 18 SCRA 1071). Similar transfers and re-assignments of employees have been upheld such as the reassignment of one from a position of supervisor to that of engineer at the power house (Interwood Employees Assn. v. Interwood, 99 Phil. 82), or the transfer of the union president from his position of messenger clerk in a hotel to purely office work and two other unionists from the position of hotel guard to line and elevator men, without diminution of pay or other employee's rights (Bay View Hotel Employees Union v. Bay View Hotel, L-10393, March 30, 1960), or the temporary assignment of a sales clerk to another section of the store (Marcaida v. PECO, 63 O.G. 8559). Subsequent decisions of this Court have made no deviation from the doctrine. In Philippine Japan Active Carbon Corp. v. NLRC, promulgated on March 8, 1989 6 this Court made the following pronouncement, to wit: It is the employer's prerogative, based on its assessment and perception of its employees' qualifications, aptitudes, and competence, to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. An employee's right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be

most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal. In Yuco Chemical Industries, Inc. v. MOLE et al. (judgment promulgated on May 28, 1990) 7 the same "general principles on transfer" were re-stated. The Court said: . . . In a number of cases, the Court has recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment provided that there is no demotion in rank or diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer's right to control and manage its enterprise effectively. Even as the law is solicitous of the employees' welfare, it cannot ignore the right of the employer to exercise what are clearly and obviously management prerogatives. The freedom of management to conduct its business operations to achieve its purpose cannot be denied. But like all other rights, there are limits. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right must be exercised. Thus it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. Nor when the real reason is to penalize an employee for his union activities and thereby defeat his right to self-organization. But the transfer can be upheld when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee. The acceptability of the proposition that transfers made by an employer for an illicit or underhanded purpose e.g., to evade the duty to bargain collectively, or to defeat the welfare, right of collective bargaining, or discriminate against one or some of them on account of their union activities is self-evident and cannot be gainsaid. The difficulty lies in the situation where no such illicit, improper or underhanded purpose can be ascribed to the employer, the objection to the transfer being ground solely upon the, personal inconvenience or hardship that will be caused to the employee by reason of the transfer. What then? In Dosch v. NLRC, supra, this Court found itself unable to agree with the NLRC that the petitioner employee was guilty of disobedience and insubordination in refuse to accept his transfer from the Philippines to an overseas post. Said the Court: . . . The only piece of evidence on which (respondent employer) Northwest bases the charge of contumacious refusal is petitioner's letter dated August 28, 1975 to R.C. Jenkins wherein petitioner acknowledged receipt of the former's memorandum dated August 18, 1975, appreciated his promotion to Director of International Sales but at the same time regretted "that at this time for personal reasons and reasons of my family, I am unable to accept the transfer from the Philippines' and thereafter expressed his preference to remain in my Position of Manager-Philippines until such time that my services in that capacity are no longer required by Northwest Airlines." From this evidence, We cannot discern even the slightest hint of defiance, much less imply insubordination on the part of petitioner.

Withal, it is evident that the courteous tone of the employee's letter did not alter the actuality of his refusal to accept the transfer decreed by his employer in the exercise of its sound business judgment and discretion; and that the transfer of an employee to an overseas post cannot be likened to a transfer from a city to another within the country, as in the case at bar. In this case, the employee (Laplana) had to all intents and purposes resigned from her position. She had unequivocally asked that she be considered dismissed, herself suggesting the reason therefor retrenchment. When so dismissed, she accepted separation pay. On the other hand, the employer has not been shown to be acting otherwise than in good faith, and in the legitimate pursuit of what it considered its best interests, in deciding to transfer her to another office. There is no showing whatever that the employer was transferring Laplana to another work place, not because she would be more useful there, but merely "as a subterfuge to rid . . . (itself) of an undesirable worker," or "to penalize an employee for . . . union activities. . . ." The employer was moreover not unmindful of Laplana's initial plea for reconsideration of the directive for her transfer to Laoag; in fact, in response to that plea not to be moved to the Laoag Office, the employer opted instead to transfer her to Manila, the main office, offering at the same time the normal benefits attendant upon transfers from an office to another. The situation here presented is of an employer transferring an employee to another office in the exercise of what it took to be sound business judgment and in accordance with predetermined and established office policy and practice, and of the latter having what was believed to be legitimate reasons for declining that transfer, rooted in considerations of personal convenience and difficulties for the family. Under these circumstances, the solution proposed by the employee herself, of her voluntary termination of her employment and the delivery to her of corresponding separation pay, would appear to be the most equitable. Certainly, the Court cannot accept the proposition that when an employee opposes his employer's decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee's wishes that should be made to prevail. In adopting that proposition by way of resolving the controversy, the respondent NLRC gravely abused its discretion. WHEREFORE, the writ of certiorari prayed for is GRANTED and the Resolution of August 5, 1986 of respondent NLRC is thereby nullified and set aside, and the termination of services of private respondent is declared legal and proper. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 74229 August 11, 1989 SHOEMART, INC., and ROMEO B. PEREZ, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division ) and MAXIMA R. SORIANO respondents. Jose S. Diloy Jr. for petitioners. Felixberto N. Boquiren for private respondent.

On certiorari with preliminary injunction and/or a restraining order in G.R. No. 63912 "Shoemart v. The NLRC, et al.", the Second Division of this Court in its resolution dated May 18, 1983 dismissed the petition for lack of merit (p. 44, Rollo-63912). Meanwhile, after her reinstatement, due to a difficult pregnancy, Soriano filed successive leaves of absences. On September 30, 1981, when she was four (4) months pregnant, she applied for a fifteen (15) day sick leave, September 30,1981 to October 14, 1981 due to threatened abortion. On October 20, 1981 she applied for four (4) months vacation leave commencing October 21, 1981 to February 20,1982 upon her physician's advice to avoid possible complications in her pregnancy. Then on February 7, 1982, Soriano applied for forty-five (45) days maternity leave (February 21, 1982 to April 7, 1982) giving February 22, 1982 as her expected date of confinement. All these applications were granted. After the expiration of her maternity leave, Soriano did not report back for work. No leave extension having been granted nor any word sent to Shoemart as to why she could not report for work, her continued absence was marked unauthorized. On April 15, 1982, Soriano sent a notice to Shoemart stating that she had not yet delivered her baby, and that she could have been mistaken in her "counting." Shoemart's department manager accepted the note but informed its bearer (Soriano's husband) that Soriano should report for work on May 30, 1982. However, on May 30,1982 and on the succeeding days, Soriano did not return to work. She did not inform Shoemart of her condition nor give any reason for her unexplained absence. Consequently, Shoemart was prompted to terminate her services for gross neglect of duty amounting to abandonment of work under Article VI of its Rules and Regulations which is also a ground for dismissal under the New Labor Code. On October 7, 1983, Soriano filed a new complaint with the Ministry of Labor and Employment (MOLE) [NLRC-NCR Case No. 10-4473-83] charging Shoemart with illegal dismissal, violation of PD 1571 (integration into the basic wage of the emergency cost of living allowances under PD 525 and PD 1123) and of the CBA wage increase of P l.00 a day effective July 1, 1981, and withholding of SSS check for sickness benefits in the amount of P122.70 (p. 27, Rollo).lwph1.t In his decision dated April 26, 1985, the labor arbiter found Soriano's dismissal justified. However, he ordered Shoemart to pay her the amount of P76.56 representing her short payment and unpaid Pl.00 wage increase a day per existing CBA, plus the amount of P122.70 covering the withheld payment of her sickness benefits, or a total of P199.26." (p. 34, Rollo). As earlier stated, the NLRC on appeal modified the decision of the labor arbiter. It ruled that the discharge of Soriano was illegal for being violative of procedural due process as mandated in BP Blg. 130 and ordered her reinstatement with backwages. One commissioner dissented. The NLRC decision states: WHEREFORE, premises considered the appealed Decision is hereby, MODIFIED as above discussed, by ordering respondent-appellee to reinstate complainant-appellant to her

GUTTIERREZ, JR., J.: This is a petition seeking to reverse and set aside the December 3, 1985 decision of the National Labor Relations Commission (NLRC) in Case No. AB-410-10849-81 [should be NLRC-NCR Case No. 10-4473-83], 1 entitled "Maxima R. Soriano v. Shoemart, Inc." The NLRC modified the April 26,1985 decision of the Labor Arbiter which sustained the termination/dismissal of respondent employee by Shoemart, Inc., but directed the latter to pay the former certain short payments and withheld payments in the total amount of P199.26 The respondent Commission ordered the reinstatement of the private respondent. Respondent Maxima R. Soriano was employed by petitioner Shoemart, Inc., on July 5, 1973, as salesclerk involved in its cosmetics department. On March 17, 1981, Shoemart sent Soriano a notice of termination on the ground of abandonment of work from February 13, 1981 to March 17, 1981. Soriano, in turn filed a complaint with the then Ministry of Labor and Employment (Case No. AB-4-10849-81) for illegal dismissal and certain money claims. While the case was pending before the labor arbiter, Soriano was allowed to resume work on July 21, 1981 at the Company's Cubao store. Despite Soriano's reinstatement, trial proceeded but only on the issue of money claims. On December 7, 1981 a decision was rendered by the Labor Arbiter in favor of Maxima Soriano, the decretal portion of which reads: WHEREFORE, respondent SHOEMART, INC., of 627 C. Palanca Sr., St., San Miguel, Manila, is directed to pay complainant MAXIMA SORIANO in care of Attorney Felixberto Boquiren, 5th Floor, Maritima Bldg., 117 Dasmarinas St., Manila, the amount of FIVE THOUSAND SEVENTY PESOS AND 63/100 (P5,070.63), as backwages, service incentive leave and overtime pay, plus FIVE HUNDRED (P500.00) PESOS as attorney's fee. (p. 25, Rollo-63912) An appeal to the NLRC was dismissed in a resolution dated December 28, 1982.

position without loss of seniority rights plus backwages computed from October 7, 1983 up to the time of actual reinstatement. Respondent-appellee are (sic) likewise ordered to pay complainant the amount of P 76.56 representing her short payment and the unpaid Pl.00 wage increase a day per the existing CBA, plus the amount of P122.70 covering the withheld payment of her sickness benefit. xxx xxx xxx (p. 46, Rollo, Decision dated December 3, 1985) On January 23, 1986, Shoemart filed a motion for reconsideration of the aforesaid decision. The motion was subsequently denied. Hence, the present petition for certiorari. The petitioner submits that respondent NLRC gravely abused its discretion when it modified the decision below and decreed the reinstatement with backwages of Soriano despite the clear existence of a valid ground for termination. It should be noted that respondent NLRC ordered the reinstatement with backwages of Soriano because it considered her dismissal as illegal for want of due process. It could not find evidence showing the petitioner's substantial, or at least minimum, compliance with the procedure set forth in the rules implementing BP Blg. 130, the pertinent provisions of which state: RULE XIV. TERMINATION OF EMPLOYMENT 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. SEC. 5. Answer and hearing. The worker may answer the allegations stated against him in the notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample opportunity to be heard and to defend himself with the assistance of his representative, if he so desires. SEC. 6. Decision to dismiss. The employer shall immediately notify a worker in writing of a decision to dismiss him stating clearly the reasons therefor. In its memorandum filed with this Court, dated November 14, 1986, the petitioner admitted that it failed to comply with the mandated requirements of BP Blg. 130. (pp. 126-127, Rollo). Shoemart rationalized its omission by stating that a cloud of bias would have engulfed the process had it been resorted to and that it would merely be one of

formality, a farce and a mockery of the procedural requirements. The petitioner may have had some reasons for not complying with the procedures outlined in the law but these are not sufficient to detract from the necessity of basic fair play. The dismissal of an employee without any formal investigation is unwarranted. The due process requirement is not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern since it constitutes a safeguard of the highest order in response to man's innate sense of justice. (Miguel v. National Labor Relations Commission, G.R. No. 78993, June 22, 1988) It is clear in Section 1, Rule XIV Implementing Regulations of the Labor Code, that "No worker shall be dismissed except for a just or authorized cause provided by law and after due process." Thus, the two facets of this legal provision as discussed by this Court in an earlier case (Primero v. Intermediate Appellate Court, 156 SCRA 436 [1987]), are: (a) the legality of the act of dismissal; that is dismissal under the grounds provided for under Article 283 of the New Labor Code and (b) the legality in the manner of dismissal; that is with due observance of the procedural requirements of Sections 2, 5 and 6 of BP Blg. 130. Conversely, illegality of the act of dismiss constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process. While the Labor Code treats the nature of and the remedies available as regards the first which are: (1) reinstatement to his former position without loss of seniority rights and (2) payment of backwages corresponding to the period from his regal dismissal up to actual reinstatement (Article 279, Labor Code; DM Consunji, Inc. v. Pucan 159 SCRA 113 [1988]), said Code does not deal at all with the second, that is the manner of the dismissal, which is therefore governed exclusively by the Civil Code. (Primero v. Intermediate Appellate Court, supra).lwph1.t In any event, the decisive issue which arises is whether or not the denial of due process under the circumstances of this case makes the dismissal for just cause so arbitrary and illegal as to warrant reinstatement and payment of backwages. While it appears that Shoemart failed to observe due process in the termination of Soriano's employment, the clearly apparent conclusion in this case is that respondent Soriano is not entirely without fault. She was grossly remiss in her duties toward her employer, as shown by her frequent, prolonged and unexplained absences. She was intermittently absent from September 30, 1981 to October 14, 1981 and from October 21, 1981 until the present complaint for illegal dismissal was filed on October 7, 1983. And while there might have been occasions when petitioner was apprised of the reasons for her non-appearance (e.g., Exhibit E, Letter to Shoemart dated August 10, 1982 with copy of the death certificate of Soriano's father), the fact remains that from May 30,1982 and onwards to October 7, 1983, there was absolutely no communication from her. (pp. 11-12, Private Respondent's Memorandum). We note that Soriano was earlier dismissed, also for abandonment, but was allowed to work while the first case was pending before the labor arbiter. There

was likewise misrepresentation if not deception because on February 21, 1982 the respondent filed an application for maternity leave stating that February 22, 1982 or the following day was her expected date of delivery. This expected date was supported by a medical certificate giving May 15, 1981 as her last menstrual period. Almost two months from the expected date or on April 15, 1982, Soriano sent word that the baby had not yet been delivered. The Labor Arbiter not only found the delay "unusual" but the alleged miscarriage of that same child on August 4, 1982 was declared "highly unbelievable and improbable." (p. 30, Rollo).lwph1.t Otherwise stated, the petitioner was justified in assuming that Soriano was no longer interested in resuming her employment. "Abandonment" of work is manifest. It can not be said that Soriano was not aware of the consequences of her acts under the circumstances of this case. The petitioner cannot be faulted for not continuing Soriano in her employment. In the final analysis, respondent Soriano was afforded due process although belatedly before the Labor Arbiter and then before the NLRC. As we have ruled, the purpose of the law is to insure that the employer's prerogative to dismiss or lay-off an employee is exercised without abuse of discretion or arbitrariness. The proceedings before the Labor Arbiter and the National Labor Relations Commission have upheld this guarantee. The rights of the employee have been effectively safeguarded. (Piedad v. Lanao del Norte Electric Cooperative, Inc., 153 SCRA 51l [1987]. In fact, Shoemart generously reinstated her while the first case was pending. But the events that transpired thereafter, proved without question, that she is an inveterate absentee who does not deserve reinstatement. In a recent case (Wenphil Corporation v. National Labor Relations Commission and Roberto Mallare G.R. No. 80587, February 8, 1989), under circumstances similar to the case at bar, this Court, without condoning the employer's failure to extend to an employee his right to an investigation before causing his dismissal, sustained the dismissal of the respondent employee where his dismissal was found to be for just and authorized cause in an appropriate proceeding in the Ministry of Labor and Employment. Thus, said the Court, "It will be highly prejudicial to the interests of the employer to impose on him the services of an employee who has been shown to be guilty of the charges that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable remains in the service (Wenphil Corporation v. National Labor Relations Commission, et al. supra). For failure to observe the procedural requirements, a sanction was imposed by this Court on the employer to indemnify the dismissed employee. It was held however, that the measure of the award depends on the facts of each case and the gravity of the omission committed by the employer (ibid). We take into account the following circumstances stressed by the petitioner in its memorandum:

1. Private Respondent was absent from work from May 30, 1982 to October 7, 1983 or a period of one (1) year, four (4) months and nine (9) days; 2. Such prolonged absence from work was without any valid notice or leave from Petitioner-Company; 3. Such absence was not by reason of any illness, disease or like ailments; 4. Private Respondent despite opportunity to resume employment deliberately refused to report back for work; and, 5. The NLRC found Private Respondent guilty of negligence of duty. (p. 128, Rollo) In view of the length of service of the private respondent with Shoemart, however, we apply the precedent in Wenphil v. NLRC, et al., (supra) where a P1,000.00 indemnity was given to the dismissed employee for the failure of the employer to strictly comply with the requirements of due process. WHEREFORE, the decision of the National Labor Relations Commission dated December 23,1985 is REVERSED insofar as its order of reinstatement with backwages is concerned. Petitioner Shoemart, Inc. is, however, ordered to indemnify the private respondent in the amount of P1,000.00. The P76.56 short payment, P1.00 wage increase a pay per the existing Collective Bargaining Agreement, and the P122.70 sickness benefit payment ordered by the respondent Commission are AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

Article 280 of the Labor Code, who enjoyed security of tenure. Moreover, when he was allowed to work after 21 August 1994, when his probationary employment of six months expired, he acquired a vested right to a permanent employment and could only be dismissed for a valid cause. Accordingly, after finding petitioner's dismissal to be illegal, the Labor Arbiter ordered the respondent company to immediately reinstate the petitioner to his former position without loss of seniority rights, with full back wages and benefits computed from the date of his dismissal until his actual reinstatement, less the salaries he received under his second employment contract. On appeal, respondent NLRC reversed the Labor Arbiter's decision and upheld the validity of petitioner's separation from the respondent company on the ground that his employment contract was for a fixed period of one year and six months, certain to end on 21 August 1994. His motion for reconsideration having been denied, the petitioner filed this special civil action for certiorari contending that respondent NLRC palpably erred and committed grave abuse of discretion in reversing the decision of the Labor Arbiter. Section 2 of the contract of employment itself recognized the status of the petitioner as a probationary employee. Having worked beyond 21 August 1994 and for six months thereafter until his dismissal on 21 February 1995, he had become a regular employee "not only by operation of law (Articles 280 and 281) but also by virtue of the contract." In its Comment, the respondent company supports the assailed decision and maintains that the petitioner was hired on a fixed-term basis and was never placed on probation. The termination of his services was not due to his dismissal but the expiration of his term of employment; thus, he is not entitled to reinstatement, back wages, and damages. On the other hand, in its Manifestation in Lieu of Comment, the Office of the Solicitor General (OSG) agrees with the petitioner. Hence, we, required the NLRC to file its own comment. As expected, the NLRC urged affirmance of the challenged decision. The only question before us is whether the NLRC committed grave abuse of discretion in reversing the decision of the Labor Arbiter, which ordered the reinstatement of the petitioner with full back wages. We resolve the issue in the affirmative. The NLRC committed grave abuse of discretion when it reversed the findings of fact of the Labor Arbiter by giving undue, if not unwarranted, emphasis on the dates fixed in the contract and failing to consider the rest of the terms of the contract, as well as the attendant circumstances surrounding petitioner's employment. Section 2 of the Contract of Employment in question provided: Sec. 2. This contract shall be effective for a period of one year commencing on Feb. 21, 1994 until Aug. 21, 1995, unless sooner terminated pursuant to the provision hereof. From Feb. 21, 1994 to August 21, 1994, or for a period of six (6) months, the EMPLOYEE shall be contractual during which the EMPLOYER can terminate the EMPLOYEE's services by serving written notice to that effect. Such termination shall be immediate, or at whatever date within this six-month period, as the EMPLOYER

G.R. No. 127448 September 10, 1998 JUANITO VILLANUEVA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, (Second Division) HON. COMMISSIONERS: ROGELIO AYALA, RAUL T. AQUINO, INNODATA PHILS. INC. / INNODATA PROCESSING CORP. and TODD SOLOMON, respondents.

DAVIDE, JR., J.: In this special civil action for certiorari, petitioner Juanito Villanueva seeks to annul 1 the decision of the National Labor Relations Commission (NLRC) in NLRC Case No. 2 00-09-06202-95 and its resolution denying petitioner's motion for reconsideration. 3 The former reversed the decision of the Labor Arbiter of 21 May 1996 finding that the petitioner was illegally dismissed from his employment. The factual and procedural antecedents of this case are as follows: Petitioner Juanito M. Villanueva started working with respondent Innodata Philippines, Inc.,/Innodata Processing Corporation as an "abstractor" with a daily salary of P180. The contract of employment provided for a period of effectivity of "one year commencing on Feb. 21, 1994, until Aug. 21, 1995." It was also stipulated that from 21 February 1994 to 21 August 1994, or for a period of six months, petitioner's employment would be "contractual" and could be terminated at whatever date within this period by mere service of notice to that effect. However, should his employment be continued beyond 21 August 1994, he would become a regular employee upon demonstration of sufficient skill to meet the standards set by the respondent company. Should he fail to demonstrate the ability to master his task during the first six months, he could be placed on probation for another six months; after which, he could be evaluated for promotion as a regular employee. On 21 February 1995, petitioner's services were terminated by reason of "end of 5 contract." Three weeks thereafter, the petitioner was rehired by the respondent corporation, this time, as a data encoder effective 13 March 1995 to 15 August 1995, with a lesser pay 6 of P164.10 per day. On 13 August 1995, the petitioner was again separated from the respondent 7 company also on account of "end of contract." This prompted the petitioner to file a complaint against the respondent company and its president, Todd Solomon, for illegal dismissal with prayer for moral and exemplary damages and attorney's fees. In his 21 May 1996 Decision, Labor Arbiter Manuel R. Caday held that as an abstractor engaged in processing, encoding of data, precoding, editing, proofreading and scoring activities which were necessary and desirable in the usual business of the respondent corporation the petitioner was a regular employee pursuant to
4

may determine. Should the EMPLOYEE continue his employment beyond Aug. 21, 1994, he shall become a regular employee upon demonstration of sufficient skill in terms of his ability to meet the standards set by the EMPLOYER. If the EMPLOYEE fails to demonstrate the ability to master his task during the first six months he can be placed on probation for another six (6) months after which he will be evaluated for promotion as regular employee. We agree with the OSG that the contract cannot be strictly construed as one for a fixed term. For one, while the first paragraph of Section 2 spoke of the contract's duration to be "one" year, it was in fact, for one year and six months because it was to commence on 21 February 1994 and terminate on 21 August I995. For another, while the second paragraph specified the first six-month period of employment, 21 February to 21 August 1994, as "contractual," the third sentence of that paragraph granted the petitioner regular employment status should he "continue his employment beyond August 21, 1994, . . . upon demonstration of sufficient skill in terms of his ability to meet the standards" set by the respondent company. It is clear that the first six 8 months was in reality the "probation period" under Article 281 of the Labor Code, since petitioner would become a regular employee if the employment would continue beyond that period upon demonstration of sufficient skill in accord with the standards set by the respondent corporation. Significantly, the respondent company alleges that it has never placed the petitioner 9 on probation. This could only mean that petitioner's continuance in employment beyond 21 August 1994 was not for probation purposes under the fourth sentence of the second paragraph of Section 2 reading as follows: "If the employee fails to demonstrate the ability to master his task during the first six months he can be placed on probation for another six (6) months after which he will be evaluated for promotion as a regular employee." If the petitioner was thus allowed to remain in employment beyond 21 August 1994, it could be for no other reason than that he demonstrated "sufficient skill in terms of his ability to meet the standards set" by the respondent company. He, therefore, became a regular employee by virtue of the third sentence of the Second paragraph of Section 2 of the contract. Besides, the Labor Arbiter found that as an abstractor, the petitioner was engaged in "processing, encoding of data, precoding, editing, proofreading and scoring, all of 10 which activities are deemed necessary and desirable in the usual business of respondent company." The employment then was "regular" under the first paragraph of Article 280 of the Labor Code, which reads: Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. The termination of petitioner's employment contract on 21 February 1995, as well as the subsequent issuance on 13 March 1995 of a "new" contract for five months as

"data encoder," was a devious, but crude, attempt to circumvent petitioner's right to security of tenure as a regular employee guaranteed by Article 279 of the Labor 11 Code. Hence, the so-called "end of contract" on 21 February 1995 amounted to a dismissal without any valid cause. Notably, the respondent company prepared the contract of employment. It was a contract of adhesion, and petitioner had only to adhere to it by signing it. Its terms 12 should be construed strictly against the party who prepared it. Any ambiguity 13 therein must be resolved against the respondent company, especially because under Article 1702 of the Civil Code, in case of doubt, all labor contracts shall be construed in favor of the laborer. We cannot allow the respondent company to construe otherwise what appears to be clear from the wordings of the contract. The interpretation which the respondent company seeks to wiggle out is wholly unacceptable, as it would result in a violation of petitioner's right to security of tenure guaranteed in Section 3 of Article XIII of the Constitution and in Articles 279 and 281 of the Labor Code. WHEREFORE, the challenged decision of 11 October 1996 and resolution of 29 November 1996 of the National Labor Relations Commission are SET ASIDE, and the decision of the Labor Arbiter of 21 May 1996 in NLRC-NCR-00-09-06202-95 is REINSTATED. Costs against private respondent Innodata Philippines, Inc. SO ORDERED.

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDOvs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATIONS ADMINISTRATOR, NLRC, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION G.R. No. 104776, December 5,1994.

On October 27, 1988, AIBC and BRII filed a Consolidated Reply, POEA Adminitartor rendered his decision which awarded the amount of $824, 652.44 in favor of only 324 complainants. Claimants submitted their Appeal Memorandum For Partial Appeal from the decision of the POEA. AIBC also filed its MR and/or appeal in addition to the Notice of Appeal filed earlier. NLRC promulgated its Resolution, modifying the decision of the POEA. The resolution removed some of the benefits awarded in favor of the claimants. NLRC denied all the MRs. Hence, these petitions filed by the claimants and by AlBC and BRII. The case rooted from the Labor Law enacted by Bahrain where most of the complainants were deployed. His Majesty Ise Bin Selman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1176, otherwise known re the Labour Law for the Private Sector. Some of the provision of Amiri Decree No. 23 that are relevant to the claims of the complainants-appellants are as follows: Art. 79: x x x A worker shall receive payment for each extra hour equivalent to his wage entitlement increased by a minimum of twenty-rive per centurn thereof for hours worked during the day; and by a minimum off fifty per centurn thereof for hours worked during the night which shall be deemed to being from seven oclock in the evening until seven oclock in the morning . Art. 80: Friday shall be deemed to be a weekly day of rest on full pay. If employee worked, 150% of his normal wage shall be paid to him x x x. Art. 81; x x x When conditions of work require the worker to work on any official holiday, he shall be paid an additional sum equivalent to 150% of his normal wage. Art. 84: Every worker who has completed one years continuous service with his employer shall be entitled to Laos on full pay for a period of not less than 21 days for each year increased to a period not less than 28 days after five continuous years of service. A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his service in that year. Art. 107: A contract of employment made for a period of indefinite duration may be terminated by either party thereto after giving the other party prior notice before such termination, in writing, in respect of monthly paid workers and fifteen days notice in respect of other workers. The party terminating a contract without the required notice shall pay to the other party compensation equivalent to the amount of wages payable to the worker for the period of such notice or the unexpired portion thereof. Art. Ill: x x x the employer concerned shall pay to such worker, upon termination of employment, a leaving indemnity for the period of his employment calculated on the basis of fifteen days wages for each year of the first three years of service and of one months wages for each year of service thereafter. Such worker shall be entitled to payment of leaving indemnity upon a quantum meruit in proportion to the period of his service completed within a year.

FACTS: This is a consolidation of 3 cases of SPECIAL CIVIL ACTIONS in the Supreme Court for Certiorari. On June 6, 1984, Cadalin, Amul and Evangelista, in their own behalf and on behalf of 728 other OCWs instituted a class suit by filing an Amended Complaint with the POEA for money claims arising from their recruitment by ASIA INTERNATIONAL BUILDERS CORPORATION (AIBC) and employment by BROWN & ROOT INTERNATIONAL, INC (BRI) which is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while AIBC is a domestic corporation licensed as a service contractor to recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its foreign principals. The amended complaint sought the payment of the unexpired portion of the employment contracts, which was terminated prematurely, and secondarily, the payment of the interest of the earnings of the Travel and Reserved Fund; interest on all the unpaid benefits; area wage and salary differential pay; fringe benefits; reimbursement of SSS and premium not remitted to the SSS; refund of withholding tax not remitted to the BIR; penalties for committing prohibited practices; as well as the suspension of the license of AIBC and the accreditation of BRII On October 2, 1984, the POEA Administrator denied the Motion to Strike Out of the Records filed by AIBC but required the claimants to correct the defic iencies in the complaint pointed out. AIB and BRII kept on filing Motion for Extension of Time to file their answer. The POEA kept on granting such motions. On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked that AIBC and BRII declared in default for failure to file their answers. On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their answers within ten days from receipt of the order. (at madami pang motions ang na-file, new complainants joined the case, ang daming inavail na remedies ng both parties) On June 19, 1987, AIBC finally submitted its answer to the complaint. At the same hearing, the parties were given a period of 15 days from said date within which to submit their respective position papers. On February 24, 1988, AIBC and BRII submitted position paper.

ISSUE: 1. WON the foreign law should govern or the contract of the parties.(WON the complainants who have worked in Bahrain are entitled to the above-mentioned benefits provided by Amiri Decree No. 23 of Bahrain). 2. WON the Bahrain Law should apply in the case. (Assuming it is applicable WON complainants claim for the benefits provided therein have prescribed.) 3. Whether or not the instant cases qualify as; a class suit (siningit ko nalang) (the rest of the issues in the full text of the case refer to Labor Law)

case, the foreign law is adopted as a system to regulate the relations of the parties, including questions of their capacity to enter into the contract, the formalities to be observed by them, matters of performance, and so forth. Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions of a foreign statute shall be deemed incorporated into their contract as a set of terms. By such reference to the provisions of the foreign law, the contract does not become a foreign contract to be governed by the foreign law. The said law does not operate as a statute but as a set of contractual terms deemed written in the contract. A basic policy of contract is to protect the expectation of the parties. Such party expectation is protected by giving effect to the parties own choice of the applicable law. The choice of law must, however, bear some relationship the parties or their transaction. There is no question that the contracts sought to be enforced by claimants have a direct connection with the Bahrain law because the services were rendered in that country.

RULING: 1. NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading and proof of a foreign law and admitted in evidence a simple copy of the Bahrains Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC applied the Amiri Deere, No. 23 of 1976, which provides for greater benefits than those stipulated in the overseas-employment contracts of the claimants. It was of the belief that where the laws of the host country are more favorable and beneficial to the workers, then the laws of the host country shall form part of the overseas employment contract. It approved the observation of the POEA Administrator that in labor proceedings, all doubts in the implementation of the provisions of the Labor Code and its implementing regulations shall be resolved in favor of labor. The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that the laws of the host country became applicable to said contracts if they offer terms and conditions more favorable than those stipulated therein. However there was a part of the employment contract which provides that the compensation of the employee may be adjusted downward so that the total computation plus the non-waivable benefits shall be equivalent to the compensation therein agree, another part of the same provision categorically states that total remuneration and benefits do not fall below that of the host country regulation and custom. Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the parties that drafted it. Article 1377 of the Civil Code of the Philippines provides: The interpretation of obscure words or stip ulations in a contract shall not favor the party who caused the obscurity. Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form containing the stipulations of the employment contract and the employees merely take it or leave it. The presumption is that there was an imposition by one party against the other and that the employees signed the contracts out of necessity that reduced their bargaining power. We read the overseas employment contracts in question as adopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof. The parties to a contract may select the law by which it is to be governed. In such a

2. NLRC ruled that the prescriptive period for the filing of the claims of the complainants was 3 years, as provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of the Civil Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976. Article 156 of the Amiri Decree No. 23 of 1976 provides: A claim arising out of a contract of employment shall not actionable after the lapse of one year from the date of the expiry of the Contract. As a general rule, a foreign procedural law will not be applied in the forum (local court), Procedural matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based upon a foreign substantive law. A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive, depending on the characterization given such a law. In Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955]), where the issue was the applicability of the Panama Labor Code in a case filed in the State of New York for claims arising from said Code, the claims would have prescribed under the Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as it was not specifically intended to be substantive, hence, the prescriptive period provided in the law of the forum should apply. The Court observed: . . . we are dealing with a statute of limitations of a foreign country, and it is not clear on the face of the statute that its purpose was to limit the enforceability, outside as well as within the foreign country concerned, of the substantive rights to which the statute pertains. We think that as a yardstick for determining whether that was the purpose, this test is the most satisfactory one. The Court further noted: Applying that test here it appears to us that the libellant is entitled to succeed, for the respondents have failed to satisfy us that the Panamanian period of limitation in question was specifically aimed against the

particular rights which the libellant seeks to enforce. The Panama Labor Code is a statute having broad objectives. The American court applied the statute of limitations of New York, instead of the Panamanian law, after finding that there was no showing that the Panamanian law on prescription was intended to be substantive. Being considered merely a procedural law even in Panama, it has to give way to the law of the forum (local Court) on prescription of actions. However the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum (local Court) has a borrowing statute. Said statute has the practical effect of treating the foreign statute of limitation as one of substance. A borrowing statute directs the state of the forum (local Court) to apply the foreign statute of limitations to the pending claims based on a foreign law. While there are several kinds of borrowing statutes, one form provides that an action barred by the laws of the place where it accrued will not be enforced in the forum even though the local statute was not run against it. Section 48 of Code of Civil Procedure is of this kind. It provides: If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the Philippine Islands. Section 48 has not been repealed or amended by the Civil Code of the Philippines. In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976. The courts of the forum (local Court) will not enforce any foreign claim obnoxious to the forums public policy. To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the protection to labor. In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that: The state shall promote social justice in all phases of national development (Sec. 10). The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare (Sec. 18). In Article XIII on Social Justice and Human Rights, the 1987 Constitution provides: Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. Thus, the applicable law on prescription is the Philippine law. The next question is whether the prescriptive period governing the filing of the claims is 3 years, as provided by the Labor Code or 10 years, as provided by the Civil Code of the Philippines. Article 1144 of the Civil Code of the Philippines provides: The following actions must be brought within ten years from the time the right of action accross: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment

In this case, the claim for pay differentials is primarily anchored on the written contracts between the litigants, the ten-year prescriptive period provided by Art. 1144(l) of the New Civil Code should govern.

3. NO. A class suit is proper where the subject matter of the controversy is one of common or general interest to many and the parties are so numerous that it is impracticable to bring them all before the court. When all the claims are for benefits granted under the Bahrain law many of the claimants worked outside Bahrain. Some of the claimants were deployed in Indonesia under different terms and condition of employment. Inasmuch as the First requirement of a class suit is not present (common or general interest based on the Amiri Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall be entitled to rile their claims in a class suit. While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for employees benefits), there is no common question of law or fact. While some claims are based on the Amiri Law of Bahrain, many of the claimants never worked in that country, but were deployed elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the other employees of defendants. A claimant has no concern in protecting the interests of the other claimants as shown by the fact, that hundreds of them have abandoned their co-claimants and have entered into separate compromise settlements of their respective claims. The claimants who worked in Bahrain cannot be allowed to sue in a class suit in a judicial proceeding. WHEREFORE, all the three petitioners are DISMISSED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 148372 June 27, 2005

b) The economic interplay consisting of the inflation and the erratic changes in the peso-dollar exchange rate which precipitated a soaring banking interest. c) Labor problems that has precipitated adverse company effect on the media and in the financial circuit. d) Liberalization of the industry (GATT) which has resulted in flooding the market with imported goods; e) Other related adverse matters. 9. The inability of the EYCO Group of Companies to meet the obligations as they fall due on the schedule agreed with the bank has now become a stark reality. The situation therefore is that since the obligations would not be met within the scheduled due date, complications and problems would definitely arise that would impair and affect the operations of the entire conglomerate comprising the EYCO Group of Companies. xxx 12. By virtue of this development, there is a need for suspension of all accounts o[r] obligations incurred by the petitioners in their separate and combined capacities in the meantime that they are working for the rehabilitation of the companies that would eventually redound to the benefit of these creditors. 13. The foregoing notwithstanding, however, the present combined financial condition of the petitioners clearly indicates that their assets are more than enough to pay off the credits. x x x (Emphasis and underscoring supplied) 2 On September 19, 1997, the SEC issued an Order3 the pertinent portions of which read: xxx It appearing that the petition is sufficient in form and substance, the corporate petitioners prayer for the creation of management or receivership committee and creditors approval of the proposed Rehabilitation Plan is hereby set for hearing on October 22, 1997 at 2:00 oclock in the afternoon at the SICD, SEC Bldg., EDSA, Greenhills, Mandaluyong City. xxx Finally, the petitioners are hereby enjoined from disposing any and all of their properties in any manner, whatsoever, except in the ordinary course of business and from making any payment outside of the legitimate business expenses during the pendency of the proceedings and as a consequence of the filing of the Petition, all actions, claims and proceedings against herein petitioners pending before any court, tribunal, office board and/or commission are deemed SUSPENDED until further orders from this Hearing Panel pursuant to the rulings of the Supreme Court in the cases of RCBC v. IAC et al., 213 SCRA 830 and BPI v. CA, 229 SCRA 223. (Underscoring supplied) And on September 30, 1997, the SEC issued an Order 4 approving the creation of an interim receiver for the EYCO Group of Companies. On October 10, 1997, the EYCO Group of Companies issued to its employees the following Memorandum:5 This is to formally announce the entry of the Interim Receiver Group represented by SGV from today until October 22, 1997 or until further formal notice from the SEC.

CLARION PRINTING HOUSE, INC., and EULOGIO YUTINGCO, petitioners, vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (Third Division) and MICHELLE MICLAT, respondents. DECISION CARPIO-MORALES, J.: Respondent Michelle Miclat (Miclat) was employed on April 21, 1997 on a probationary basis as marketing assistant with a monthly salary of P6,500.00 by petitioner Clarion Printing House (CLARION) owned by its co-petitioner Eulogio Yutingco. At the time of her employment, she was not informed of the standards that would qualify her as a regular employee. On September 16, 1997, the EYCO Group of Companies of which CLARION formed part filed with the Securities and Exchange Commission (SEC) a "Petition for the Declaration of Suspension of Payment, Formation and Appointment of Rehabilitation Receiver/ Committee, Approval of Rehabilitation Plan with Alternative Prayer for Liquidation and Dissolution of Corporation"1 the pertinent allegations of which read: xxx 5. The situation was that since all these companies were sister companies and were operating under a unified and centralized management team, the financial requirements of one company would normally be backed up or supported by one of the available fundings from the other companies. 6. The expansion exhausted the cash availability of Nikon, NKI, and 2000 because those fundings were absorbed by the requirements of NPI and EYCO Properties, Inc. which were placed on real estate investments. However, at the time that those investments and expansions were made, there was no cause for alarm because the market situation was very bright and very promising, hence, the decision of the management to implement the expansion. 7. The situation resulted in the cash position being spread thin. However, despite the thin cash positioning, the management still was very positive and saw a very viable proposition since the expansion and the additional investments would result in a bigger real estate base which would be very credible collateral for further expansions. It was envisioned that in the end, there would be bigger cash procurement which would result in greater volume of production, profitability and other good results based on the expectations and projections of the team itself. 8. Unfortunately, factors beyond the control and anticipation of the management came into play which caught the petitioners flat-footed, such as: a) The glut in the real estate market which has resulted in the bubble economy for the real estate demand which right now has resulted in a severe slow down in the sales of properties;

This interim receiver groups function is to make sure that all assets of the company are secured and accounted for both for the protection of us and our creditors. Their function will involve familiarization with the different processes and controls in our organization & keeping physical track of our assets like inventories and machineries. Anything that would be required from you would need to be in writing and duly approved by the top management in order for us to maintain a clear line. We trust that this temporary inconvenience will benefit all of us in the spirit of goodwill. Lets extend our full cooperation to them. Thank you. (Underscoring supplied) On October 22, 1997, the Assistant Personnel Manager of CLARION informed Miclat by telephone that her employment contract had been terminated effective October 23, 1997. No reason was given for the termination. The following day or on October 23, 1997, on reporting for work, Miclat was informed by the General Sales Manager that her termination was part of CLARIONs cost -cutting measures. On November 17, 1997, Miclat filed a complaint 6 for illegal dismissal against CLARION and Yutingco (petitioners) before the National Labor Relations Commission (NLRC). In the meantime, or on January 7, 1998, the EYCO Group of Companies issued a Memorandum7 addressed to company managers advising them of "a temporary partial shutdown of some operations of the Company" commencing on January 12, 1998 up to February 28, 1998: In view of the numerous external factors such as slowdown in business and consumer demand and consistent with Art. 286 of the Revised Labor Code of the Philippines, we are constrained to go on a temporary partial shutdown of some operations of the Company. To implement this measure, please submit to my office through your local HRAD the list of those whom you will require to report for work and their specific schedules. Upon revalidation and approval of this list, all those not in the list will not receive any pay nor will it be credited against their VL. Please submit the listing no later than the morning of Friday, January 09, 1998. Shutdown shall commence on January 12, 1998 up to February 28, 1998, unless otherwise recalled at an earlier date. Implementation of th[ese] directives will be done through your HRAD departments. (Underscoring supplied) In her Position Paper8 dated March 3, 1998 filed before the labor arbiter, Miclat claimed that she was never informed of the standards which would qualify her as a regular employee. She asserted, however, that she qualified as a regular employee since her immediate supervisor even submitted a written recommendation in her favor before she was terminated without just or authorized cause. Respecting the alleged financial losses cited by petitioners as basis for her termination, Miclat disputed the same, she contending that as marketing assistant tasked to receive sales calls, produce sales reports and conduct market surveys, a credible assessment on production and sales showed otherwise. In any event, Miclat claimed that assuming that her termination was necessary, the manner in which it was carried out was illegal, no written notice thereof having been served on her, and she merely learned of it only a day before it became effective.

Additionally, Miclat claimed that she did not receive separation pay, 13th month pay and salaries for October 21, 22 and 23, 1997. On the other hand, petitioners claimed that they could not be faulted for retrenching some of its employees including Miclat, they drawing attention to the EYCO Group of Companies being placed under receivership, notice of which was sent to its supervisors and rank and file employees via a Memorandum of July 21, 1997; that in the same memorandum, the EYCO Group of Companies advised them of a scheme for voluntary separation from employment with payment of severance pay; and that CLARION was only adopting the "LAST IN, FIRST OUT PRINCIPLE" when it terminated Miclat who was relatively new in the company. Contending that Miclats termination was made with due process, petitioners referred to the EYCO Group of Companies abovesaid July 21, 1997 Memorandum which, so they claimed, substantially complied with the notice requirement, it having been issued more than one month before Miclat was terminated on October 23, 1997. By Decision9 of November 23, 1998, the labor arbiter found that Miclat was illegally dismissed and directed her reinstatement. The dispositive portion of the decision reads: WHEREFORE, in view of the foregoing premises, judgment is hereby rendered ordering the respondent to reinstate complainant to her former or equivalent position without loss of seniority rights and benefits and to pay her backwages, from the time of dismissal to actual reinstatement, proportionate 13th month pay and two (2) days salary computed as follows: a.1) Backwages 10/23/97 to 11/30/98 P6,500.00 x 13.25 months = P86,125.00 a.2) Proportionate 13th month pay 1/12 of P86,125 = 7,177.08 b) 13th month pay - 1997 =P6,500 x 9.75 months/12 = 5,281.25 c) Two days salary =P6,500/26 x 2 days = 500.00 TOTAL P 99,083.33 (Emphasis and underscoring supplied). Before the National Labor Relations Commission (NLRC) to which petitioners appealed, they argued that:10 1. [CLARION] was placed under receivership thereby evidencing the fact that it sustained business losses to warrant the termination of [Miclat] from her employment. 2. The dismissal of [Miclat] from her employment having been effected in accordance with the law and in good faith, [Miclat] does not deserve to be reinstated and paid backwages, 13th month pay and two (2) days salary. And petitioners pointed out that CLARION had expressed its decision to shutdown its operations by Memorandum11 of January 7, 1998 to its company managers. Appended to petitioners appeal before the NLRC were photocopies of their balance sheets from 1997 to November 1998 which they claimed to "unanimously show that x x x

[petitioner] company experienced business reverses which were made the basis x x x in retrenching x x x."12 By Resolution13 of June 17, 1999, the NLRC affirmed the labor arbiters decision. The pertinent portion of the NLRC Resolution reads: There are three (3) valid requisites for valid retrenchment: (1) the retrenchment is necessary to prevent losses and such losses are proven; (2) written notices to the employees and to the Department of Labor and Employment at least one (1) month prior to the intended date of retrenchment; and (3) payment of separation pay equivalent to one (1) month pay or at least month pay for every year of service, whichever is higher. The two notices are mandatory. If the notice to the workers is later than the notices sent to DOLE, the date of termination should be at least one month from the date of notice to the workers. In Lopez Sugar Corporation v. Federation of Free Workers Philippine Labor Union Association (PLUA-NACUSIP) and National Labor Relations Commission, the Supreme Court had the occasion to set forth four standards which would justify retrenchment, being, 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 bona fide 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 course with serious consequences for the livelihood of the employees retired or otherwise laid-off; thirdly, - because of the consequential nature of retrenchment, it must 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 cost than labor costs; and lastly, - the alleged losses if already realized and the expected imminent losses sought to be forestalled, must be proven by sufficient and convincing evidence. The records show that these requirements were not substantially complied with. And proofs presented by respondents-appellants were short of being sufficient and convincing to justify valid retrenchment. Their position must therefore fail. The reason is simple. Evidences on record presented fall short of the requirement of substantial, sufficient and convincing evidence to persuade this Commission to declare the validity of retrenchment espoused by respondents-appellants. The petition before the Securit[ies] and Exchange Commission for suspension of payment does not prove anything to come within the bounds of justifying retrenchment. In fact, the petition itself lends credence to the fact that retrenchment was not actually reinstated under the circumstances prevailing when it stated, "The foregoing notwithstanding, however, the present combined financial condition of the petitioners clearly indicates that their assets are more than enough to pay off the credits." Verily, reading further into the petition, We are not ready to disregard the fact that the petition merely seeks to suspend payments of their obligation from creditor banks and other financing institutions, and not because of imminent substantial financial loss. On this account, We take note of paragraph 7 of the petition which stated: " The situation resulted in cash position being spread thin. However, despite the thin cash positioning, the management was very positive and saw a very viable proposition since the expansion and the additional investments would result in a bigger real estate base which would be a very credible collateral for further expansions. It was envisioned that in the end, there would a bigger cash procurement which would result in greater volume of production, profitability and other good results based on the expectations and projections of the team itself. " Admittedly, this does not create a picture of retrenchable business atmosphere pursuant to Article 283 of the Labor Code. We cannot disregard the fact that respondent-appellants failed in almost all of the criteria set by law and jurisprudence in justifying valid retrenchment. The two (2) mandatory

notices were violated. The supposed notice to the DOLE (Annex "4," List of Employees on Shutdown) is of no moment, the same having no bearing in this case. Herein complainantappellee was not even listed therein and the date of receipt by DOLE, that is, January 18, 1999, was way out of time in relation to this case. And no proof was adduced to evidence cost cutting measures, to say the least. Nor was there proof shown that separation pay had been awarded to complainant-appellee. WHEREFORE, premises considered, and finding no grave abuse of discretion on the findings of Labor Arbiter Nieves V. De Castro, the appeal is DENIED for lack of merit. The decision appealed from is AFFIRMED in toto. (Italics in the original; underscoring supplied; citations omitted) Petitioners Motion for Reconsideration of the NLRC resolution having been denied by Resolution14 of July 29, 1999, petitioners filed a petition for certiorari15 before the Court of Appeals (CA) raising the following arguments: 1. PETITIONER CLARION WAS PLACED UNDER RECEIVERSHIP THEREBY EVIDENCING THE FACT THAT IT SUSTAINED BUSINESS LOSSES TO WARRANT THE TERMINATION OF PRIVATE RESPONDENT MICLAT FROM HER EMPLOYMENT. 2. THE DISMISSAL OF PRIVATE RESPONDENT MICLAT FROM HER EMPLOYMENT HAVING BEEN EFFECTED IN ACCORDANCE WITH THE LAW AND IN GOOD FAITH, PRIVATE RESPONDENT DOES NOT DESERVE TO BE REINSTATED AND PAID BACKWAGES, 13th MONTH PAY AND TWO (2) DAYS SALARY. (Underscoring supplied) By Decision16 of November 24, 2000, the CA sustained the resolutions of the NLRC in this wise: In the instant case, Clarion failed to prove its ground for retrenchment as well as compliance with the mandated procedure of furnishing the employee and the Department of Labor and Employment (hereafter, DOLE) with one (1) month written notice and payment of separation pay to the employee. Clarions failure to discharge its burden of proof is evident from the following instances: First, Clarion presented no evidence whatsoever before the Labor Arbiter. To prove serious business losses, Clarion presented its 1997 and 1998 financial statements and the SEC Order for the Creation of an Interim Receiver, for the first time on appeal before the NLRC. The Supreme Court has consistently disallowed such practice unless the party making the belated submission of evidence had satisfactorily explained the delay. In the instant case, said financial statements are not admissible in evidence due to Clarions failure to explain the delay. Second, even if such financial statements were admitted in evidence, they would not alter the outcome of the case as statements have weak probative value. The required method of proof in such case is the presentation of financial statements prepared by independent auditors and not merely by company accountants. Again, petitioner failed in this regard. Third, even audited financial statements are not enough. The employer must present the statement for the year immediately preceding the year the employee was retrenched, which Clarion failed to do in the instant case, to prove not only the fact of business losses but more importantly, the fact that such losses were substantial, continuing and without immediate prospect of abatement. Hence, neither the NLRC nor the courts must blindly accept such audited financial statements. They must examine and make inferences from the data presented to

establish business losses. Furthermore, they must be cautioned by the fact that "sliding incomes" or decreasing gross revenues alone are not necessarily business losses within the meaning of Art. 283 since in the nature of things, the possibility of incurring losses is constantly present in business operations. Last, even if business losses were indeed sufficiently proven, the employer must still prove that retrenchment was resorted to only after less drastic measures such as the reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiency, reduction of marketing and advertising costs, faster collection of customer accounts, reduction of raw materials investment and others, have been tried and found wanting. Again, petitioner failed to prove the exhaustion of less drastic measures short of retrenchment as it had failed with the other requisites. It is interesting to note that Miclat started as a probationary employee on 21 April 1997. There being no stipulation to the contrary, her probation period had a duration of six (6) months from her date of employment. Thus, after the end of the probation period on 22 October 1997, she became a regular employee as of 23 October 1997 since she was allowed to work after the end of said period. It is also clear that her probationary employment was not terminated at the end of the probation period on the ground that the employee failed to qualify in accordance with reasonable standards made known to her at the time of engagement. However, 23 October 1997 was also the day of Miclats termination from employment on the ground of retrenchment. Thus, we have a bizarre situation when the first day of an employees regular employment was also the day of her termination. However, this is entirely possible, as had in fact happened in the instant case, where the employers basis for termination is Art. 288, instead of Art. 281 of the Labor Code. If petitioner terminated Miclat with Art. 281 in mind, it would have been too late to present such theory at this stage and it would have been equally devastating for petitioner had it done so because no evidence exists to show that Miclat failed to qualify with petitioners standards for regularization. Failure to discharge its burden of proof would still be petitioners undoing. Whichever way We examine the case, the conclusion is the same Miclat was illegally dismissed. Consequently, reinstatement without loss of seniority rights and full backwages from date of dismissal on 23 October 1997 until actual reinstatement is in order. WHEREFORE, the instant petition is hereby DISMISSED and the 29 July 1999 and 7 June 1999 resolutions of the NLRC are SUSTAINED. (Emphasis and underscoring supplied) By Resolution17 of May 23, 2001, the CA denied petitioners motion for reconsideration of the decision. Hence, the present petition for review on certiorari, petitioners contending that: WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING THE ASSAILED DECISIONS OF HONORABLE PUBLIC RESPONDENT COMMISSION: A. HOLDING THAT PRIVATE ILLEGALLY DISMISSED; and RESPONDENT MICLAT WAS

reverses it had gravely suffered as reflected in its financial statements/balance sheets, thereby leaving as its only option the retrenchment of its employees including Miclat.19 Petitioners further argue that when a company is under receivership and a receiver is appointed to take control of its management and corporate affairs, one of the evident reasons is to prevent further losses of said company and protect its remaining assets from being dissipated; and that the submission of financial reports/statements prepared by independent auditors had been rendered moot and academic, the company having shutdown its operations and having been placed under receivership by the SEC due to its inability to pay or comply with its obligations. 20 Respecting the CAs holding that the financial statements CLARION submitted for the first time on appeal before the NLRC are inadmissible in evidence due to its failure to explain the delay in the submission thereof, petitioners lament the CAs failure to consider that technical rules on evidence prevailing in the courts are not controlling in proceedings before the NLRC which may consider evidence such as documents and affidavits submitted by the parties for the first time on appeal. 21 As to the CAs holding that CLARION failed to prove the exhaustion of less drastic measures short of retrenching, petitioners advance that prior to the termination of Miclat, CLARION, together with the other companies under the EYCO Group of Companies, was placed under receivership during which drastic measures to continue business operations of the company and eventually rehabilitate itself were implemented. 22 Denying Miclats entitlement to backwages, petitioners proffer that her dismissal rested upon a valid and authorized cause. And petitioners assail as grossly erroneous the award of 13th month pay to Miclat, she not having sought it and, therefore, there was no jurisdiction to award the same.23 The petition is partly meritorious. Contrary to the CAs ruling, petitioners could present evidence for the first time on appeal to the NLRC. It is well-settled that the NLRC is not precluded from receiving evidence, even for the first time on appeal, because technical rules of procedure are not binding in labor cases. The settled rule is that the NLRC is not precluded from receiving evidence on appeal as technical rules of evidence are not binding in labor cases. In fact, labor officials are mandated by the Labor Code to use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. Thus, in Lawin Security Services v. NLRC, and Bristol Laboratories Employees Association-DFA v. NLRC, we held that even if the evidence was not submitted to the labor arbiter, the fact that it was duly introduced on appeal to the NLRC is enough basis for the latter to be more judicious in admitting the same, instead of falling back on the mere technicality that said evidence can no longer be considered on appeal. Certainly, the first course of action would be more consistent with equity and the basic notions of fairness. (Italics in the original; citations omitted) 24 It is likewise well-settled that for retrenchment to be justified, any claim of actual or potential business losses must satisfy the following standards: (1) the losses 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 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.25 And it is the employer who has the onus of proving the presence of these standards.

B. ORDERING THE REINSTATEMENT OF PRIVATE RESPONDENT MICLAT TO HER FORMER OR EQUIVALENT POSITION WITHOUT LOSS OF SENIORITY RIGHTS AND BENEFITS AND PAYMENT OF BACKWAGES, 1[3]th MONTH PAY AND TWO (2) DAYS SALARY.18 Petitioners argue that the conclusion of the CA that no sufficient proof of financial losses on the part of CLARION was adduced is patently erroneous, given the serious business

Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) ("reorganization of the securities and exchange commission with additional powers and placing said agency under the administrative supervision of the office of the president"), 26 as amended, read: SEC. 5 In addition to the regulatory and adjudicative functions of THE SECURITIES AND EXCHANGE COMMISSION over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: xxx (d) Petitions of corporations, partnerships or associations declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership, association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree. SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx (c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the provisions of the Rules of Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing public and creditors: Provided, however, That the Commission may in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to powers of the regular receiver under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: x xx (d) To create and appoint a management committee, board or body upon petition or motu propio to undertake the management of corporations, partnership or other associations not supervised or regulated by other government agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties or paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority stockholders, parties-litigants of the general public: x x x (Emphasis and underscoring supplied). From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of a receiver or management committee by the SEC presupposes a finding that, inter alia, a company possesses sufficient property to cover all its debts but "foresees the impossibility of meeting them when they respectively fall due" and "there is imminent danger of dissipation, loss, wastage or destruction of assets of other properties or paralization of business operations." That the SEC, mandated by law to have regulatory functions over corporations, partnerships or associations,27 appointed an interim receiver for the EYCO Group of Companies on its petition in light of, as quoted above, the therein enumerated "factors beyond the control and anticipation of the management" rendering it unable to meet its obligation as they fall due, and thus resulting to "complications and problems . . . to arise that would impair and affect [its] operations . . ." shows that CLARION, together with the other member-companies of the EYCO Group of Companies, was suffering business reverses justifying, among other things, the retrenchment of its employees.

This Court in fact takes judicial notice of the Decision 28 of the Court of Appeals dated June 11, 2000 in CA-G.R. SP No. 55208, "Nikon Industrial Corp., Nikolite Industrial Corp., et al. [including CLARION], otherwise known as the EYCO Group of Companies v. Philippine National Bank, Solidbank Corporation, et al., collectively known and referred as the Consortium of Creditor Banks," which was elevated to this Court via Petition for Certiorari and docketed as G.R. No. 145977, but which petition this Court dismissed by Resolution dated May 3, 2005: Considering the joint manifestation and motion to dismiss of petitioners and respondents dated February 24, 2003, stating that the parties have reached a final and comprehensive settlement of all the claims and counterclaims subject matter of the case and accordingly, agreed to the dismissal of the petition for certiorari, the Court Resolved to DISMISS the petition for certiorari (Underscoring supplied). The parties in G.R. No. 145977 having sought, and this Court having granted, the dismissal of the appeal of the therein petitioners including CLARION, the CA decision which affirmed in toto the September 14, 1999 Order of the SEC, the dispositive portion of which SEC Order reads: WHEREFORE, premises considered, the appeal is as it is hereby, granted and the Order dated 18 December 1998 is set aside. The Petition to be Declared in State of Suspension of payments is hereby disapproved and the SAC Plan terminated. Consequently, all committee, conservator/ receivers created pursuant to said Order are dissolved and discharged and all acts and orders issued therein are vacated. The Commission, likewise, orders the liquidation and dissolution of the appellee corporations. The case is hereby remanded to the hearing panel below for that purpose. x x x (Emphasis and underscoring supplied), has now become final and executory. Ergo, the SECs disapproval of the EYCO Group of Companies "Petition for the Declaration of Suspension of Payment . . ." and the order for the liquidation and dissolution of these companies including CLARION, must be deemed to have been unassailed. That judicial notice can be taken of the above-said case of Nikon Industrial Corp. et al. v. PNB et al., there should be no doubt. As provided in Section 1, Rule 129 of the Rules of Court: SECTION 1. Judicial notice, when mandatory. A court shall take judicial notice, without the introduction of evidence, of the existence and territorial extent of states, their political history, forms of government and symbols of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the political constitution and history of the Philippines, the official acts of the legislative, executive and judicial departments of the Philippines, the laws of nature, the measure of time, and the geographical divisions. (Emphasis and underscoring supplied) which Mr. Justice Edgardo L. Paras interpreted as follows: A court will take judicial notice of its own acts and records in the same case, of facts established in prior proceedings in the same case, of the authenticity of its own records of another case between the same parties, of the files of related cases in the same court, and of public records on file in the same court. In addition judicial notice will be taken of the record, pleadings or judgment of a case in another court between the same parties or involving one of the same parties, as well as of the record of another case between different parties in the same court. Judicial notice will also be taken of court personnel. (Emphasis and underscoring supplied)29

In fine, CLARIONs claim that at the time it terminated Miclat it was experiencing business reverses gains more light from the SECs disapproval of the EYCO Group of Companies petition to be declared in state of suspension of payment, filed before Miclats termination, and of the SECs consequent order for the group of companies dissolution and liquidation. This Courts finding that Miclats termination was justified notwithstanding, since at the time she was hired on probationary basis she was not informed of the standards that would qualify her as a regular employee, under Section 6, Rule I of the Implementing Rules of Book VI of the Labor Code which reads: SEC. 6. Probationary employment. There is probationary employment where the employee, upon his engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment, based on reasonable standards made known to him at the time of engagement. "Probationary employment shall be governed by the following rules: xxx (d) In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a regular employee" (Emphasis and underscoring supplied), she was deemed to have been hired from day one as a regular employee.30 CLARION, however, failed to comply with the notice requirement provided for in Article 283 of the Labor Code, to wit: ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the worker and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. x x x (Emphasis and underscoring supplied) This Court thus deems it proper to award the amount equivalent to Miclats one (1) month salary of P6,500.00 as nominal damages to deter employers from future violations of the statutory due process rights of employees.31 Since Article 283 of the Labor Code also provides that "[i]n case of retrenchment to prevent losses, . . . 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 [being] considered one (1) whole year," this Court holds that Miclat is entitled to separation pay equivalent to one (1) month salary. As to Miclats entitlement to 13th month pay, paragraph 6 of the Revised Guidelines on the 13th Month Pay Law provides: 6. 13th Month Pay of Resigned or Separated Employee An employee x x x whose services were terminated any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the calendar year up to the time of his resignation or termination from the service. Thus if he worked only from January up to September his proportionate 13th month pay shall be equivalent to 1/12 of his total basic salary he earned during that period. xxx

Having worked at CLARION for six months, Miclats 13th month pay should be computed as follows: (Monthly Salary x 6 ) / 12 = Proportionate 13th month pay (P6,500.00 x 6) / 12 = P3,250.00 With the appointment of a management receiver in September 1997, however, all claims and proceedings against CLARION, including labor claims, 32 were deemed suspended during the existence of the receivership. 33 The labor arbiter, the NLRC, as well as the CA should not have proceeded to resolve respondents complaint for illegal dismissal and should instead have directed respondent to lodge her claim before the then duly-appointed receiver of CLARION. To still require respondent, however, at this time to refile her labor claim against CLARION under the peculiar circumstances of the case that 8 years have lapsed since her termination and that all the arguments and defenses of both parties were already ventilated before the labor arbiter, NLRC and the CA; and that CLARION is already in the course of liquidation this Court deems it most expedient and advantageous for both parties that CLARIONs liability be determined with finality, instead of still requiring respondent to lodge her claim at this time before the liquidators of CLARION which would just entail a mere reiteration of what has been already argued and pleaded. Furthermore, it would be in the best interest of the other creditors of CLARION that claims against the company be finally settled and determined so as to further expedite the liquidation proceedings. For the lesser number of claims to be proved, the sooner the claims of all creditors of CLARION are processed and settled. WHEREFORE, the Court of Appeals November 24, 2000 Decision, together with its May 23, 2001 Resolution, is SET ASIDE and another rendered declaring the legality of the dismissal of respondent, Michelle Miclat. Petitioners are ORDERED, however, to PAY her the following in accordance with the foregoing discussions: 1) P6,500.00 as nominal damages for non-compliance with statutory due process; 2) P6,500.00 as separation pay; and 3) P3,250.00 as 13th month pay. Let a copy of this Decision be furnished the SEC Hearing Panel charged with the liquidation and dissolution of petitioner corporation for inclusion, in the list of claims of its creditors, respondent Michelle Miclats claims, to be satisfied in accordance with Article 110 of the Labor Code in relation to the Civil Code provisions on Concurrence and Preference of Credits. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

This Agreement made and executed by and between: HENRY LEI, of legal age, Filipino citizen, married, and a resident of Digos, Davao del Sur, now and hereinafter called the FIRST PARTY, a n d

G.R. No. 78693 January 28, 1991 ZOSIMO CIELO, petitioner, vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, HENRY LEI and/or HENRY LEI TRUCKING respondents. Francisco D. Alas for petitioner. Mateo G. Delegencia for private respondent.

ZOSIMO CIELO, of legal age, married, Filipino citizen, and a resident of Agusan, Canyon, Camp Philipps, now and hereinafter called the SECOND PARTY, WITNESSETH That the FIRST PARTY is an owner of some cargo trucks. WHEREAS, the SECOND PARTY desires to operate one of the said cargo trucks which he himself shall drive for income; NOW, THEREFORE, for the foregoing premises, the FIRST PARTY does hereby assign one cargo truck of his fleet to the SECOND PARTY under the following conditions and stipulations: 1. That the term of this Agreement is six (6) months from and after the execution hereof, unless otherwise earlier terminated at the option of either party; 2. That the net income of the said vehicle after fuel and oil shall be divided by and between them on ninety/ten percent (90/10%) basis in favor of the FIRST PARTY; 3. That there is no employer/employee relationship between the parties, the nature of this Agreement being contractual; 4. In the event the SECOND PARTY needs a helper the personnel so employed by him shall be to his personal account, who shall be considered his own employee; 5. That the loss of or damage to the said vehicle shall be to account of the SECOND PARTY; he shall return the unit upon the expiration or termination of this contract in the condition the same was received by him, fair wear and tear excepted. IN WITNESS WHEREOF, the parties hereunto affixed their signature on this 30th day of June, 1984, at Digos, Davao del Sur, Philippines. (Sgd.) HENRY LEI (Sgd.) ZOSIMO CIELO First Party Second Party SIGNED IN THE PRESENCE OF: (Sgd.) VICTOR CHAN (Sgd.) AMALFE M. NG The agreement was supposed to have commenced on June 30, 1984, and to end on December 31, 1984. On December 22, 1984, however, the petitioner was formally notified by the private respondent of the termination of his services on the ground of expiration of their contract. Soon thereafter, on January 22, 1985, the petitioner filed his complaint with the Ministry of Labor and Employment.

CRUZ, J.:p The petitioner is a truck driver who claims he was illegally dismissed by the private respondent, the Henry Lei Trucking Company. The Labor Arbiter found for him and 1 ordered his reinstatement with back wages. On appeal, the decision was reversed by the National Labor Relations Commission, which held that the petitioner's 2 employment had expired under a valid contract. The petitioner then came to us on certiorari under Rule 65 of the Rules of Court. Required to submit a Comment (not to file a motion to dismiss), the private respondent nevertheless moved to dismiss on the ground that the petition was filed sixty-eight days after service of the challenged decision on the petitioner, hence late. The motion was untenable, of course. Petitions for certiorari under Rule 65 may be instituted within a reasonable period, which the Court has consistently reckoned at three months.** In his own Comment, the Solicitor General defended the public respondent and agreed that the contract between the petitioner and the private respondent was a binding agreement not contrary to law, morals or public policy. The petitioner's services could be legally terminated upon the expiration of the period agreed upon, which was only six months. The petitioner could therefore not complain that he had been illegally dismissed. As an examination of the claimed agreement was necessary to the resolution of this case, the Court required its production by the petitioner. But he could not comply because he said he had not been given a copy by the private respondent. A similar requirement proved fruitless when addressed to the private respondent, which explained it could not locate the folder of the case despite diligent search. It was only on October 15, 1990, that the records of the case, including the subject agreement, were finally received by the Court from the NLRC, which had obtained them from its 3 Cagayan de Oro regional office. The said agreement reads in full as follows: AGREEMENT KNOW ALL MEN BY THESE PRESENTS:

In his position paper, the petitioner claimed he started working for the private respondent on June 16, 1984, and having done so for more than six months had acquired the status of a regular employee. As such, he could no longer be dismissed except for lawful cause. He also contended that he had been removed because of his refusal to sign, as required by the private respondent, an affidavit reading as follows: AFFIDAVIT That I, ZOSIMO CIELO, Filipino, of legal age, married/single and a resident of Agusan Canyon, Camp Philipps, after having been duly sworn to in accordance with law, hereby depose and say: That I am one of the drivers of the trucks of Mr. HENRY LEI whose hauling trucks are under contract with the Philippine Packing Corporation; That I have received my salary and allowances from Mr. HENRY LEI the sum of P1,421.10 for the month of October 1984. That I have no more claim against the said Mr. Henry Lei. IN WITNESS WHEREOF, I have hereunto affixed my signature this 15th day of November 1984.r The private respondent rests its case on the agreement and maintains that the labor laws are not applicable because the relations of the parties are governed by their voluntary stipulations. The contract having expired, it was the prerogative of the trucking company to renew it or not as it saw fit. The writ will issue. While insisting that it is the agreement that regulates its relations with the petitioner, the private respondent is ensnared by its own words. The agreement specifically declared that there was no employer-employee relationship between the parties. Yet the affidavit the private respondent prepared required the petitioner to acknowledge that "I have received my salary and allowances from Mr. Henry Lei," suggesting an employment relationship. According to its position paper, the petitioner's refusal to sign the affidavit constituted disrespect or insubordination, which had "some bearing on the renewal of his contract of employment with the respondent." Of this affidavit, the private respondent had this to say: . . . Since October 1984, respondent adopted a new policy to require all their employees to sign an affidavit to the effect that they received their salaries. Copy of which is hereto attached as Annex "C," covering the months of October and November 1984. All other employees of the respondent signed the said affidavit, only herein complainant refused to do so for reasons known only to him. . . . It appears from the records that all the drivers of the private respondent have been hired on a fixed contract basis, as evidenced by the mimeographed form of the agreement and of the affidavit. The private respondent merely filled in the blanks with the corresponding data, such as the driver's name and address, the amount received by him, and the date of the document. Each driver was paid through individual 4 vouchers rather than a common payroll, as is usual in companies with numerous employees.

The private respondent's intention is obvious. It is remarkable that neither the NLRC nor the Solicitor General recognized it. There is no question that the purpose behind these individual contracts was to evade the application of the labor laws by making it appear that the drivers of the trucking company were not its regular employees. Under these arrangements, the private respondent hoped to be able to terminate the services of the drivers without the inhibitions of the Labor Code. All it had to do was refuse to renew the agreements, which, significantly, were uniformly limited to a sixmonth period. No cause had to be established because such renewal was subject to the discretion of the parties. In fact, the private respondent did not even have to wait for the expiration of the contract as it was there provided that it could be "earlier terminated at the option of either party." By this clever scheme, the private respondent could also prevent the drivers from becoming regular employees and thus be entitled to security of tenure and other benefits, such as a minimum wage, cost-of-living allowances, vacation and sick leaves, holiday pay, and other statutory requirements. The private respondent argues that there was nothing wrong with the affidavit because all the affiant acknowledged therein was full payment of the amount due him under the agreement. Viewed in this light, such acknowledgment was indeed not necessary at all because this was already embodied in the vouchers signed by the payee-driver. But the affidavit, for all its seeming innocuousness, imported more than that. What was insidious about the document was the waiver the affiant was unwarily making of the statutory rights due him as an employee of the trucking company. And employee he was despite the innocent protestations of the private respondent. We accept the factual finding of the Labor Arbiter that the petitioner was a regular employee of the private respondent. The private respondent is engaged in the trucking business as a hauler of cattle, crops and other cargo for the Philippine Packing Corporation. This business requires the services of drivers, and continuously because the work is not seasonal, nor is it limited to a single undertaking or operation. Even if ostensibly hired for a fixed period, the petitioner should be considered a regular employee of the private respondent, conformably to Article 280 of the Labor Code providing as follows: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessarily or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied)

In Brent School, Inc. vs. Zamora, the Court affirmed the general principle that "where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc." Such circumstances have been sufficiently established in the case at bar and justify application of the following conclusions: Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. The agreement in question had such a purpose and so was null and void ab initio. The private respondent's argument that the petitioner could at least be considered on probation basis only and therefore separable at will is self-defeating. The Labor Code clearly provides as follows: Art. 281. Probationary employment. Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. There is no question that the petitioner was not engaged as an apprentice, being already an experienced truck driver when he began working for the private respondent. Neither has it been shown that he was informed at the time of his employment of the reasonable standards under which he could qualify as a regular employee. It is plain that the petitioner was hired at the outset as a regular employee. At any rate, even assuming that the original employment was probationary, the Labor Arbiter found that the petitioner had completed more than six month's service with the trucking company and so had acquired the status of a regular employee at the time of his dismissal. Even if it be assumed that the six-month period had not yet been completed, it is settled that the probationary employee cannot be removed except also for cause as provided by law. It is not alleged that the petitioner was separated for poor performance; in fact, it is suggested by the private respondent that he was dismissed for disrespect and insubordination, more specifically his refusal to sign the affidavit as required by company policy. Hence, even as a probationer, or more so as a regular employee, the petitioner could not be validly removed under Article 282 of the Labor Code, providing as follows: Art. 282. Termination by employer. An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing. In refusing to sign the affidavit as required by the private respondent, the petitioner was merely protecting his interests against an unguarded waiver of the benefits due him under the Labor Code. Such willful disobedience should commend rather than prejudice him for standing up to his rights, at great risk to his material security, against the very source of his livelihood. The Court looks with stern disapproval at the contract entered into by the private respondent with the petitioner (and who knows with how many other drivers). The agreement was a clear attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as in ordinary private transactions. They were not, to be sure. The agreement was in reality a contract of employment into which were read the provisions of the Labor Code and the social justice policy mandated by the Constitution. It was a deceitful agreement cloaked in the habiliments of legality to conceal the selfish desire of the employer to reap undeserved profits at the expense of its employees. The fact that the drivers are on the whole practically unlettered only makes the imposition more censurable and the avarice more execrable. WHEREFORE, the petition is GRANTED. The decision of the National Labor Relations Commission is SET ASIDE and that of the Labor Arbiter REINSTATED, with costs against the private respondents. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 148130 June 16, 2006

On the claim of illegal dismissal, the same is unavailing as complainant had been declared as one with partial permanent disability. Thus, he should be entitled to disability benefit of 18 days for every year of credited service of fourteen (14) years less the amount he already received under the Companys Disability Plan. On the claim of 13th month pay, the respondent Agency not falling under the enumerated exempted employers under P.D. 851 and in the absence of any proof that respondent is already paying its employees a 13th month pay or more in a calendar year, perforce, respondent agency should pay complainant his monthly pay computed at [sic] the actual month [sic] worked, which is 8 months. Since complainant was forced to litigate his case, he is hereby awarded 10% of the total award as attorneys fees. SO ORDERED.
8

PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL SHIPPING (BAHAMAS) CO., LTD.) and TRANS-GLOBAL MARITIME AGENCY, INC., Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and FLORELLO W. TANCHICO, Respondents. DECISION CARPIO, J.: The Case Before the Court is a petition for review assailing the 25 January 2001 Decision and 3 7 May 2001 Resolution of the Court of Appeals in CA-G.R. SP No. 54756. The Antecedent Facts On 6 March 1978, Esso International Shipping (Bahamas) Co., Ltd., ("Esso") through Trans-Global Maritime Agency, Inc. ("Trans-Global") hired Florello W. Tanchico ("Tanchico") as First Assistant Engineer. In 1981, Tanchico became Chief Engineer. On 13 October 1992, Tanchico returned to the Philippines for a two-month vacation after completing his eight-month deployment. On 8 December 1992, Tanchico underwent the required standard medical examination prior to boarding the vessel. The medical examination revealed that Tanchico was suffering from "Ischemic Heart Disease, Hypertensive Cardio-Muscular Disease and Diabetes Mellitus." Tanchico took medications for two months and a subsequent stress test showed a negative result. However, Esso no longer deployed Tanchico. Instead, Esso offered to pay him benefits under the Career Employment Incentive Plan. Tanchico accepted the offer. On 26 April 1993, Tanchico filed a complaint against Esso, Trans-Global and Malayan Insurance Co., Inc. ("Malayan") before the Philippine Overseas Employment Administration (POEA) for illegal dismissal with claims for backwages, separation pay, disability and medical benefits and 13th month pay. In view of the enactment of 4 Republic Act No. 8042 ("RA 8042") transferring to the National Labor Relations Commission (NLRC) the jurisdiction over money claims of overseas workers, the case was indorsed to the Arbitration Branch of the National Capital Region. In a 5 Decision dated 16 October 1996, Labor Arbiter Jose G. De Vera ("Labor Arbiter De Vera") dismissed the complaint for lack of merit. Tanchico appealed to the NLRC. The Ruling of the NLRC In its Resolution of 3 September 1998, the NLRC affirmed the Decision of Labor 7 Arbiter De Vera. Tanchico filed a motion for reconsideration. In a Resolution promulgated on 29 March 1999, the NLRC reconsidered its 3 September 1998 Resolution, as follows:
6 1 2

Esso and Trans-Global moved for the reconsideration of the 29 March 1999 9 10 Resolution. In its 27 July 1999 Resolution, the NLRC denied their motion. Esso, now using the name Petroleum Shipping Limited ("Petroleum Shipping"), and Trans-Global (collectively referred to as "petitioners") filed a petition for certiorari before the Court of Appeals assailing the 29 March 1999 and 27 July 1999 Resolutions of the NLRC. The Ruling of the Court of Appeals In its Decision promulgated on 25 January 2001, the Court of Appeals affirmed in toto the 29 March 1999 Resolution of the NLRC. The Court of Appeals ruled that Tanchico was a regular employee of Petroleum Shipping. The Court of Appeals held that petitioners are not exempt from the 11 coverage of Presidential Decree No. 851, as amended ("PD 851") which mandates the payment of 13th month pay to all employees. The Court of Appeals further ruled that Tanchico is entitled to disability benefits based on his 14 years of tenure with petitioners. The Court of Appeals stated that the employer-employee relationship subsisted even during the period of Tanchicos vacation. The Court of Appeals noted that petitioners were aware of Tanchicos medical history yet they still deployed him for 14 years. Finally, the Court of Appeals sustained the award of attorneys fees. Petitioners moved for the reconsideration of the Decision. In its 7 May 2001 Resolution, the Court of Appeals modified its Decision by deducting Tanchicos vacation from his length of service. Thus: WHEREFORE, our decision is hereby MODIFIED. The petitioners are ordered to pay to the private respondent the following: (1) disability wages equivalent to 18 days per year multiplied by 10 years less any amount already received under the companys disability plan; prorated 13th month pay corresponding to eight (8) months of actual work; and attorneys fee equivalent to 10% of the total award. SO ORDERED.
12

Petitioners went to this Court for relief on the following grounds: I. The Court of Appeals decided a question of substance not in accord with law, applicable decision of this Court and International Maritime Law when it ruled that private respondent, a seafarer, was a regular employee;

II. The Court of Appeals decided a question of substance not in accord with law when it held that the private respondent was entitled to greater disability benefit than he was [sic]; III. The Court of Appeals decided a question of substance not heretofore determined by this Court when it ruled that private respondent was entitled to 13th month pay although it was not provided for in the contract of employment between petitioners and private respondent; and IV. The Court of Appeals decided a question of substance not in accord with law when it awarded private respondent attorneys fees despite the Labor Arbiters and the public respondents, albeit initially, dismissal of the 13 complaint. The Issues The issues are as follows: 1. Whether Tanchico is a regular employee of petitioners; and 2. Whether Tanchico is entitled to 13th month pay, disability benefits and attorneys fees. The Ruling of This Court The petition is partly meritorious. Seafarers are Contractual Employees The issue on whether seafarers are regular employees is already a settled matter. In Ravago v. Esso Eastern Marine, Ltd., the Court traced its ruling in a number of cases that seafarers are contractual, not regular, employees. Thus, in Brent School, 15 Inc. v. Zamora, the Court cited overseas employment contract as an example of contracts where the concept of regular employment does not apply, whatever the nature of the engagement and despite the provisions of Article 280 of the Labor 16 Code. In Coyoca v. NLRC, the Court held that the agency is liable for payment of a seamans medical and disability benefits in the event that the principal fails or refuses to pay the benefits or wages due the seaman although the seaman may not be a regular employee of the agency. The Court squarely passed upon the issue in Millares v. NLRC where one of the issues raised was whether seafarers are regular or contractual employees whose employment are terminated everytime their contracts of employment expire. The Court explained: [I]t is clear that seafarers are considered contractual employees. They can not be considered as regular employees under Article 280 of the Labor Code. Their employment is governed by the contracts they sign everytime they are rehired and their employment is terminated when the contract expires. Their employment is contractually fixed for a certain period of time. They fall under the exception of Article 280 whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. We need not depart from the rulings of the Court in the two aforementioned cases which indeed constitute stare decisis with respect to the employment status of seafarers.
17 14

Petitioners insist that they should be considered regular employees, since they have rendered services which are usually necessary and desirable to the business of their employer, and that they have rendered more than twenty (20) years of service. While this may be true, the Brent case has, however, held that there are certain forms of employment which also require the performance of usual and desirable functions and which exceed one year but do not necessarily attain regular employment status under Article 280. Overseas workers including seafarers fall under this type of employment which are governed by the mutual agreements of the parties. In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and Regulations of the POEA. The Standard Employment Contract governing the employment of All Filipino Seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the contract of seamen shall be for a fixed period. And in no case should the contract of seamen be longer than 12 months. It reads: Section C. Duration of Contract The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be stated in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent of the parties. Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the mutual interest of both the seafarer and the employer why the employment status must be contractual only or for a certain period of time. Seafarers spend most of their time at sea and understandably, they can not stay for a long and an indefinite period of time at sea. Limited access to shore society during the employment will have an adverse impact on the seafarer. The national, cultural and lingual diversity among the crew during the COE is a reality that necessitates the limitation of its period. Petitioners make much of the fact that they have been continually re-hired or their contracts renewed before the contracts expired (which has admittedly been going on for twenty (20) years). By such circumstance they claim to have acquired regular status with all the rights and benefits appurtenant to it. Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by practical considerations that experienced crew members are more preferred. Petitioners were only given priority or preference because of their experience and qualifications but this does not detract the fact that herein petitioners 18 are contractual employees. They can not be considered regular employees. x x x The Court reiterated the Millares ruling in Gu-Miro v. Adorable where it held that a radio officer on board a vessel cannot be considered as a regular employee notwithstanding that the work he performs is necessary and desirable in the business of the company. Thus, in the present case, the Court of Appeals erred in ruling that Tanchico was a regular employee of Petroleum Shipping. On 13th Month Pay The Court of Appeals premised its grant of 13th month pay on its ruling that Tanchico was a regular employee. The Court of Appeals also ruled that petitioners are not
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exempt from the coverage of PD 851 which requires all employers to pay their employees a 13th month pay. We do not agree with the Court of Appeals. Again, Tanchico was a contractual, not a regular, employee. Further, PD 851 does not apply to seafarers. The WHEREAS clauses of PD 851 provides: WHEREAS, it is necessary to further protect the level of real wages from ravages of world-wide inflation; WHEREAS, there has been no increase in the legal minimum wage rates since 1970; WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year. PD 851 contemplates the situation of land-based workers, and not of seafarers who generally earn more than domestic land-based workers. Tanchicos employment is governed by his Contract of Enlistment ("Contract"). The Contract has been approved by the POEA in accordance with Title I, Book One of the 21 Labor Code and the POEA Rules Governing Employment. The coverage of the Contract includes Compensation, Overtime, Sundays and Holidays, Vacations, Living Allowance, Sickness, Injury and Death, Transportation and Travel Expense, Subsistence and Living Quarters. It does not provide for the payment of 13th month 22 pay. The Contract of Employment, which is the standard employment contract of the POEA, likewise does not provide for the payment of 13th month pay. In Coyoca v. NLRC which involves a claim for separation pay, this Court held: Furthermore, petitioners contract did not provide for separation benefits. In this connection, it is important to note that neither does POEA standard employment contract for Filipino seamen provide for such benefits. As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas Employment and the said Rules do not provide for separation or 23 termination pay. x x x Hence, in the absence of any provision in his Contract governing the payment of 13th month pay, Tanchico is not entitled to the benefit. On Disability Benefits Petitioners allege that Tanchicos Contract ended on 13 October 1992 when he returned to Manila. They allege that the vacation period is not part of the period of employment. We cannot accept petitioners contention. The duration of the Contract was for eight months. The Contract also provides: Article V VACATIONS Vacation days shall be earned at the rate of seven and one-half days (7.5) days for each thirty (30) days of continuous service, calculated from date of departure from Manila and until date of return to Manila. Vacation begins on the day following arrival in Manila.
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Every effort will be made to grant earned vacations promptly after eight (8) months of service; however, the COMPANY shall have the right to advance or delay vacations to coincide with vessel repairs, for operational reasons or due to personal requirements. SEAFARER shall receive vacation compensation for each thirty (30) days of continuous service in accordance with the rates listed in Addendum No. 1, Column (12), to be paid in Manila. Amounts shall be pro-rated according to the ranks/ratings and period of time in which the SEAFARER served. For period of less than thirty (30) days service, vacations and compensation shall be reduced proportionately. Time off for illness, injury, vacation, leave of absence or stand-by shall not be considered service under the provisions of this Article. It is the COMPANYs intention that each SEAFARER enjoy his full vacation period. Because of urgent fleet needs, however, it occasionally may be necessary to recall a 24 SEAFARER early from vacation. Since Tanchico received compensation during his vacation, the Contract did not terminate on the day he returned to Manila. The Contract remained in force during Tanchicos vacation period. However, the Court of Appeals erred when it ruled that Tanchico is entitled to disability benefits of 18 days for every year of service. The Court of Appeals ruled that Tanchicos employment was continuous and that his tenure with petitioners was for 14 years. Again, the Court of Appeals assumed that Tanchico was a regular employee. The Court of Appeals failed to consider that Tanchicos employment terminated with the end of each contract. The Contract provides: Article VIII SICKNESS-INJURY/DEATH A. The COMPANY shall provide, during the period of the Contract, Insurance coverage for the SEAFARER against loss of life, permanent disability, temporary disability, injury, occupational illness, hospital and medical expense in such amounts as the COMPANY shall determine but not lower than what the COMPANY would have to pay under the Philippine Overseas Employment Administrations requirements or the vessels flag state requirements (whichever is higher). B. If SEAFARER is removed from a vessel for medical treatment he shall be entitled to receive a disability benefit equal to his monthly wage rate (or prorata thereof) from date of disembarkation until date of rejoining his vessel, assignment to another vessel or until date of repatriation to Manila if still disabled. Medical, surgical, hospital, or clinical treatment shall be recommended by a doctor approved by the COMPANY and SEAFARER must follow all medical advices. SEAFARER will not be entitled to disability benefit payments for disability resulting from his own misconduct, negligence, unlawful acts, altercations, vice, etc. C. After disembarkation from a vessel, the SEAFARER is entitled to one hundred percent (100%) of his wages until he is declared fit or the degree of permanent disability has been assessed by the COMPANYs physician for a maximum period of 120 days commencing on date of such disembarkation.

Upon the expiration of such 120 days and if the SEAFARER is still disabled, the SEAFARER shall be paid his wages equivalent to 18 days for every year of credited service. In special instances and at the discretion of the COMPANY, the maximum number of days of COMPANY benefits may be extended beyond 120 days for a SEAFARER with over 80 months credited COMPANY service, or in such other case as may be determined by the COMPANY. Upon expiration of COMPANY benefits and if still disabled, the following amounts shall be paid up to maximum of 365 days, inclusive of the period of the above benefits. All Ranks ................................................ US $10 per day D. If disability should occur while SEAFARER is on vacation, he must, within 3 days from date thereof, notify the COMPANYs Agent in the Philippines in order that the latter shall be able to certify as to his condition. Certification of disability required for payment of any disability benefits must be approved by a doctor appointed by the COMPANY and SEAFARER must be disabled seven (7) days or more to be eligible to benefits and sick leave status, COMPANY benefits shall be limited to a maximum of 18 days. Benefits under the COMPANY Disability Plan shall be made only to the extent and in such amounts as are equal to the differential between any payments which may be due SEAFARER under COMPANYs obligation as set forth in the 1st paragraph of this Article VIII and 90 percent of SEAFARERs last wage rate. E. In case of death at sea or at a foreign port, the tradition of the sea and requirements of the laws of such foreign port will be observed. If practical, every effort will be made on the part of the COMPANY to return the remains of a deceased SEAFARER to Manila at COMPANY expense. F. The SEAFARER acknowledges that even without signed receipts, any wage payments made to him for a period during which he is entitled to benefits under any law by reason of death, temporary or permanent disability, shall be deemed an advance payment of compensation benefits due to him under such law, but only to the extent of benefits due for the period of disability during which wages are paid. Wages, as set forth in Addendum No. 1, Column (1), shall be the basis for any 25 calculation of benefits due SEAFARER under this Article VIII. (Emphasis supplied) Indications that Tanchico was suffering from ischemia were detected on 8 December 1992 during Tanchicos vacation period. Thus, petitioners paid him disability benefits for 18 days in accordance with the Contract. Tanchico cannot claim that he only 26 acquired the illness during his last deployment since the Medical Report he submitted to the NLRC showed that he has been hypertensive since 1983 and diabetic since 1987. In the absence of concrete proof that Tanchico acquired his disability during his last deployment and not during his vacation, he is only entitled to disability benefits for 18 days.

Petitioners claim that they already paid Tanchico his disability benefits for 18 days but 27 he refused to sign the receipt. Tanchico alleged that he was only paid under the 28 Career Employment Incentive Plan. This is a factual matter which this Court cannot resolve. This matter has to be remanded to the Labor Arbiter for resolution. WHEREFORE, we GRANT the petition. We REVERSE and SET ASIDE the 25 January 2001 Decision and 7 May 2001 Resolution of the Court of Appeals in CAG.R. SP No. 54756. We REINSTATE the 16 October 1996 Decision of Labor Arbiter Jose G. De Vera dismissing the complaint for illegal dismissal and the claims for backwages, separation pay and 13th month pay. We REMAND the case to the Labor Arbiter to determine if Florello Tanchico has been paid his disability benefits for 18 days in accordance with his Contract of Enlistment. If no payment has been made, the Labor Arbiter is DIRECTED to determine the amount Tanchico is entitled. SO ORDERED.