Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 114671 November 24, 1999

AURELIO SALINAS, JR., ARMANDO SAMULDE, ALEJANDRO ALONZO and AVELINO
CORTEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ATLANTIC GULF AND PACIFIC
CO. of MANILA, INC.,respondents.

PURISIMA, J.:
This petition for review should have been properly initiated and is therefore treated as a
special civil action forcertiorari under Rule 65. The herein petitioners, Aurelio Salinas, Jr.,
Armando Samulde, Alejandro Alonzo and Avelino Cortez, assail the Resolution 1 dated
January 31, 1994 of the National Labor Relations Commission (NLRC, for brevity) which
dismissed their complaint, and affirming, in effect, the Decision 2 of the Labor Arbiter
declaring them project employees and not regular employees of respondent Atlantic Gulf
and Pacific Company of Manila, Inc. (hereinafter referred to as AG & P).
Petitioner Alejandro Alonzo had been employed with AG & P in the several construction
projects of the latter from 1982 to 1989, in the course of which he essentially performed
the same job, initially as a laborer, and later as bulk cement operator, bulk cement
plant/carrier operator, and crane driver. Under similar circumstances, petitioner Avelino
Cortez had been employed with AG & P from 1979 to 1988 as carpenter/forklift operator;
petitioner Armando Samulde served as lubeman/stationary operator from 1982 to 1989;
while petitioner Aurelio Salinas, Jr., used to work as carpenter/finishing carpenter from
1983 to 1988.
On May 29, June 6, July 4 and July 5 of 1989, respectively, petitioners Salinas, Samulde,
Alonzo and Cortez filed against the respondent corporation separate complaints for
illegal dismissal, which cases were consolidated and jointly heard by Labor Arbiter
Manuel P. Asuncion.
In his Order of dismissal, Labor Arbiter Asuncion found that petitioners are project
employees whose work contracts with AG & P indicate that they were employed in such
Page 1 of 497

category; that they have been assigned to different work projects, not just to one and
that their work relation with AG & P, relative to termination, is governed by Policy
Instruction No. 20.
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the
complaint for want of merit, ratiocinating thus:
In the first place, examining the contract of employment of complainants
herein presented as evidence by respondent, we found that a) they were
employed for a specific project and for a specific period; b) that they were
assigned to different projects and not just one as earlier claimed by them. In
short, from the evidence adduced by respondent which complainants
miserably failed to rebut with their one page position paper containing
sweeping statements, there appears to be no doubt that they are project
employees hired for a specific project. Their subsequent separation from
service, therefore, as a result of the completion of the project or its phase
did not result in illegal dismissal. 3
Dissatisfied with the aforesaid disposition below, petitioners found their way to this Court
via the present petition posing as the sole issue whether they are regular or project
employee.
Petitioners principally argue that following the ruling in the Caramol
case, 4 NLRC gravely erred in dismissing their complaint and declaring them project
employees. According to them, they had been covered by a number of contracts
renewed continuously, with periods ranging from five (5) to nine (9) years, and they
performed the same kind of work through out their employment, and such was usually
necessary and desirable in the trade or business of the respondent corporation; and their
work did not end on a project-to-project basis, although the contrary was made to appear
by the employer through the signing of separate employment contracts.
Petitioners emphatically stressed that no report even a single one, was ever submitted
by the respondent corporation to the nearest public employment office every time
petitioners' employment was terminated pursuant to Policy Instruction No. 20. There
being no report, NLRC's insistence that they (petitioners) were respondents corporation's
project employees is without any legal basis; petitioners maintain.
In its Manifestation and Motion in Lieu of Comment,
agrees with the contention of petitioners, to wit:

the Office of the Solicitor General

5. Thus, since petitioners had continuously performed the same kind of

work during the whole course of their employment . . . their jobs were
indeed necessary and desirable to the private respondent's main line of

Page 2 of 497

business. And this should be the main consideration in classifying the

nature of employment afforded the herein workers.
6. Furthermore, if private respondent really employed the herein petitioners
on a project-to-project basis, it should have submitted a series of reports to
the nearest public employment office every time the employment of the
workers were terminated, in line with Policy Instruction No. 20 of the
Department of Labor. (citation omitted) Private respondent miserably failed
to do its obligation under the set-up. This failure effectively belies its
assertion that herein petitioners are project
employees. 6
Respondent corporation preliminary contends that the present petition for review should
have been brought under Rule 65, Rule 45 not being the proper remedy.
Assuming arguendo that the petition should be treated under Rule 65, the petition would
still fail for failure of the petitioners to present a motion for reconsideration. It maintains
that the instant petition should not be given due course due to non-exhaustion of
administrative remedies as required by Section 14, Rule VII (sic). It theorizes further that
the questioned Resolution had already become final and executory on March 20, 1994,
ten days after receipt thereof by petitioners on March 9, 1994. Respondent corporation
also claims that the present petition is insufficient in form, for failure to attach thereto a
duplicate original or certified true copies of the complainants-petitioners' position paper,
respondent corporation's position paper, and the questioned resolution of the public
respondent.
AG & P staunchly claims that the petitioners are mere project employees; that the
questioned resolution of public respondent is supported by substantial evidence and
therefore, conclusive and binding. According to respondent corporation, factual findings
of the NLRC are generally accorded not only respect but, at times, finality as long as such
findings are based on substantial evidence; that the doctrinal cases cited by petitioners
have no applicability in the case under scrutiny and that the Magante case 7 does not
apply because it was therein established that Magante was never deployed from project
to project but had been regularly assigned to perform carpentry work; and on the other
hand, the Baguio Country Club case 8 pertains to "entertainment-service."
Meanwhile the De Leon case, 9 claims the respondent corporation, bolsters instead, its
position since it recognizes the legality of project employment, which is not deemed
regular but a separate and distinct category, particularly in the construction business. It
also attempts to create a chasm between the doctrinal case of Caramol and the present
case, allegedly due to different circumstances involved, and citing the implementation of
Department Order No. 19, amending Policy Instruction No. 20, which allows the rehiring
of project workers on a project-to-project basis (Section 2.3.b), and which considers the
report of termination of employment a mere "indicator" of project employment. (Section
2.2)
Page 3 of 497

The petition is impressed with merit.

The present case is on all fours with the cases of Caramol vs. NLRC (penned by Justice
Bellosillo) and Samson vs. NLRC 10 (with Justice Regalado as ponente), both of which
involved the same private respondent.
In the case of Caramol, petitioner Rogelio Caramol was hired as a rigger by AG & P on a
"project-to-project" basis but whose employment was renewed forty-four (44) times by
the latter. In holding that Caramol was a regular worker, the Court declared that the
successive employment contracts where he was made to perform the same kind of work
as a rigger, would clearly manifest that Caramol's tasks were usually necessary or
desirable in the usual trade or business of AG & P. 11
The Court likewise upheld the validity of a "project-to-project" basis contract of
employment, provided that "the period was agreed upon knowingly and voluntarily by
the parties, without any force, duress or improper pressure brought to bear upon the
employee and absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other on more or
less equal terms with no moral dominance whatever being exercised by the
former . . .." 12 However, this Court warned, where from the circumstances it is apparent
that periods have been imposed to preclude the acquisition of tenurial security by the
employee, they should be struck down as contrary to public policy, morals, good custom
or public
order. 13
The case of Samson on the other hand, concerned Ismail Samson who served initially as
a rigger, as a laborer and finally as a rigger foreman for AG & P, for approximately 28
years. He was also covered by successive employment contracts with gaps of from one
(1) day up to one (1) week. Noting the successive contracts of employment, the repeated
re-hiring, and petitioner's performance of essentially the same tasks, this Court held that
Samson was a regular employee, because these were sufficient evidence that he was
performing tasks usually necessary and desirable in the ordinary course of business of
AG & P. 14 Thus the Court pronounced:
The mandate in Article 281 of the Labor Code, which pertinently prescribes
that the "provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreements 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" and 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,"

Page 4 of 497

should apply in the case of petitioner

(Samson). 15
In the case under consideration, the Court likewise rules that failure to report the
termination to Public Employment Office is a clear indication that petitioners were not
and are not project employees.
When these consolidated complaints were filed in 1989, and while petitioners were
serving the respondent corporation, the rule in force then was Policy Instruction (P.I.) No.
20, which required the employer company to report to the nearest Public Employment
Office the fact of termination of project employee as a result of the completion of the
project or any phase thereof, in which he is employed. Further, Department Order (D.O.)
No. 19, which was issued on April 1, 1993, did not totally dispense with the notice
requirement but, instead, made provisions therefor, and considered it as one of the
"indicators" that a worker is a project employee. 16
It is significant to note that the notice of termination requirement has been retained
under Section 6.1 of D.O. No. 19, viz: 17
6.1. Requirements of labor and social legislations. (a) The construction
company and the general contractor and/or subcontractor referred to in
Sec. 2.5 shall be responsible for the workers in its employ on matters of
compliance with the requirements of existing laws and regulations on hours
of work, wages, wage-related benefits, health, safety and social welfare
benefits, including submission to the DOLE-Regional Office of Work
Accident/Illness Report, Monthly Report on Employees'
Terminations/Dismissals/Suspensions and other reports. . . . (Emphasis
supplied)
In light of the cases of Caramol and Samson and the application of P.I. No. 20 as
amended by D.O. No. 19, the retroactive or prospective effect of D.O. No. 19 is of no
moment. Nevertheless, it was held in Samson vs. NLRCthat it is prospective in effect.
Otherwise, it would be prejudicial to the employees and would run counter to the
constitutional mandate on social justice and protection to labor and furthermore, such
view is more in accord with the avowed purpose of said Department Order. 18
It is basic and irrefragable rule that in carrying out and interpreting the provisions of the
Labor Code and its implementing regulations, the workingman's welfare should be the
primordial and paramount consideration. The interpretation herein made gives meaning
and substance to the liberal and compassionate spirit of the law enunciated in Article 4
of Labor Code that "all doubts in the implementation and interpretation of the provisions
of the Labor Code including its implementing rules and regulations shall be resolved in
favor of labor". 19

Page 5 of 497

It is beyond cavil that petitioners had been providing the respondent corporation with
continuous and uninterrupted services, except for a day or so gap in their successive
employment contracts. Their contracts had been renewed several times, with the total
length of their services ranging from five (5) to nine (9) years. Throughout the duration
of their contracts, they had been performing the same kinds of work (e.g., as lubeman,
bulk cement operator and carpenter), which were usually necessary and desirable in the
construction business of AG & P, its usual trade or business.
Undoubtedly, periods in the present case have been imposed to preclude the acquisition
of tenurial security by petitioners, and must be struck down for being contrary to public
policy, morals, good customs or public order.
Anent the issue that the petition should have been brought under Rule 65 and not under
Rule 45 of the Revised Rules of Court, this rule is not
inflexible. 20 In the interest of justice, often the Court has judiciously treated as special
civil actions for certiorari petitions erroneously captioned as petitions for review
on certiorari. 21
With regard to the issue on non-exhaustion of administrative remedies, the Court hold
that the failure of petitioners to interpose a motion for reconsideration of the NLRC
decision before coming to this Court was not a fatal omission. The exhaustion of
administrative remedies doctrine is not a hard and fast rule and does not apply where
the issue is purely a legal one. 22 A motion for reconsideration as a prerequisite for the
bringing of an action under Rule 65 may be dispensed with where the issue is purely of
law, as in this case. 23 At all events and in the interest of substantial justice, especially in
cases involving the rights of workers, procedural lapses, if any, may be disregarded to
enable the Court to examine and resolve the conflicting rights and responsibilities of the
parties. This liberality is warranted in the case at bar, especially since it has been shown
that the intervention of the Court is necessary for the protection of the herein
petitioner(s). 24
WHEREFORE, the questioned Resolution of the NLRC in NLRC NCR Case No. 00-05-0248989; NLRC NCR Case No. 00-06-02621-89; NLRC NCR Case No. 00-06-02815-89; NLRC NCR
Case No. 00-07-03095-89; and NLRC NCR Case No. 00-07-03129-89, is SET ASIDE and
another one is hereby ENTERED ordering the respondent corporation to reinstate
petitioners without loss of seniority and with full backwages. Costs against the
respondent corporation.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
Page 6 of 497

SECOND DIVISION

G.R. No. 96078 January 9, 1992

HILARIO RADA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and PHILNOR
CONSULTANTS AND PLANNERS, INC., respondents.
Cabellero, Calub, Aumentado & Associates Law Offices for petitioner.

REGALADO, J.:
In this special civil action for certiorari, petitioner Rada seeks to annul the decision of
respondent National Labor Relations Commission (NLRC), dated November 19, 1990,
reversing the decision of the labor arbiter which ordered the reinstatement of petitioner
with backwages and awarded him overtime pay. 1
The facts, as stated in the Comment of private respondent Philnor Consultants and
Planners, Inc. (Philnor), are as follows:
Petitioner's initial employment with this Respondent was under a "Contract
of Employment for a Definite Period" dated July 7, 1977, copy of which is
hereto attached and made an integral part hereof as Annex A whereby
Petitioner was hired as "Driver" for the construction supervision phase of
the Manila North Expressway Extension, Second Stage (hereinafter referred
to as MNEE Stage 2) for a term of "about 24 months effective July 1, 1977.
xxx xxx xxx
Highlighting the nature of Petitioner's employment, Annex A specifically
provides as follows:
It is hereby understood that the Employer does not have a
continuing need for the services of the Employee beyond the
termination date of this contract and that the Employee's
services shall automatically, and without notice, terminate
upon the completion of the above specified phase of the
project; and that it is further understood that the engagement
of his/her services is coterminus with the same and not with
Page 7 of 497

the whole project or other phases thereof wherein other

employees of similar position as he/she have been hired. (Par.
7, emphasis supplied)
Petitioner's first contract of employment expired on June 30, 1979.
Meanwhile, the main project, MNEE Stage 2, was not finished on account of
various constraints, not the least of which was inadequate funding, and the
same was extended and remained in progress beyond the original period of
2.3 years. Fortunately for the Petitioner, at the time the first contract of
employment expired, Respondent was in need of Driver for the extended
project. Since Petitioner had the necessary experience and his performance
under the first contract of employment was found satisfactory, the position
of Driver was offered to Petitioner, which he accepted. Hence a second
Contract of Employment for a Definite Period of 10 months, that is, from July
1, 1979 to April 30, 1980 was executed between Petitioner and Respondent
on July 7, 1979. . . .
In March 1980 some of the areas or phases of the project were completed,
but the bulk of the project was yet to be finished. By that time some of
those project employees whose contracts of employment expired or were
about to expire because of the completion of portions of the project were
offered another employment in the remaining portion of the project.
Petitioner was among those whose contract was about to expire, and since
his service performance was satisfactory, respondent renewed his contract
of employment in April 1980, after Petitioner agreed to the offer.
Accordingly, a third contract of employment for a definite period was
executed by and between the Petitioner and the Respondent whereby the
Petitioner was again employed as Driver for 19 months, from May 1, 1980
to November 30, 1981, . . .
This third contract of employment was subsequently extended for a number
of times, the last extension being for a period of 3 months, that is, from
October 1, 1985 to December 31, 1985, . . .
The last extension, from October 1, 1985 to December 31, 1985 (Annex E)
covered by an "Amendment to the Contract of Employment with a Definite
Period," was not extended any further because Petitioner had no more work
to do in the project. This last extension was confirmed by a notice on
November 28, 1985 duly acknowledged by the Petitioner the very next
day, . . .
Sometime in the 2nd week of December 1985, Petitioner applied for
"Personnel Clearance" with Respondent dated December 9, 1985 and
acknowledged having received the amount of P3,796.20 representing
Page 8 of 497

conversion to cash of unused leave credits and financial assistance.

Petitioner also released Respondent from all obligations and/or claims, etc.
in a "Release, Waiver and Quitclaim" . . . 2
Culled from the records, it appears that on May 20, 1987, petitioner filed before the
NLRC, National Capital Region, Department of Labor and Employment, a Complaint for
non-payment of separation pay and overtime pay. On June 3, 1987, Philnor filed its
Position Paper alleging, inter alia, that petitioner was not illegally terminated since the
project for which he was hired was completed; that he was hired under three distinct
contracts of employment, each of which was for a definite period, all within the
estimated period of MNEE Stage 2 Project, covering different phases or areas of the said
project; that his work was strictly confined to the MNEE Stage 2 Project and that he was
never assigned to any other project of Philnor; that he did not render overtime services
and that there was no demand or claim for him for such overtime pay; that he signed a
"Release, Waiver and Quitclaim" releasing Philnor from all obligations and claims; and
that Philnor's business is to provide engineering consultancy services, including
supervision of construction services, such that it hires employees according to the
requirements of the project manning schedule of a particular contract. 3
On July 2, 1987, petitioner filed an Amended Complaint alleging that he was illegally
dismissed and that he was not paid overtime pay although he was made to render three
hours overtime work form Monday to Saturday for a period of three years.
On July 7, 1987, petitioner filed his Position Paper claiming that he was illegally dismissed
since he was a regular employee entitled to security of tenure; that he was not a project
employee since Philnor is not engaged in the construction business as to be covered by
Policy Instructions No. 20; that the contract of employment for a definite period executed
between him and Philnor is against public policy and a clear circumvention of the law
designed merely to evade any benefits or liabilities under the statute; that his position as
driver was essential, necessary and desirable to the conduct of the business of Philnor;
that he rendered overtime work until 6:00 p.m. daily except Sundays and holidays and,
therefore, he was entitled to overtime pay. 4
In his Reply to Respondent's Position Paper, petitioner claimed that he was a regular
employee pursuant to Article 278(c) of the Labor Code and, thus, he cannot be
terminated except for a just cause under Article 280 of the Code; and that the public
respondent's ruling in Quiwa vs. Philnor Consultants and Planners, Inc. 5 is not applicable
to his case since he was an administrative employee working as a company driver, which
position still exists and is essential to the conduct of the business of Philnor even after
the completion of his contract of employment. 6 Petitioner likewise avers that the
contract of employment for a definite period entered into between him and Philnor was a
ploy to defeat the intent of Article 280 of the Labor Code.

Page 9 of 497

On July 28, 1987, Philnor filed its Respondent's Supplemental Position Paper, alleging
therein that petitioner was not a company driver since his job was to drive the
employees hired to work at the MNEE Stage 2 Project to and from the filed office at Sto.
Domingo Interchange, Pampanga; that the office hours observed in the project were from
7:00 a.m. to 4:00 p.m. Mondays through Saturdays; that Philnor adopted the policy of
allowing certain employees, not necessarily the project driver, to bring home project
vehicles to afford fast and free transportation to and from the project field office
considering the distance between the project site and the employees' residence, to avoid
project delays and inefficiency due to employee tardiness caused by transportation
problem; that petitioner was allowed to use a project vehicle which he used to pick up
and drop off some ten employees along Epifanio de los Santos Avenue (EDSA), on his
way home to Marikina, Metro Manila; that when he was absent or on leave, another
employee living in Metro Manila used the same vehicle in transporting the same
employees; that the time used by petitioner to and from his residence to the project site
from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to 6:00 p.m., or about three hours daily,
was not overtime work as he was merely enjoying the benefit and convenience of free
transportation provided by Philnor, otherwise without such vehicle he would have used
at least four hours by using public transportation and spent P12.00 daily fare; that in the
case ofQuiwa vs. Philnor Consultants and Planners, Inc., supra, the NLRC upheld Philnor's
position that Quiwa was a project employee and he was not entitled to termination pay
under Policy Instructions No. 20 since his employment was coterminous with the
completion of the project.
On August 25, 1987, Philnor filed its Respondent's Reply/Comments to Complainant's
Rejoinder and Reply, submitting therewith two letters dated January 5, 1985 and
February 6, 1985, signed by MNEE Stage 2 Project employees, including herein
petitioner, where they asked what termination benefits could be given to them as the
MNEE Stage 2 Project was nearing completion, and Philnor's letter-reply dated February
22, 1985 informing them that they are not entitled to termination benefits as they are
contractual/project employees.
On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision
following dispositive portion:

with the

WHEREFORE, in view of all the foregoing considerations, judgment is hereby

rendered:
(1) Ordering the respondent company to reinstate the complainant to his
former position without loss of seniority rights and other privileges with full
backwages from the time of his dismissal to his actual reinstatement;
(2) Directing the respondent company to pay the complainant overtime pay
for the three excess hours of work performed during working days from
January 1983 to December 1985; and
Page 10 of 497

(3) Dismissing all other claims for lack of merit.

SO ORDERED.
Acting on Philnor's appeal, the NLRC rendered its assailed decision dated November 19,
1990, setting aside the labor arbiter's aforequoted decision and dismissing petitioner's
complaint.
Hence this petition wherein petitioner charges respondent NLRC with grave abuse of
discretion amounting to lack of jurisdiction for the following reasons:
1. The decision of the labor arbiter, dated August 31, 1989, has already become final and
executory;
2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding nor is it
applicable to this case;
3. The petitioner is a regular employee with eight years and five months of continuous
services for his employer, private respondent Philnor;
4. The claims for overtime services, reinstatement and full backwages are valid and
meritorious and should have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more in accord with the
facts, the law and evidence.
The petition is devoid of merit.
1. Petitioner questions the jurisdiction of respondent NLRC in taking cognizance of the
appeal filed by Philnor in spite of the latter's failure to file a supersedeas bond within ten
days from receipt of the labor arbiter's decision, by reason of which the appeal should be
deemed to have been filed out of time. It will be noted, however, that Philnor was able to
file a bond although it was made beyond the 10-day reglementary period.
While it is true that the payment of the supersedeas bond is an essential requirement in
the perfection of an appeal, however, where the fee had been paid although payment
was delayed, the broader interests of justice and the desired objective of resolving
controversies on the merits demands that the appeal be given due course. Besides, it
was within the inherent power of the NLRC to have allowed late payment of the bond,
considering that the aforesaid decision of the labor arbiter was received by private
respondent on October 3, 1989 and its appeal was duly filed on October 13, 1989.
However, said decision did not state the amount awarded as backwages and overtime
pay, hence the amount of the supersedeas bond could not be determined. It was only in
the order of the NLRC of February 16, 1990 that the amount of the supersedeas bond
Page 11 of 497

was specified and which bond, after an extension granted by the NLRC, was timely filed
by private respondent.
Moreover, as provided by Article 221 of the Labor Code, "in any proceeding before the
Commission or any of the Labor Arbiters, the rules of evidence prevailing in Courts of law
or equity shall not be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall 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. 8 Finally, the issue of
timeliness of the appeal being an entirely new and unpleaded matter in the proceedings
below it may not now be raised for the first time before this Court. 9
2. Petitioner postulates that as a regular employee, he is entitled to security of tenure,
hence he cannot be terminated without cause. Private respondent Philnor believes
otherwise and asserts that petitioner is merely a project employee who was terminated
upon the completion of the project for which he was employed.
In holding that petitioner is a regular employee, the labor arbiter found that:
. . . There is no question that the complainant was employed as driver in the
respondent company continuously from July 1, 1977 to December 31, 1985
under various contracts of employment. Similarly, there is no dispute that
respondent Philnor Consultant & Planner, Inc., as its business name
connotes, has been engaged in providing to its client(e)le engineering
consultancy services. The record shows that while the different labor
contracts executed by the parties stipulated definite periods of engaging
the services of the complainant, yet the latter was suffered to continue
performing his job upon the expiration of one contract and the renewal of
another. Under these circumstances, the complaint has obtained the status
of regular employee, it appearing that he has worked without fail for almost
eight years, a fraction of six months considered as one whole year, and that
his assigned task as driver was necessary and desirable in the usual
trade/business of the respondent employer. Assuming to be true, as spelled
out in the employment contract, that the Employer has no "continuing need
for the services of the Employe(e) beyond the termination date of this
contract and that the Employee's services shall automatically, and without
notice, terminate upon completion of the above specified phase of the
project," still we cannot see our way clear why the complainant was hired
and his services engaged contract after contract straight from 1977 to 1985
which, to our considered view, lends credence to the contention that he
worked as regular driver ferrying early in the morning office personnel to
the company main office in Pampanga and bringing back late in the
afternoon to Manila, and driving company executives for inspection of
construction workers to the jobsites. All told, we believe that the
Page 12 of 497

complainant, under the environmental facts obtaining in the case at bar, is

a regular employee, the provisions of written agreement to the
contrary notwithstanding and regardless of the oral understanding of the
parties . . . 10
On the other hand, respondent NLRC declared that, as between the uncorroborated and
unsupported assertions of petitioners and those of private respondent which are
supported by documents, greater credence should be given the latter. It further held
that:
Complainant was hired in a specific project or undertaking as driver. While
such project was still on-going he was hired several times with his
employment period fixed every time his contract was renewed. At the
completion of the specific project or undertaking his employment contract
was not renewed.
We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants and
Planners, Inc., NLRC RAB III 5-1738-84, it is being applicable in this
case, viz.:
. . . While it is true that the activities performed by him were
necessary or desirable in the usual business or trade of the
respondent as consultants, planners, contractor and while it is
also true that the duration of his employment was for a period
of about seven years, these circumstances did not make him a
regular employee in contemplation of Article 281 of (the) Labor
Code. . . . 11
Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et
al. 12 is applicable to the case at bar. Thus:
We hold that private respondents were project employees whose work was
coterminous with the project or which they were hired. Project employees,
as distinguished from regular or non-project employees, are mentioned in
section 281 of the Labor Code as those "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."
Policy Instructions No. 20 of the Secretary of Labor, which was issued to
stabilize employer-employee relations in the construction industry,
provides:

Page 13 of 497

Project employees are those employed in connection with a

particular construction project. Non-project (regular)
employees are those employed by a construction company
without reference to any particular project.
Project employees are not entitled to termination pay if they
are terminated as a result of the completion of the project or
any phase thereof in which they are employed, regardless of
the number of projects in which they have been employed by a
particular construction company. Moreover, the company is not
required to obtain clearance from the Secretary of Labor in
connection with such termination.
The petitioner cited three of its own cases wherein the National Labor
Relations Commission, Deputy Minister of Labor and Employment Inciong
and the Director of the National Capital Region held that the layoff of its
project employees was lawful. Deputy Minister Inciong in TFU Case No.
1530, In Re Sandoval Shipyards, Inc. Application for Clearance to Terminate
Employees, rendered the following ruling on February 26, 1979;
We feel that there is merit in the contention of the applicant
corporation. To our mind, the employment of the employees
concerned were fixed for a specific project or undertaking. For
the nature of the business the corporation is engaged into is
one which will not allow it to employ workers for an indefinite
period.
It is significant to note that the corporation does not construct
vessels for sale or otherwise which will demand continuous
productions of ships and will need permanent or regular
workers. It merely accepts contracts for shipbuilding or for
repair of vessels form third parties and, only, on occasion when
it has work contract of this nature that it hires workers to do
the job which, needless to say, lasts only for less than a year
or longer.
The completion of their work or project automatically
terminates their employment, in which case, the employer is,
under the law, only obliged to render a report on the
termination of the employment. (139-140, Rollo of G.R. No.
65689) (Emphasis supplied)
In Cartagenas, et al. vs. Romago Electric Company, Inc., et al.,

Page 14 of 497

13

we likewise held that:

As an electrical contractor, the private respondent depends for its business

on the contracts it is able to obtain from real estate developers and builders
of buildings. Since its work depends on the availability of such contracts or
"projects," necessarily the duration of the employment's of this work force
is not permanent but co-terminus with the projects to which they are
assigned and from whose payrolls they are paid. It would be extremely
burdensome for their employer who, like them, depends on the availability
of projects, if it would have to carry them as permanent employees and pay
them wages even if there are no projects for them to work on. (Emphasis
supplied.)
It must be stressed herein that although petitioner worked with Philnor as a driver for
eight years, the fact that his services were rendered only for a particular project which
took that same period of time to complete categorizes him as a project employee.
Petitioner was employed for one specific project.
A non-project employee is different in that the employee is hired for more than one
project. A non-project employee, vis-a-vis a project employee, is best exemplified in the
case of Fegurin, et al. vs. National Labor Relations Commission, et al. 14 wherein four of
the petitioners had been working with the company for nine years, one for eight years,
another for six years, the shortest term being three years. In holding that petitioners are
regular employees, this Court therein explained:
Considering the nature of the work of petitioners, that of carpenter, laborer
or mason, their respective jobs would actually be continuous and on-going.
When a project to which they are individually assigned is completed, they
would be assigned to the next project or a phase thereof. In other words,
they belonged to a "work pool" from which the company would draw
workers for assignment to other projects at its discretion. They are,
therefore, actually "non-project employees."
From the foregoing, it is clear that petitioner is a project employee considering that he
does not belong to a "work pool" from which the company would draw workers for
assignment to other projects at its discretion. It is likewise apparent from the facts
obtaining herein that petitioner was utilized only for one particular project, the MNEE
Stage 2 Project of respondent company. Hence, the termination of herein petitioner is
valid by reason of the completion of the project and the expiration of his employment
contract.
3. Anent the claim for overtime compensation, we hold that petitioner is entitled to the
same. The fact that he picks up employees of Philnor at certain specified points along
EDSA in going to the project site and drops them off at the same points on his way back
from the field office going home to Marikina, Metro Manila is not merely incidental to
petitioner's job as a driver. On the contrary, said transportation arrangement had been
Page 15 of 497

adopted, not so much for the convenience of the employees, but primarily for the benefit
of the employer, herein private respondent. This fact is inevitably deducible from the
Memorandum of respondent company:
The herein Respondent resorted to the above transport arrangement
because from its previous project construction supervision experiences,
Respondent found out that project delays and inefficiencies resulted from
employees' tardiness; and that the problem of tardiness, in turn, was
aggravated by transportation problems, which varied in degrees in
proportion to the distance between the project site and the employees'
residence. In view of this lesson from experience, and as a practical, if
expensive, solution to employees' tardiness and its concomitant problems,
Respondent adopted the policy of allowing certain employees not
necessarily project drivers to bring home project vehicles, so that
employees could be afforded fast, convenient and free transportation to and
from the project field office. . . . 15
Private respondent does not hesitate to admit that it is usually the project driver who is
tasked with picking up or dropping off his fellow employees. Proof thereof is the
undisputed fact that when petitioner is absent, another driver is supposed to replace him
and drive the vehicle and likewise pick up and/or drop off the other employees at the
designated points on EDSA. If driving these employees to and from the project site is not
really part of petitioner's job, then there would have been no need to find a replacement
driver to fetch these employees. But since the assigned task of fetching and delivering
employees is indispensable and consequently mandatory, then the time required of and
used by petitioner in going from his residence to the field office and back, that is, from
5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to around 6:00 p.m., which the labor arbiter
rounded off as averaging three hours each working day, should be paid as overtime
work. Quintessentially, petitioner should be given overtime pay for the three excess
hours of work performed during working days from January, 1983 to December, 1985.
WHEREFORE, subject to the modification regarding the award of overtime pay to herein
petitioner, the decision appealed from is AFFIRMED in all other respects.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-65689 May 31, 1985

Page 16 of 497

SANDOVAL SHIPYARDS, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ROGELIO DIAMANTE, MANUEL
PACRES, ROLANDO CERVALES, DIONISIO CERVALES and MACARIO
SAPUTALO, respondents.
G.R. No. L-66119 May 31, 1985
SANDOVAL SHIPYARDS, INC., petitioner,
vs.
VICENTE LEOGARDO, JR., Deputy Minister of Labor and Employment, DANILO
DE LA CRUZ, RODRIGO VILLARUZ, RODRIGO PEREZ, AQUILINO TABILON,
ARMANDO ESGLANDA, MANUEL MEDINA, FREDDIE ABADIEZ, FELICIANO
TOLANG, ALFREDO DE LA CRUZ, NICOLAS MARIANO, VICENTE CEBUANO,
ROLANDO ROLDAN, TEODORO ROLDAN, SOLOMON GEMINO, MARIO RICAFORT,
ROLANDO LOPEZ and ANGEL SAMSON, respondents.
Abad Santos, Sunga & Associates for petitioner.
Neva Blancaver for private respondents.

AQUINO, J:
These cases are about the dismissal of alleged project workers. Sandoval Shipyards, Inc.
has been engaged in the building and repair of vessels. It contends that each vessel is a
separate project and that the employment of the workers is terminated with the
completion of each project.
The workers contend otherwise. They claim to be regular workers and that the
termination of one project does not mean the end of their employment since they can be
assigned to unfinished projects.
In G.R. No. 65689, Rogelio Diamante, Manuel Pacres, Macario Saputalo, Rolando Cervales
and Dionisio Cervales were assigned to the construction of the LCT Catarman, Project No.
7511. After three months of work, the project was completed on July 26, 1979. The five
workers were served a termination notice. The termination was reported to the Ministry
of Labor on August 3, 1979. They filed a complaint for illegal dismissal.
The National Labor Relations Commission affirmed the decision of the Labor Arbiter
ordering the reinstatement of the five complainants with backwages from July 27, 1979.

Page 17 of 497

In G.R. No. 66119, respondents Danilo de la Cruz, et al., 17 in all, were assigned to work
in Project No. 7901 for the construction of a tanker ordered by Mobil Oil Philippines, Inc.
There were 55 workers in that project. The tanker was launched on January 31, 1980.
Upon the yard manager's recommendation, the personnel manager of Sandoval
Shipyards terminated the services of the welders, helpers and construction workers
effective February 4, 1980. The termination was duly reported to the Ministry of Labor
and Employment.
Three days later, or on February 7, twenty-seven out of the 55 workers were hired for a
new project. The 27 included four of the 17 respondents who filed a complaint for illegal
dismissal on February 6.
After hearing, the Director of the Ministry's Capital Region ordered the reinstatement of
the complainants. The Deputy Minister of Labor affirmed that order.
We hold that private respondents were project employees whose work was coterminous
with the project for which they were hired. Project employees, as distinguished from
regular or non-project employees, are mentioned in section 281 of the Labor Code as
those "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."
Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize
employer-employee relations in the construction industry, provides:
Project employees are those employed in connection with a particular
construction project. Non-project (regular) employees are those employed
by a construction company without reference to any particular project.
Project employees are not entitled to termination pay if they are terminated
as a result of the completion of the project or any phase thereof in which
they are employed, regardless of the number of projects in which they have
been employed by a particular construction company. Moreover, the
company is not required to obtain clearance from the Secretary of Labor in
connection with such termination.
The petitioner cited three of its own cases wherein the National Labor Relations
Commission, Deputy Minister of Labor and Employment Inciong and the Director of the
National Capital Region held that the layoff of its project employees was lawful. Deputy
Minister Inciong in TFU Case No. 1530, In Re Sandoval Shipyards, Inc. Application for
Clearance to Terminate Employees, rendered the following ruling on February 26,1979:
We feel that there is merit in the contention of the applicant corporation. To
our mind, the employment of the employees concerned were fixed for a
Page 18 of 497

specific project or undertaking. For the nature of the business the

corporation is engaged into is one which will not allow it to employ workers
for an indefinite period.
It is significant to note that the corporation does not construct vessels for
sale or otherwise which will demand continuous productions of ships and
will need permanent or regular workers. It merely accepts contracts for
ship-building or for repair of vessels from third parties and, only, on
occasion when it has work contract of this nature that it hires workers to do
the job which, needless to say, lasts only for less than a Year or longer.
The completion of their work or project automatically terminates their
employment, in which case, the employer is, under the law, only obliged to
render a report on the termination of the employment. (139-140, Rollo of G.
R. No. 65689).
In NLRC Case No. RB-IV-7743-76, Nicanor San Pedro, et. al. vs. Sandoval Shipyards,
Inc., the NLRC in its resolution of May 16, 1978 held that the layoff of the 17
complainants (which include three respondents in G.R. No. 65689 and two respondents in
G.R. No. 66119) after the construction of the tanker, M/T Oil Queen VII, in July, 1976 was
justified because they were project employees (135-138, Rollo of G.R. No. 65689).
In Gaspar vs. Sandoval Shipyards, Inc., NCR-STF-3-184081, Director Estrella held in his
order dated June 22, 1981 that two workers of the petitioner were project workers whose
employment was terminated upon the completion of the Project eject.
Respondent Deputy Minister Leogardo, Jr. himself on October 25, 1984 affirmed that
finding. He ruled that the complainants "are project workers whose employments are
coterminous with the completion of the project, regardless of the number of projects in
which they have worked, as provided under Policy Instructions No. 20 of the Ministry of
Labor and Employment" and "as their employment is one for a definite period, they are
not entitled to separation pay." (187, Rollo of G.R. No. 65689)
The public respondents in the instant two cases acted with grave abuse of discretion
amounting to lack of jurisdiction in disregarding these precedents.
WHEREFORE, the NLRC resolution dated July 29, 1983 and the order of Deputy Minister
Leogardo, Jr., dated March 15, 1983 are reversed and set aside. The complaints for illegal
layoff are dismissed. No costs.
SO ORDERED.

Page 19 of 497

SECOND DIVISION
ABESCO CONSTRUCTION AND
G.R. No. 141168
DEVELOPMENT CORPORATION
and MR. OSCAR BANZON,
General Manager,
Petitioners,
Present:

-versus-

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and
GARCIA, JJ.

ALBERTO RAMIREZ, BERNARDO

DIWA, MANUEL LOYOLA,
REYNALDO P. ACODESIN,
ALEXANDER BAUTISTA,
EDGAR TAJONERA and
GARY DISON,*
Respondents. Present:
April 10, 2006
x------------------------------------------x
RESOLUTION
CORONA, J.:
Petitioner company was engaged in a construction business where respondents
were hired on different dates from 1976 to 1992 either as laborers, road roller operators,
painters or drivers.
In 1997, respondents filed two separate complaints[1] for illegal dismissal against
the company and its General Manager, Oscar Banzon, before the Labor Arbiter (LA).
Petitioners allegedly dismissed them without a valid reason and without due process of
law. The complaints also included claims for non-payment of the 13 th month pay, five
days service incentive leave pay, premium pay for holidays and rest days, and moral
and exemplary damages. The LA later on ordered the consolidation of the two
complaints.[2]
Petitioners denied liability to respondents and countered that respondents were
project employees since their services were necessary only when the company had
projects to be completed. Petitioners argued that, being project employees, respondents
employment was coterminous with the project to which they were assigned. They were
not regular employees who enjoyed security of tenure and entitlement to separation pay
upon termination from work.
Page 20 of 497

After trial, the LA declared respondents as regular employees because they

belonged to a work pool from which the company drew workers for assignment to
different projects, at its discretion. He ruled that respondents were hired and re-hired
over a period of 18 years, hence, they were deemed to be regular employees. He
likewise found that their employment was terminated without just cause. In a decision
dated January 7, 1998, he stated:
WHEREFORE, judgment is hereby rendered declaring respondents
guilty of illegal dismissal and ordering the latter to reinstate complainants
to their former positions with backwages and other benefits from the time
their compensation was withheld from them up to the time their actual
reinstatement which as of the date of this decision amounted to:
1.
2.
3.
4.
5.
6.
7.

NAME
Alberto Ramirez
Manuel B. Loyola
Hernando Diwa
Reynaldo Acodesin
Alexander Bautista
Edgar Tajonera
Gary Dison
TOTAL

P49,764.00
46,695.22
49,764.00
46,695.22
45,285.24
62,985.00
53,911.00
P 355,099.68

However, if reinstatement is no longer feasible, a one-month salary shall be

awarded as a form of separation pay, in addition to the aforementioned
award.
Respondents are likewise ordered to pay complainants the following:
xxx
All other claims are hereby dismissed for lack of merit. [3]
Petitioners appealed to the National Labor Relations Commission (NLRC) which
affirmed the LAs decision.[4]
Subsequently, petitioners filed a petition for review in the Court of Appeals (CA)
arguing that they were not liable for illegal dismissal since respondents services were
merely put on hold until the resumption of their business operations. They also averred
that they had paid respondents their full wages and benefits as provided by law, hence,
the latter had no more right to further benefits.
The CA was not convinced and dismissed petitioners appeal. It held:
We note that the petitioners are taking a new tack in arguing, for the
first time, that the [respondents] were not dismissed but their employment
was merely suspended. Previous to this, their defense was that the
Page 21 of 497

[respondents] were project employees who were not entitled to security of

tenure. The petitioners are barred from raising a new defense at this stage
of the case.
xxx

xxx

xxx

WHEREFORE, the petition for certiorari is hereby DISMISSED, for lack

of merit.[5]

Petitioners filed a motion for reconsideration but it was dismissed by the CA. [6]
In this petition for review under Rule 45 of the Rules of Court, petitioners raise the
following issues for resolution: (1) whether respondents were project employees or
regular employees and (2) whether respondents were illegally dismissed.
On the first issue, we rule that respondents were regular employees. However, we
take exception to the reasons cited by the LA (which both the NLRC and the CA affirmed)
in considering respondents as regular employees and not as project employees.
Contrary to the disquisitions of the LA, employees (like respondents) who work
under different project employment contracts for several years do not automatically
become regular employees; they can remain as project employees regardless of the
number of years they work.[7]Length of service is not a controlling factor in determining
the nature of ones employment.[8]
Moreover, employees who are members of a work pool from which a company
(like petitioner corporation) draws workers for deployment to its different projects do not
become regular employees by reason of that fact alone. The Court has enunciated in
some cases [9] that members of a work pool can either be project employees or
regular employees.
The principal test for determining whether employees are project employees or
regular employees is whether they are assigned to carry out a specific project or
undertaking, the duration and scope of which are specified at the time they are engaged
for that project.[10] Such duration, as well as the particular work/service to be
performed, is defined in an employment agreement and is made clear to the employees
at the time of hiring.[11]
In this case, petitioners did not have that kind of agreement with respondents.
Neither did they inform respondents of the nature of the latters work at the time of
hiring. Hence, for failure of petitioners to substantiate their claim that respondents were
project employees, we are constrained to declare them as regular employees.
Furthermore, petitioners cannot belatedly argue that respondents continue to be
their employees (so as to escape liability for illegal dismissal). Before the LA, petitioners
staunchly postured that respondents were only project employees whose employment
tenure was coterminous with the projects they were assigned to. However, before the
CA, they took a different stance by insisting that respondents continued to be their
Page 22 of 497

employees. Petitioners inconsistent and conflicting positions on their true relation with
respondents make it all the more evident that the latter were indeed their regular
employees.
On the issue of illegal dismissal, we hold that petitioners failed to adhere to the
two-notice rule which requires that workers to be dismissed must be furnished with: (1)
a notice informing them of the particular acts for which they are being dismissed and (2)
a notice advising them of the decision to terminate the employment. [12] Respondents
were never given such notices.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.

THIRD DIVISION

GRANDSPAN
CORPORATION,

DEVELOPMENT
G.R. No. 141464
Petitioner,
Present:

PANGANIBAN, J., Chairman,

-

versus

SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES,and
GARCIA, JJ.

RICARDO BERNARDO, ANTONINO

CEIDOZA
and
EDGARDO
DEL
PRADO, surviving parent of EDGAR
DEL PRADO,
Respondents.

Page 23 of 497

Promulgated:

September 21, 2005

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

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, assailing the Decision [1] dated September 17, 1999 and
Resolution[2] dated January 6, 2000 rendered by the Court of Appeals in CA-G.R. SP No.
50610, entitled Ricardo Bernardo, Antonino Ceidoza and Edgardo Del Prado, as
surviving parent of Edgar Del Prado vs. National Labor Relations Commission, Grandspan
Development Corporation and Joaquin Narag doing business under the name & style of J.
Narag Construction.

The instant controversy stemmed from a complaint for illegal dismissal and nonpayment of benefits filed with the Labor Arbiter by Ricardo Bernardo, Antonino Ceidoza
and
Edgar
Del
Prado, respondents, against
Grandspan
Development
Corporation, petitioner, and/or its warehouse manager, Manuel G. Lee, docketed as NLRC
Case No. RAB-IV-11-4605-92-RI.

Respondents, in their complaint, alleged that sometime in 1990, they were

employed as truck scale monitors by petitioner with a daily salary of P104.00 each.
Eventually, they were assigned at its Truck Scale Section of the Warehouse/Materials
Department. They were issued identification cards signed by Bonifacio Selmo,
petitioners personnel manager. On October 28, 1992, petitioner sent them a notice
Page 24 of 497

terminating their services effective October 29, 1992 for using profane or offensive
language, in violation of Article VI (2) (a) of the companys Rules and Regulations.
Petitioner denied the allegations of respondents in their complaint, claiming that
they are employees of J. Narag Construction. Sometime in the third quarter of 1992,
Canad Japan Co., Ltd. engaged petitioners services for fabrication works of several
round and rectangular steel tanks needed for the HCMG or Sogo project due for
completion in September, 1992. As a consequence, petitioner subcontracted the
services of J. Narag Construction which, in turn, assigned its 3 helpers (herein
respondents) to work for petitioners project. Sometime in October, 1992, Manuel G.
Lee, manager of petitioners Warehouse Department received a report from supervisor
Robert Ong that respondents vandalized the companys log book and chairs. This
prompted petitioner to send J. Narag Construction a memorandum terminating the
services of respondents for violation of the companys Rules and Regulations.

After the submission of the parties pleadings and position papers, the Labor
Arbiter rendered a Decision dated June 30, 1994 dismissing respondents complaint. In
concluding that respondents were validly dismissed from employment, the Labor Arbiter
held that they were project employees whose services were terminated upon completion
of the project for which they were hired.
Upon appeal, the National Labor Relations Commission (NLRC) issued a Resolution
dated March 7, 1995 remanding the case to the Labor Arbiter for appropriate
proceedings to determine whether there is an employer-employee relationship between
the parties.
Both parties filed their respective motions for reconsideration but were denied by
the NLRC in separate Resolutions dated April 28, 1995 and May 31, 1995.
Respondents then filed with this Court a petition for certiorari. Pursuant to our
ruling in St. Martins Funeral Home vs. NLRC,[3] we referred the petition to the Court of
Appeals for its appropriate action and disposition.

Meantime, respondent Del Prado died and was substituted by his surviving parent,
Edgardo Del Prado.
On September 17, 1999, the Appellate Court rendered a Decision setting aside the
NLRCs Resolutions and ordering petitioner (1) to reinstate respondents Bernardo and
Ceidoza to their former positions and pay, jointly and severally with J. Narag
Construction, their backwages and other benefits, and (2) to pay respondent Del Prado
his separation pay.
The Court of Appeals found that respondents are employees of petitioner; that
they were non-project workers; and that they were denied due process, thus:
Page 25 of 497

In the instant case, petitioners were assigned to the Truck Scaling

Materials Department of Grandspan. They worked in Grandspans premises
using the materials, supplies and equipment of Grandspan. They were
under the supervision of Grandspan as to the manner and results of their
work, and performed services directly connected to the usual business of
respondent Grandspan for the fabrication of heavy structural components.
The memorandum dated 28 October 1992 (p. 75 Rollo) dismissing the
petitioners in fact emanated from Grandspan Materials Manager Manuel G.
Lee and is addressed to the Personnel Department of Grandspan, albeit
containing the self-serving claim that the employees-petitioners were J.
Narag Construction personnel. Under the circumstances, We rule that J.
Narag was a labor-only contractor. While petitioners were in J. Narag
Constructions payroll, such fact does not per se establish J. Narag
Construction as an independent contractor, i.e., the employer of the
petitioners. x x x.

xxx

xxx

The Office of the Solicitor General opines that petitioners were nonproject employees as they were assigned at Grandspans Materials
Department. We agree. Moreover, if petitioners were truly project
employees, private respondents should have presented proof that they
submitted to the nearest public employment office a report of termination
of service of their project employees upon completion of the construction
project, as required by Policy Instruction No. 20. x x x.

Going now to the issue of whether or not petitioners were illegally

dismissed, We rule in the affirmative. In the letter/memo dated 28 October
1992 (Rollo, p. 75), by which Grandspan ostensibly requested J. Narag to
terminate petitioners contract immediately, the reason cited for the
dismissal was violation of Article VI 2.a. of company Rules and Regulations
(the use of profane or offensive languages addressed to company officers)
committed, according to the petitioners, through the vandalism of logbooks
and office furniture at the Truck Scale Section of the Warehouse/Materials
Department with obscene drawings. x x x.

However, this is not supported by substantial evidence which is

necessary in order that petitioners may be dismissed for just cause.
Considering that private respondent failed to discharge the burden of proof
reposed on it to show that the dismissal was justified, the inevitable result is
a finding that the dismissal was unjustified (Uy vs. NLRC, 261 SCRA 505;
Caurdanetaan Piece Workers Union vs. Laguesma, 296 SCRA 401).

Page 26 of 497

Moreover, petitioners were not given ample opportunity to prepare

adequately for their defense, including legal representation (Abiera vs.
NLRC, supra; Pangasinan III Electric Cooperative, Inc. vs. NLRC, 215 SCRA
669), nor were they served notice of investigation, nor given an opportunity
to be heard. This violates the requirement of notice and hearing in case of
employee dismissal, thus petitioners dismissal was void (Abiera vs. NLRC,
202 SCRA 7; Falguera vs. Lansangan, 251 SCRA 364).

As illegally dismissed employees, petitioners are protected by Article

279 of the Labor Code, x x x.

In the case of petitioner Edgar del Prado, now deceased and

represented in this petition by his surviving parent Edgardo del Prado,
reinstatement is no longer possible, thus he should be paid separation pay
equivalent to one month salary for every year of service in addition to
backwages (International Phamaceuticals, Inc. vs. NLRC, 287 SCRA 228).

WHEREFORE, finding merit in the petition, the same is GRANTED.

The assailed NLRC resolutions dated 7 March 1995 and 28 April 1995 are
ANNULLED and SET ASIDE.

Private respondent Grandspan is ordered to reinstate petitioners

Ricardo Bernardo and Antonino Ceidoza to their former positions without
loss of seniority rights. Grandspan and J. Narag Construction are declared
jointly and severally liable to pay said petitioners full backwages and other
benefits and privileges enjoyed by respondent Grandspan employees.

Private respondents Grandspan and J. Narag Construction are likewise

ordered to pay petitioner Edgardo del Prado, surviving parent of Edgar del
Prado, the latters separation pay at the rate of one (1) month salary for
every year of service rendered by the deceased.

SO ORDERED.
On October 8, 1999, petitioner filed a motion for reconsideration. Respondents
also filed a motion for reconsideration and/or clarification praying that the Appellate
Courts Decision be modified by awarding respondent Del Prado his backwages.

Page 27 of 497

On January 6, 2000, the Court of Appeals promulgated its Resolution denying

petitioners motion for reconsideration but modifying its Decision in the sense that
petitioner and J. Narag Construction are ordered to pay respondent Del Prado his
separation pay and backwages.

Hence, this petition for review on certiorari.

The issue for our resolution is whether the Court of Appeals erred in holding that
respondents are employees of petitioner.

Petitioner argues that it has no employer-employee relationship with respondents

since they are employees of J. Narag Construction, an independent contractor.

In Miguel vs. JCT Group, Inc.,[4] we held:

The test for determining an employer-employee relationship hinges

on resolving who has the power to select employees, who pays for their
wages, who has the power to dismiss them, and who exercises control in
the methods and the results by which the work is accomplished.

The Court of Appeals found that J. Narag Construction assigned respondents to

perform activities directly related to the main business of petitioner. They worked
in petitioners premises, using its equipment, materials and supplies. J. Narag
Constructions payroll worksheets covering the period from December 21, 1990 toJuly
31, 1991 show that the payment of their salaries was approved by petitioner. The
manager and supervisor of petitioners Warehouse Department supervised the manner
and results of their work. It was petitioner who terminated their services after finding
them guilty of using profane or offensive language in violation of Article VI (2) (a) of the
companys Rules and Regulations. The Appellate Court then concluded that these
circumstances confirm the existence of an employer-employee relationship between
petitioner and respondents.
We agree.

Page 28 of 497

Unswayed, petitioner insists that J. Narag Construction, being a legitimate

independent contractor, is the employer of respondents. On this point, the Court of
Appeals held that J. Narag Construction is a labor-only contractor.

Article 106 of the Labor Code, as amended, provides in part:

ART. 106. Contractor or subcontracting. x x x.

xxx

xxx

There is labor-only contracting where the person supplying workers

to an employer does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. x x x.

On the basis of the records, we have no reason to deviate from the Appellate
Courts finding that J. Narag Construction is indeed a labor-only contractor. These are
the reasons: (1) it is not registered as a building contractor with the SEC; (2) it has no
contract with petitioner; and (3) there is no proof of its financial capability and has no list
of equipment, tools, machineries and implements used in the business.

Clearly, J. Narag Construction could not be respondents employer.

But petitioner maintains that respondents are project employees and as such,
their services ended in September, 1992 upon completion of its HCMG or Sogo project.

In Kiamco vs. NLRC,[5] we held:

The principal test for determining whether particular employees are
properly characterized as project employees, as distinguished from
regular employees, is whether or not the project employees were
assigned to carry out a specific project or undertaking, the duration and
scope of which were specified at the time the employees were engaged for
that project. As defined, project employees are those workers hired (1) for
Page 29 of 497

a specific project or undertaking, and (2) the completion or termination of

such project or undertaking has been determined at the time of
engagement of the employee.

Here, petitioner could not present employment contracts signed by respondents

showing that their employment was for the duration of the HCMG or Sogo project.

Likewise, as correctly observed by the Court of Appeals, petitioner failed to

present any report terminating the services of respondents when its projects were
actually finished.

Section 2.2 (e) of the Labor Department Order No. 19 expressly provides that the
report of termination is one of the indications of project employment. [6]

Time and again, we held that failure of the employer to file termination reports
after every project completion with the nearest public employment office is an
indication that respondents were
not project employees.[7]
We, therefore, uphold the finding of the Court of Appeals that respondents are
petitioners regular employees. As such, they are entitled to security of tenure and can
only be dismissed for a just or authorized cause, as provided by Article 279 of the Labor
Code, as amended, thus:

"ARTICLE 279. Security of Tenure. In cases of regular employment,

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

In Bolinao Security and Investigation Service, Inc. vs. Toston [8], we emphasized
that it is incumbent upon the employer to prove by the quantum of evidence required
Page 30 of 497

by law that the dismissal of an employee is not illegal, otherwise, the dismissal would be
unjustified.

Here, petitioner failed to discharge its burden. In terminating respondents

services, it merely relied on the alleged completion of the HCMG or Sogo project and on
the report that respondents uttered profane or offensive language in violation of the
companys Rules and Regulations.
As earlier mentioned, they are not project
employees. And as found by the Court of Appeals, there is no evidence to substantiate
the charge of uttering profane or offensive language.

It also appears that petitioner violated respondents right to due process.

In Loadstar Shipping Co., Inc. vs. Mesano, [9] we held:

The law requires that an employee sought to be dismissed must be

served two written notices before termination of his employment. The first
notice is to apprise the employee of the particular acts or omissions by
reason of which his dismissal has been decided upon; and the second notice
is to inform the employee of the employers decision to dismiss him. Failure
to comply with the requirement of two notices makes the dismissal illegal.
The procedure is mandatory. Non-observance thereof renders the dismissal
of an employee illegal and void.

Records show that respondents were not served by petitioner with notices, verbal
or written, informing them of the particular acts for which their dismissal is sought.
Neither were they required to give their side regarding the alleged serious misconduct
imputed against them.

Page 31 of 497

We thus sustain the Court of Appeals ruling that respondents were deprived
of both their substantive and procedural rights to due process and, therefore,
thetermination of their employment is illegal.

Since respondents were illegally dismissed from work, they are entitled to
reinstatement without loss of seniority rights, full backwages, inclusive of allowances,
and other benefits or their monetary equivalent computed from the time their
compensation was withheld from them up to the time of their actual
reinstatement.[10]

However, the circumstances obtaining in this case do not warrant the

reinstatement of respondents. Antagonism caused a severe strain in the parties
employer-employee relationship. Thus, a more equitable disposition would be an award
of separation pay equivalent to at least one month pay, or one month pay for every year
of service, whichever is higher, (with a fraction of at least six (6) months being
considered as one (1) whole year),[11] in addition to their full backwages, allowances and
other benefits.[12]

Records show that respondents were employed by petitioner from 1990 to October
29, 1992, or for two (2) years, with a daily salary of P104.00 each, hence, entitled to
a separation pay of P4,992.00.[13]

WHEREFORE, the assailed Decision dated September 17, 1999 and Resolution
dated January 6, 2000 of the Court of Appeals in CA-G.R. SP No. 50610
arehereby AFFIRMED with MODIFICATION in the sense that petitioner is ordered to
pay each respondent separation pay equivalent to P4,992.00, plus their respective full
backwages, and other privileges and benefits, or their monetary equivalent, during the
period of their dismissal up to their supposed actual reinstatement.

Costs against petitioner.

SO ORDERED.

Page 32 of 497

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 109902 August 2, 1994

ALU-TUCP, Representing Members: ALAN BARINQUE, with 13 others, namely:
ENGR. ALAN G. BARINQUE, ENGR. DARRELL LEE ELTAGONDE, EDUARD H.
FOOKSON, JR., ROMEO R. SARONA, RUSSELL GACUS, JERRY BONTILAO, EUSEBIO
MARIN, JR., LEONIDO ECHAVEZ, BONIFACIO MEJOS, EDGAR S. BONTUYAN, JOSE
G. GARGUENA, JR., OSIAS B. DANDASAN, and GERRY I. FETALVERO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL STEEL CORPORATION
(NSC), respondents.
Leonard U. Sawal for petitioners.
Saturnino Mejorada for private respondent.

FELICIANO, J.:
In this Petition for Certiorari, petitioners assail the Resolution of the National Labor
Relations Commission ("NLRC") dated 8 January 1993 which declared petitioners to be
project employees of private respondent National Steel Corporation ("NSC"), and the
NLRC's subsequent Resolution of 15 February 1993, denying petitioners' motion for
reconsideration.
Petitioners plead that they had been employed by respondent NSC in connection with its
Five Year Expansion Program (FAYEP I & II) 1 for varying lengths of time when they were
separated from NSC's service:
Employee Date Nature of Separated
Employed Employment
1. Alan Barinque 5-14-82 Engineer 1 8-31-91
2. Jerry Bontilao 8-05-85 Engineer 2 6-30-92
3. Edgar Bontuyan 11-03-82 Chairman to present
Page 33 of 497

4. Osias Dandasan 9-21-82 Utilityman 1991

5. Leonido Echavez 6-16-82 Eng. Assistant 6-30-92
6. Darrell Eltagonde 5-20-85 Engineer 1 8-31-91
7. Gerry Fetalvero 4-08-85 Mat. Expediter regularized
8. Eduard Fookson 9-20-84 Eng. Assistant 8-31-91
9. Russell Gacus 1-30-85 Engineer 1 6-30-92
10. Jose Garguena 3-02-81 Warehouseman to present
11. Eusebio Mejos 11-17-82 Survey Aide 8-31-91
12. Bonifacio Mejos 11-17-82 Surv. Party Head 1992
13. Romeo Sarona 2-26-83 Machine Operator 8-31-91 2
On 5 July 1990, petitioners filed separate complaints for unfair labor practice,
regularization and monetary benefits with the NLRC, Sub-Regional Arbitration Branch XII,
Iligan City.
The complaints were consolidated and after hearing, the Labor Arbiter in a Decision
dated 7 June 1991, declared petitioners "regular project employees who shall continue
their employment as such for as long as such [project] activity exists," but entitled to the
salary of a regular employee pursuant to the provisions in the collective bargaining
agreement. It also ordered payment of salary differentials. 3
Both parties appealed to the NLRC from that decision. Petitioners argued that they were
regular, not project, employees. Private respondent, on the other hand, claimed that
petitioners are project employees as they were employed to undertake a specific project
NSC's Five Year Expansion Program (FAYEP I & II).
The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It affirmed
the Labor Arbiter's holding that petitioners were project employees since they were hired
to perform work in a specific undertaking the Five Years Expansion Program, the
completion of which had been determined at the time of their engagement and which
operation was not directly related to the business of steel manufacturing. The NLRC,
however, set aside the award to petitioners of the same benefits enjoyed
by regular employees for lack of legal and factual basis.
Deliberating on the present Petition for Certiorari, the Court considers that petitioners
have failed to show any grave abuse of discretion or any act without or in excess of
jurisdiction on the part of the NLRC in rendering its questioned resolutions of 8 January
1993 and 15 February 1993.
The law on the matter is Article 280 of the Labor Code which reads in full:
Art. 280. Regular and Casual Employment The provisions of the written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, and employment shall be deemed to be regular
Page 34 of 497

where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year 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)
Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are
"necessary, desirable and work-related to private respondent's main business, steelmaking"; and (ii) they have rendered service for six (6) or more years to private
respondent NSC. 4
The basic issue is thus whether or not petitioners are properly characterized as "project
employees" rather than "regular employees" of NSC. This issue relates, of course, to an
important consequence: the services of project employees are co-terminous with the
project and may be terminated upon the end or completion of the project for which they
were hired. 5 Regular employees, in contract, are legally entitled to remain in the service
of their employer until that service is terminated by one or another of the recognized
modes of termination of service under the Labor Code. 6
It is evidently important to become clear about the meaning and scope of the term
"project" in the present context. The "project" for the carrying out of which "project
employees" are hired would ordinarily have some relationship to the usual business of
the employer. Exceptionally, the "project" undertaking might not have an ordinary or
normal relationship to the usual business of the employer. In this latter case, the
determination of the scope and parameeters of the "project" becomes fairly easy. It is
unusual (but still conceivable) for a company to undertake a project which has absolutely
no relationship to the usual business of the company; thus, for instance, it would be an
unusual steel-making company which would undertake the breeding and production of
fish or the cultivation of vegetables. From the viewpoint, however, of the legal
characterization problem here presented to the Court, there should be no difficulty in
designating the employees who are retained or hired for the purpose of undertaking fish
culture or the production of vegetables as "project employees," as distinguished from
ordinary or "regular employees," so long as the duration and scope of the project were
determined or specified at the time of engagement of the "project employees." 7 For, as
is evident from the provisions of Article 280 of the Labor Code, quoted earlier, the
Page 35 of 497

principal test for determining whether particular employees are properly characterized
as "project employees" as distinguished from "regular employees," is whether or not the
"project employees" were assigned to carry out a "specific project or undertaking," the
duration (and scope) of which were specified at the time the employees were engaged
for that project.
In the realm of business and industry, we note that "project" could refer to one or the
other of at least two (2) distinguishable types of activities. Firstly, a project could refer to
a particular job or undertaking that is within the regular or usual business of the
employer company, but which is distinct and separate, and identifiable as such, from the
other undertakings of the company. Such job or undertaking begins and ends at
determined or determinable times. The typical example of this first type of project is a
particular construction job or project of a construction company. A construction company
ordinarily carries out two or more discrete identifiable construction projects: e.g., a
twenty-five- storey hotel in Makati; a residential condominium building in Baguio City;
and a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of
one of these separate projects, the scope and duration of which has been determined
and made known to the employees at the time of employment, are properly treated as
"project employees," and their services may be lawfully terminated at completion of the
project.
The term "project" could also refer to, secondly, a particular job or undertaking that
is not within the regular business of the corporation. Such a job or undertaking must also
be identifiably separate and distinct from the ordinary or regular business operations of
the employer. The job or undertaking also begins and ends at determined or
determinable times. The case at bar presents what appears to our mind as a typical
example of this kind of "project."
NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end
in view of expanding the volume and increasing the kinds of products that it may offer
for sale to the public. The Five Year Expansion Program had a number of component
projects: e.g., (a) the setting up of a "Cold Rolling Mill Expansion Project"; (b) the
establishment of a "Billet Steel-Making Plant" (BSP); (c) the acquisition and installation of
a "Five Stand TDM"; and (d) the "Cold Mill Peripherals Project." 8 Instead of contracting
out to an outside or independent contractor the tasks of constructing the buildings with
related civil and electrical works that would house the new machinery and equipment,
the installation of the newly acquired mill or plant machinery and equipment and
the commissioning of such machinery and equipment, NSC opted to execute and carry
out its Five Yeear Expansion Projects "in house," as it were, by administration. The
carrying out of the Five Year Expansion Program (or more precisely, each of its
component projects) constitutes a distinct undertaking identifiable from the ordinary
business and activity of NSC. Each component project, of course, begins and ends at
specified times, which had already been determined by the time petitioners were
engaged. We also note that NSC did the work here involved the construction of
Page 36 of 497

buildings and civil and electrical works, installation of machinery and equipment and the
commissioning of such machinery only for itself. Private respondent NSC was not in
the business of constructing buildings and installing plant machinery for the general
business community, i.e., for unrelated, third party, corporations. NSC did not hold itself
out to the public as a construction company or as an engineering corporation.
Which ever type of project employment is found in a particular case, a common basic
requisite is that the designation of named employees as "project employees" and their
assignment to a specific project, are effected and implemented in good faith, and not
merely as a means of evading otherwise applicable requirements of labor laws.
Thus, the particular component projects embraced in the Five Year Expansion Program,
to which petitioners were assigned, were distinguishable from the regular or ordinary
business of NSC which, of course, is the production or making and marketing of steel
products. During the time petitioners rendered services to NSC, their work was limited to
one or another of the specific component projects which made up the FAYEP I and II.
There is nothing in the record to show that petitioners were hired for, or in fact assigned
to, other purposes, e.g., for operating or maintaining the old, or previously installed and
commissioned, steel-making machinery and equipment, or for selling the finished steel
products.
We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter) that the
petitioners were indeed "project employees:"
It is well established by the facts and evidence on record that herein 13
complainants were hired and engaged for specific activities or undertaking
the period of which has been determined at time of hiring or engagement. It
is of public knowledge and which this Commission can safely take judicial
notice that the expansion program (FAYEP) of respondent NSC consist of
various phases [of] project components which are being executed or
implemented independently or simultaneously from each other . . .
In other words, the employment of each "project worker" is dependent and
co-terminous with the completion or termination of the specific activity or
undertaking [for which] he was hired which has been pre-determined at the
time of engagement. Since, there is no showing that they (13 complainants)
were engaged to perform work-related activities to the business of
respondent which is steel-making, there is no logical and legal sense of
applying to them the proviso under the second paragraph of Article 280 of
the Labor Code, as amended.
xxx xxx xxx

Page 37 of 497

The present case therefore strictly falls under the definition of "project
employees" on paragraph one of Article 280 of the Labor Code, as
amended. Moreover, it has been held that the length of service of a project
employee is not the controlling test of employment tenure but whether or
not "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". (See Hilario Rada v. NLRC, G.R. No.
96078, January 9, 1992; and Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674
(1985). 9
Petitioners next claim that their service to NSC of more than six (6) years should qualify
them as regular employees. We believe this claim is without legal basis. The simple fact
that the employment of petitioners as project employees had gone beyond one (1) year,
does not detract from, or legally dissolve, their status as project employees. 10 The
second paragraph of Article 280 of the Labor Code, quoted above, providing that an
employee who has served for at least one (1) year, shall be considered a regular
employee, relates to casual employees, not to project employees.
In the case of Mercado, Sr. vs. National Labor Relations Commission, 11 this Court ruled
that the proviso in the second paragraph of Article 280 relates only to casual
employees and is not applicable to those who fall within the definition of said Article's
first paragraph, i.e., project employees. The familiar grammatical rule is that a proviso is
to be construed with reference to the immediately preceding part of the provision to
which it is attached, and not to other sections thereof, unless the clear legislative intent
is to restrict or qualify not only the phrase immediately preceding the proviso but also
earlier provisions of the statute or even the statute itself as a whole. No such intent is
observable in Article 280 of the Labor Code, which has been quoted earlier.
ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is hereby DISMISSED
for lack of merit. The Resolutions of the NLRC dated 8 January 1993 and 15 February
1993 are hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 120969 January 22, 1998

Page 38 of 497

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) composed of
Presiding Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA
and Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and
VIVA FIMS, respondents.

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court,
petitioners seek to annul the 10 February 1995 Decision 1 of the National Labor Relations
Commission (hereafter NLRC), and its 6 April 1995 Resolution 2 denying the motion to
reconsider the former in NLRC-NCR-CA No. 006195-94. The decision reversed that of the
Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private
respondents on 18 July 1989 as part of the filming crew with a salary of P375.00 per
week. About four months later, he was designated Assistant Electrician with a weekly
salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he was
promoted to the rank of Electrician with a weekly salary of P475.00, which was increased
to P539.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him in
June 1990 as a member of the shooting crew with a weekly salary of P375.00, which was
increased to P425.00 in May 1991, then to P475.00 on 21 December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the
shooting area as instructed by the cameraman, returning the equipment to Viva Films'
warehouse, assisting in the "fixing" of the lighting system, and performing other tasks
that the cameraman and/or director may assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs.
Alejandria Cesario, to facilitate their request that private respondents adjust their salary
in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed
petitioners that Mr. Vic del Rosario would agree to increase their salary only if they
signed a blank employment contract. As petitioners refused to sign, private respondents
forced Enero to go on leave in June 1992, then refused to take him back when he
reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the
company payroll from 8 to 21 June 1992, but was returned on 22 June 1992. He was
again asked to sign a blank employment contract, and when he still refused, private
respondents terminated his services on 20 July 1992. 5 Petitioners thus sued for illegal
dismissal 6 before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade
name of Viva Productions, Inc., and that it is primarily engaged in the distribution and
Page 39 of 497

exhibition of movies but not in the business of making movies; in the same vein,
private respondent Vic del Rosario is merely an executive producer,i.e., the financier who
invests a certain sum of money for the production of movies distributed and exhibited by
VIVA. 7
Private respondents assert that they contract persons called "producers" also referred
to as "associate producers" 8 to "produce" or make movies for private respondents;
and contend that petitioners are project employees of the association producers who, in
turn, act as independent contractors. As such, there is no employer-employee
relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film
"Mahirap Maging Pogi," who hired petitioner Maraguinot. The movie shot from 2 July up
to 22 July 1992, and it was only then that Maraguinot was released upon payment of his
last salary, as his services were no longer needed. Anent petitioner Enero, he was hired
for the movie entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He went on
vacation on 8 June 1992, and by the time he reported for work on 20 July 1992, shooting
for the movie had already been completed. 9
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of
the respondents. The producer cannot be considered as an independent
contractor but should be considered only as a labor-only contractor and as
such, acts as a mere agent of the real employer, the herein respondent.
Respondents even failed to name and specify who are the producers. Also,
it is an admitted fact that the complainants received their salaries from the
respondents. The case cited by the respondents,Rosario Brothers,
Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are
necessary and essential to the business of the respondents, that of moviemaking. Complainant Maraguinot worked as an electrician while
complainant Enero worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants
were illegally dismissed.
Respondents are hereby ordered to reinstate complainant to their former
positions without loss [of] seniority rights and pay their backwages starting
July 21, 1992 to December 31, 1993 temporarily computed in the amount of
P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant
Alejandro Maraguinot, Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorney's fees equivalent to ten (10%)
and/or P8,400.00 on top of the award. 11

Page 40 of 497

Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In
its decision 12 of 10 February 1995, the NLRC found the following circumstances of
petitioners' work "clearly established:"
1. Complainants [petitioners herein] were hired for specific movie projects
and their employment wasco-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made
known to complainants at the time of their engagement.
xxx xxx xxx
2 Each shooting unit works on one movie project at a time. And the work of
the shooting units, which work independently from each other, are not
continuous in nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the
total working hours logged by complainants in a month show extreme
variations. . . For instance, complainant Maraguinot worked for
only 1.45 hours in June 1991 but logged a total of 183.25 hours in January
1992. Complainant Enero logged a total of only 31.57 hours in September
1991 but worked for 183.35hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of
complainants on a daily basis. Complainant Maraguinot was supposed to
report on 05 August 1991 but reported only on 30 August 1991, or a gap of
25 days. Complainant Enero worked on 10 September 1991 and his next
scheduled working day was 28 September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants' work
explain the lump sum payment for complainants' services for each movie
project. Hence, complainants were paid a standard weekly salary regardless
of the number of working days and hours they logged in. Otherwise, if the
principle of "no work no pay" was strictly applied, complainants' earnings
for certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from
working with such movie companies like Regal, Seiko and FPJ Productions
whenever they are not working for the independent movie producers
engaged by respondents . . . This allegation was never rebutted by
complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein petitioners)
were "project employees."
After their motion for reconsideration was denied by the NLRC in its Resolution 13 of 6
April 1995, petitioners filed the instant petition, claiming that the NLRC committed grave
abuse of discretion amounting to lack or excess of jurisdiction in: (1) finding that

Page 41 of 497

petitioners were project employees; (2) ruling that petitioners were not illegally
dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of private
respondents, petitioners cited their performance of activities that were necessary or
desirable in the usual trade or business of private respondents and added that their work
was continuous, i.e., after one project was completed they were assigned to another
project. Petitioners thus considered themselves part of a work pool from which private
respondents drew workers for assignment to different projects. Petitioners lamented that
there was no basis for the NLRC's conclusion that they were project employees, while the
associate producers were independent contractors; and thus reasoned that as regular
employees, their dismissal was illegal since the same was premised on a "false cause,"
namely, the completion of a project, which was not among the causes for dismissal
allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their evidence
supports the view that petitioners are project employees; point to petitioners' irregular
work load and work schedule; emphasize the NLRC's finding that petitioners never
controverted the allegation that they were not prohibited from working with other movie
companies; and ask that the facts be viewed in the context of the peculiar characteristics
of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper since
petitioners raise questions of fact, particularly, the NLRC's finding that petitioners were
project employees, a finding supported by substantial evidence; and submits that
petitioners' reliance on Article 280 of the Labor Code to support their contention that
they should be deemed regular employees is misplaced, as said section "merely
distinguishes between two types of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they were hired not for one
project, but for a series of projects, they should be deemed regular employees.
Citing Mamansag v. NLRC, 14 the OSG asserts that what matters is that there was a timeframe for each movie project made known to petitioners at the time of their hiring. In
closing, the OSG disagrees with petitioners' claim that the NLRC's classification of the
movie producers as independent contractors had no basis in fact and in law, since, on
the contrary, the NLRC "took pains in explaining its basis" for its decision.
As regards the propriety of this action, which the Office of the Solicitor General takes
issue with, we rule that a special civil action for certiorari under Rule 65 of the Rules of
Court is the proper remedy for one who complains that the NLRC acted in total disregard
of evidence material to or decisive of the controversy. 15 In the instant case, petitioners
allege that the NLRC's conclusions have no basis in fact and in law, hence the petition
may not be dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an
employer-employee relationship existed between petitioners and private respondents or
any one of private respondents. If there was none, then this petition has no merit;
conversely, if the relationship existed, then petitioners could have been unjustly
dismissed.
Page 42 of 497

A related question is whether private respondents are engaged in the business of making
motion pictures. Del Rosario is necessarily engaged in such business as he finances the
production of movies. VIVA, on the other hand, alleges that it does not "make" movies,
but merely distributes and exhibits motion pictures. There being no further proof to this
effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed
below, private respondents' evidence even supports the view that VIVA is engaged in the
business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are project
employees of associate producers who, in turn, act as independent contractors. It is
settled that the contracting out of labor is allowed only in case of job contracting. Section
8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code describes
permissible job contracting in this wise:
Sec. 8. Job contracting. There is job contracting permissible under the
Code if the following conditions are met:
(1) The contractor carries on an independent
business and undertakes the contract work on his
own account under his own responsibility
according to his own manner and method, free
from the control and direction of his employer or
principal in all matters connected with the
performance of the work except as to the results
thereof; and
(2) The contractor has substantial capital or
investment in the form of tools, equipment,
machineries, work premises, and other materials
which are necessary in the conduct of his
business.
Assuming that the associate producers are job contractors, they must then be engaged
in the business of making motion pictures. As such, and to be a job contractor under the
preceding description, associate producers must have tools, equipment, machinery, work
premises, and other materials necessary to make motion pictures. However, the
associate producers here have none of these. Private respondents' evidence reveals that
the movie-making equipment are supplied to the producers and owned by VIVA. These
include generators, 16 cables and wooden platforms, 17 cameras and "shooting
equipment;" 18 in fact, VIVA likewise owns the trucks used to transport the
equipment. 19 It is thus clear that the associate producer merely leases the equipment
from VIVA. 20 Indeed, private respondents' Formal Offer of Documentary Evidence stated
one of the purposes of Exhibit "148" as:
To prove further that the independent Producers rented Shooting Unit No. 2
from Viva to finish their films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:

Page 43 of 497

[T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget
and time-frame of at least 30 shooting days or 45 days whichever comes
first. 22
Private respondent further narrated that VIVA's generators broke down during
petitioners' last movie project, which forced the associate producer concerned to rent
generators, equipment and crew from another company. 23 This only shows that the
associate producer did not have substantial capital nor investment in the form of tools,
equipment and other materials necessary for making a movie. Private respondents in
effect admit that their producers, especially petitioners' last producer, are not engaged
in permissible job contracting.
If private respondents insist that the associate producers are labor contractors, then
these producers can only be "labor-only" contractors, defined by the Labor Code as
follows:
Art. 106. Contractor or subcontractor. . . .
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such persons are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:
(1) Does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises and other
materials; and
(2) The workers recruited and placed by such person are
performing activities which are directly related to the principal
business or operations of the employer in which workers are
habitually employed.
(b) Labor-only contracting as defined herein is
hereby prohibited and the person acting as
contractor shall be considered merely as an agent
or intermediary of the employer who shall be
responsible to the workers in the same manner
Page 44 of 497

and extent as if the latter were directly employed

by him.
(c) For cases not falling under this Article, the
Secretary of Labor shall determine through
appropriate orders whether or not the contracting
out of labor is permissible in the light of the
circumstances of each case and after considering
the operating needs of the employer and the
rights of the workers involved. In such case, he
may prescribe conditions and restrictions to
insure the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity engaged in
the same a mere agent or intermediary of the direct employer. But even by the
preceding standards, the associate producers of VIVA cannot be considered labor-only
contractors as they did not supply, recruit nor hire the workers. In the instant case, it was
Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew
members from an "available group of free-lance workers which includes the
complainants Maraguinot and Enero." 24 And in their Memorandum, private respondents
declared that the associate producer "hires the services of . . . 6) camera crew which
includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man
and electrician; (e) clapper; etc. . . . ." 25 This clearly showed that the associate
producers did not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers seems to be that
of agency, 26 as the latter make movies on behalf of VIVA, whose business is to "make"
movies. As such, the employment relationship between petitioners and producers is
actually one between petitioners and VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be
established by the "control test." While four elements are usually considered in
determining the existence of an employment relationship, namely: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer's power to control of the employee's conduct, the most important
element is the employer's control of the employee's conduct, not only as to the result of
the work to be done but also as to the means and methods to accomplish the
same. 27 These four elements are present here. In their position paper submitted to the
Labor Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by
the company, for as long as the ultimate finish[ed] product is acceptable to
the company . . .
The ensure that qualify films are produced by the PRODUCER who is an
independent contractor, the company likewise employs a Supervising
PRODUCER, a Project accountant and a Shooting unit supervisor. The
Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project
accountant varies from time to time, and the Shooting Unit Supervisor is
Ms. Alejandria Cesario.
Page 45 of 497

The Supervising PRODUCER acts as the eyes and ears of the company and
of the Executive Producer to monitor the progress of the PRODUCER's work
accomplishment. He is there usually in the field doing the rounds of
inspection to see if there is any problem that the PRODUCER is
encountering and to assist in threshing out the same so that the film project
will be finished on schedule. He supervises about 3 to 7 movie projects
simultaneously [at] any given time by coordinating with each film
"PRODUCER". The Project Accountant on the other hand assists the
PRODUCER in monitoring the actual expenses incurred because the
company wants to insure that any additional budget requested by the
PRODUCER is really justified and warranted especially when there is a
change of original plans to suit the tast[e] of the company on how a certain
scene must be presented to make the film more interesting and more
commercially viable. (emphasis supplied).
VIVA's control is evident in its mandate that the end result must be a "quality film
acceptable to the company." The means and methods to accomplish the result are
likewise controlled by VIVA, viz., the movie project must be finished within schedule
without exceeding the budget, and additional expenses must be justified; certain scenes
are subject to change to suit the taste of the company; and the Supervising Producer,
the "eyes and ears" of VIVA and del Rosario, intervenes in the movie-making process by
assisting the associate producer in solving problems encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the movie
director's control, and not VIVA's direction. The director merely instructs petitioners on
how to better comply with VIVA's requirements to ensure that a quality film is completed
within schedule and without exceeding the budget. At bottom, the director is akin to a
supervisor who merely oversees the activities of rank-and-file employees with control
ultimately resting on the employer.
Moreover, appointment slips

28

issued to all crew members state:

During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.
The words "supervisors" and "Top Management" can only refer to the "supervisors" and
"Top Management" of VIVA. By commanding crew members to observe the rules and
regulations promulgated by VIVA, the appointment slips only emphasize VIVA's control
over petitioners.
Aside from control, the element of selection and engagement is likewise present in the
instant case and exercised by VIVA. A sample appointment slip offered by private
respondents "to prove that members of the shooting crew except the driver are project
employees of the Independent Producers" 29 reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
Page 46 of 497

PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled
"MANAMBIT". This appointment shall be effective upon the commencement
of the said project and shall continue to be effective until the completion of
the same.
For your services you shall receive the daily/weekly/monthly compensation
of P812.50.
During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.
Very truly yours,
(an illegible signature)
CONFORME:
_________________
Name of appointee
Signed in the presence of:
___________________
Notably, nowhere in the appointment slip does it appear that it was the producer or
associate producer who hired the crew members; moreover, it is VIVA's corporate name
which appears on the heading of the appointment slip. What likewise tells against VIVA is
that it paid petitioners' salaries as evidenced by vouchers, containing VIVA's letterhead,
for that purpose. 30
All the circumstances indicate an employment relationship between petitioners and VIVA
alone, thus the inevitable conclusion is that petitioners are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents
contend that petitioners were project employees whose employment was automatically
terminated with the completion of their respective projects. Petitioners assert that they
were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that
petitioners were part of a work pool; 31 and, while petitioners were initially hired possibly
Page 47 of 497

as project employees, they had attained the status of regular employees in view if VIVA's
conduct.
A project employee or a member of a work pool may acquire the status of a regular
employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a
project; 32 and
2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer. 33
However, the length of time during which the employee was continuously re-hired
is not controlling, but merely serves as a badge of regular employment. 34
In the instant case, the evidence on record shows that petitioner Enero was employed for
a total of two (2) years and engaged in at least eighteen (18) projects, while petitioner
Maraguinot was employed for some three (3) years and worked on at least twenty-three
(23) projects. 35 Moreover, as petitioners' tasks involved, among other chores, the
loading, unloading and
While Maraguinot was a member of Shooting Unit III, which made the following movies
(Annex "4-A" of Respondents' Position Paper; OR, 29):
arranging of movie equipment in the shooting area as instructed by the
cameramen, returning the equipment to the Viva Films' warehouse, and assisting
in the "fixing" of the lighting system, it may not be gainsaid that these tasks
were vital, necessary and indispensable to the usual business or trade of the
employer. As regards the underscored phrase, it has been held that this is
ascertained by considering the nature of the work performed and its relation to
the scheme of the particular business or trade in its entirety. 36
A recent pronouncement of this Court anent project or work pool employees who had
attained the status of regular employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company
because their projects were not continuous is amply belied by petitioners
themselves who admit that: . . .
A work pool may exist although the workers in the pool do not receive
salaries and are free to seek other employment during temporary breaks in
the business, provided that the worker shall be available when called to
report of a project. Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to project workers insofar as
the effect of temporary cessation of work is concerned. This is beneficial to
both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the
workers to attain the status of regular employees. Clearly, the continuous
rehiring of the same set of employees within the framework of the Lao
Page 48 of 497

Group of Companies is strongly indicative that private respondents were an

integral part of a work pool from which petitioners drew its workers for its
various projects.
In a final attempt to convince the Court that private respondents were
indeed project employees, petitioners point out that the workers were not
regularly maintained in the payroll and were free to offer their services to
other companies when there were no on-going projects. This argument
however cannot defeat the workers' status of regularity. We apply by
analogy the vase of Industrial-Commercial-Agricultural Workers
Organization v. CIR [16 SCRA 526, 567-568 (1966)] which deals with regular
seasonal employees. There we held: . . .
Truly, the cessation of construction activities at the end of every project is a
foreseeable suspension of work. Of course, no compensation can be
demanded from the employer because the stoppage of operations at the
end of a project and before the start of a new one is regular and expected
by both parties to the labor relations. Similar to the case of regular seasonal
employees, the employment relation is not severed by merely being
suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The
employees are, strictly speaking, not separated from services but merely
on leave of absence without pay until they are reemployed. Thus we cannot
affirm the argument that non-payment of salary or non-inclusion in the
payroll and the opportunity to seek other employment denote project
employment. 37 (emphasis supplied)
While Lao admittedly involved the construction industry, to which Policy Instruction No.
20/Department Order No. 19 38 regarding work pools specifically applies, there seems to
be no impediment to applying the underlying principles to industries other than the
construction industry. 39 Neither may it be argued that a substantial distinction exists
between the projects undertaken in the construction industry and the motion picture
industry. On the contrary, the raison d' etre of both industries concern projects with a
foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an employer by
imposing a duty to re-hire a project employee even after completion of the project for
which he was hired. The import of this decision is not to impose a positive and sweeping
obligation upon the employer to re-hire project employees. What this decision merely
accomplishes is a judicial recognition of the employment status of a project or work pool
employee in accordance with what is fait accompli, i.e., the continuous re-hiring by the
employer of project or work pool employees who perform tasks necessary or desirable to
the employer's usual business or trade. Let it not be said that this decision "coddles"
labor, for as Lao has ruled, project or work pool employees who have gained the status
of regular employees are subject to the "no work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the business, provided that
the worker shall be available when called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is
Page 49 of 497

beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to
attain the status of regular employees.
The Court's ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector, 40 but, we stress, not at the expense of management. Lest
it be misunderstood, this ruling does not mean that simply because an employee is a
project or work pool employee even outside the construction industry, he is
deemed, ipso jure, a regular employee. All that we hold today is that once a project or
work pool employee has been: (1) continuously, as opposed to intermittently, re-hired by
the same employer for the same tasks or nature of tasks; and (2) these tasks are vital,
necessary and indispensable to the usual business or trade of the employer, then the
employee must be deemed a regular employee, pursuant to Article 280 of the Labor
Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in
industries not falling within the ambit of Policy Instruction No. 20/Department Order No.
19, hence allowing the prevention of acquisition of tenurial security by project or work
pool employees who have already gained the status of regular employees by the
employer's conduct.
In closing then, as petitioners had already gained the status of regular employees, their
dismissal was unwarranted, for the cause invoked by private respondents for petitioners'
dismissal, viz.: completion of project, was not, as to them, a valid cause for dismissal
under Article 282 of the Labor Code. As such, petitioners are now entitled to back wages
and reinstatement, without loss of seniority rights and other benefits that may have
accrued. 41 Nevertheless, following the principles of "suspension of work" and "no pay"
between the end of one project and the start of a new one, in computing petitioners'
back wages, the amounts corresponding to what could have been earned during the
periods from the date petitioners were dismissed until their reinstatement when
petitioners' respective Shooting Units were not undertaking any movie projects, should
be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was
already in effect. Pursuant to Section 34 thereof which amended Section 279 of the
Labor Code of the Philippines and Bustamante v. NLRC,42 petitioners are entitled to
receive full back wages from the date of their dismissal up to the time of their
reinstatement, without deducting whatever earnings derived elsewhere during the period
of illegal dismissal, subject however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 01 February 1995, as
well as its Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE for
having been rendered with grave abuse of discretion, and the decision of the Labor
Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however, to the
modification above mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.

Page 50 of 497

Republic of the Philippines

Supreme Court
Baguio City
SECOND DIVISION

D.M. CONSUNJI, INC. and/or DAVID

G.R. No. 192514

M. CONSUNJI,
Petitioners,

Present:

CARPIO, J.,
Chairperson,
BRION,
PERALTA,*
- versus -

PEREZ, and
SERENO, JJ.

Promulgated:

April 18, 2012

ESTELITO L. JAMIN,
Respondent.

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

Page 51 of 497

DECISION

BRION, J.:

We resolve the present appeal [1] from the decision[2] dated February 26, 2010 and
the resolution[3] dated June 3, 2010 of the Court of Appeals (CA) in CA-G.R. SP No.
100099.
The Antecedents
On December 17, 1968, petitioner D.M. Consunji, Inc. (DMCI), a construction
company, hired respondent Estelito L. Jamin as a laborer. Sometime in 1975, Jamin
became a helper carpenter. Since his initial hiring, Jamins employment contract had
been renewed a number of times. [4] On March 20, 1999, his work at DMCI was terminated
due to the completion of the SM Manila project. This termination marked the end of his
employment with DMCI as he was not rehired again.
On April 5, 1999, Jamin filed a complaint [5] for illegal dismissal, with several money
claims (including attorneys fees), against DMCI and its President/General Manager,
David M. Consunji. Jamin alleged that DMCI terminated his employment without a just
and authorized cause at a time when he was already 55 years old and had no
independent source of livelihood. He claimed that he rendered service to DMCI
continuously for almost 31 years. In addition to the schedule of projects (where he was
assigned) submitted by DMCI to the labor arbiter, [6] he alleged that he worked for three
other DMCI projects: Twin Towers, Ritz Towers, from July 29, 1980 to June 12, 1982; New
Istana Project, B.S.B. Brunei, from June 23, 1982 to February 16, 1984; and New Istana
Project, B.S.B. Brunei, from January 24, 1986 to May 25, 1986.
DMCI denied liability. It argued that it hired Jamin on a project-to-project basis,
from the start of his engagement in 1968 until the completion of its SM Manila project
onMarch 20, 1999 where Jamin last worked. With the completion of the project, it
terminated Jamins employment. It alleged that it submitted a report to the Department
of Labor and Employment (DOLE) everytime it terminated Jamins services.
The Compulsory Arbitration Rulings

Page 52 of 497

In a decision dated May 27, 2002,[7] Labor Arbiter Francisco A. Robles dismissed
the complaint for lack of merit. He sustained DMCIs position that Jamin was a project
employee whose services had been terminated due to the completion of the project
where he was assigned. The labor arbiter added that everytime DMCI rehired Jamin, it
entered into a contract of employment with him. Moreover, upon completion of the
phase of the project for which Jamin was hired or upon completion of the project itself,
the company served a notice of termination to him and a termination report to the DOLE
Regional Office. The labor arbiter also noted that Jamin had to file an application if he
wanted to be re-hired.
On appeal by Jamin, the National Labor Relations Commission (NLRC), in its
decision of April 18, 2007,[8] dismissed the appeal and affirmed the labor arbiters finding
that Jamin was a project employee. Jamin moved for reconsideration, but the NLRC
denied the motion in a resolution dated May 30, 2007.[9] Jamin sought relief from the CA
through a petition for certiorari under Rule 65 of the Rules of Court.
The CA Decision
On February 26, 2010, the CA Special Fourth Division rendered the disputed
decision[10] reversing the compulsory arbitration rulings. It held that Jamin was a
regular employee. It based its conclusion on: (1) Jamins repeated and successive
rehiring in DMCIs various projects; and (2) the nature of his work in the projects he
was performing activities necessary or desirable in DMCIs construction business.
Invoking the Courts ruling in an earlier case, [11] the CA declared that the pattern of
Jamins rehiring and the recurring need for his services are sufficient evidence of the
necessity and indispensability of such services to DMCIs business or trade, a key
indicator of regular employment. It opined that although Jamin started as a project
employee, the circumstances of his employment made it regular or, at the very
least, has ripened into a regular employment.
The CA considered the project employment contracts Jamin entered into with DMCI
for almost 31 years not definitive of his actual status in the company. It stressed that the
existence of such contracts is not always conclusive of a workers employment status as
this Court explained in Liganza v. RBL Shipyard Corporation, et al. [12] It found added
support from Integrated Contractor and Plumbing Works, Inc. v. NLRC, [13] where the Court
said that while there were several employment contracts between the worker and the
employer, in all of them, the worker performed tasks which were usually necessary or
desirable in the usual business or trade of the employer and, a review of the workers
assignments showed that he belonged to a work pool, making his employment regular.
Contrary to DMCIs submission and the labor arbiters findings, the CA noted that
DMCI failed to submit a report to the DOLE Regional Office everytime Jamins
employment was terminated, as required by DOLE Policy Instructions No. 20. The CA
opined that DMCIs failure to submit the reports to the DOLE is an indication that Jamin
was not a project employee. It further noted that DOLE Department Order No. 19, Series
of 1993, which superseded DOLE Policy Instructions No. 20, provides that the termination
report is one of the indicators of project employment. [14]
Having found Jamin to be a regular employee, the CA declared his dismissal illegal
as it was without a valid cause and without due process. It found that DMCI failed to
Page 53 of 497

provide Jamin the required notice before he was dismissed. Accordingly, the CA ordered
Jamins immediate reinstatement with backwages, and without loss of seniority rights
and other benefits.
DMCI moved for reconsideration, but the CA denied the motion in its resolution
of June 3, 2010.[15] DMCI is now before the Court through a petition for review
oncertiorari under Rule 45 of the Rules of Court. [16]
The Petition
DMCI seeks a reversal of the CA rulings on the ground that the appellate court
committed a grave error in annulling the decisions of the labor arbiter and the NLRC. It
presents the following arguments:
1. The CA misapplied the phrase usually necessary or desirable in the usual
business or trade of the employer when it considered Jamin a regular employee. The
definition of a regular employee under Article 280 of the Labor Code does not apply to
project employment or employment which has been fixed for a specific project, as
interpreted by the Supreme Court in Fernandez v. National Labor Relations
Commission[17] and D.M. Consunji, Inc. v. NLRC.[18] It maintains the same project
employment methodology in its business operations and it cannot understand why a
different ruling or treatment would be handed down in the present case.
2. There is no work pool in DMCIs roster of project employees. The CA erred in
insinuating that Jamin belonged to a work pool when it cited Integrated Contractor and
Plumbing Works, Inc. ruling.[19] At any rate, Jamin presented no evidence to prove his
membership in any work pool at DMCI.
3. The CA misinterpreted the rules requiring the submission of termination of
employment reports to the DOLE. While the report is an indicator of project employment,
as noted by the CA, it is only one of several indicators under the rules. [20] In any event,
the CA penalized DMCI for a few lapses in its submission of reports to the DOLE with a
very rigid application of the rule despite the almost unanimous proofs surrounding the
circumstances of private respondent being a project employee as shown by petitioners
documentary evidence.[21]
4. The CA erred in holding that Jamin was dismissed without due process for its
failure to serve him notice prior to the termination of his employment. As Jamin was not
dismissed for cause, there was no need to furnish him a written notice of the grounds for
the dismissal and neither is there a need for a hearing. When there is no more job for
Jamin because of the completion of the project, DMCI, under the law, has the right to
terminate his employment without incurring any liability. Pursuant to the rules
implementing the Labor Code,[22] if the termination is brought about by the completion of
the contract or phase thereof, no prior notice is required.
Finally, DMCI objects to the CAs reversal of the findings of the labor arbiter and
the NLRC in the absence of a showing that the labor authorities committed a grave
abuse of discretion or that evidence had been disregarded or that their rulings had been
arrived at arbitrarily.

Page 54 of 497

The Case for Jamin

In his Comment (to the Petition), [23] Jamin prays that the petition be denied for
having been filed out of time and for lack of merit.
He claims, in support of his plea for the petitions outright dismissal, that DMCI
received a copy of the CA decision (dated February 26, 2010) on March 4, 2010, as
stated by DMCI itself in its motion for reconsideration of the decision. [24] Since DMCI filed
the motion with the CA on March 22, 2010, it is obvious, Jamin stresses, that the motion
was filed three days beyond the 15-day reglementary period, the last day of which fell
on March 19, 2010. He maintains that for this reason, the CAs February 26, 2010
decision had become final and executory, as he argued before the CA in his Comment
and Opposition (to DMCIs Motion for Reconsideration). [25]
On the merits of the case, Jamin submits that the CA committed no error in
nullifying the rulings of the labor arbiter and the NLRC. He contends that DMCI misread
this Courts rulings in Fernandez v. National Labor Relations Commission, et al.
[26]
and D.M. Consunji, Inc. v. NLRC,[27] cited to support its position that Jamin was a
project employee.
Jamin argues that in Fernandez, the Court explained that the proviso in the second
paragraph of Article 280 of the Labor Code relates only to casual employees who shall
be considered regular employees if they have rendered at least one year of service,
whether such service is continuous or broken. He further argues that in Fernandez, the
Court held that inasmuch as the documentary evidence clearly showed gaps of a month
or months between the hiring of Ricardo Fernandez in the numerous projects where he
was assigned, it was the Courts conclusion that Fernandez had not continuously worked
for the company but only intermittently as he was hired solely for specific projects.
[28]
Also, in Fernandez, the Court affirmed its rulings in earlier cases that the failure of
the employer to report to the [nearest] employment office the termination of workers
everytime a project is completed proves that the employees are not project
employees.[29]
Jamin further explains that in the D.M. Consunji, Inc. case, the company
deliberately omitted portions of the Courts ruling stating that the complainants were not
claiming that they were regular employees; rather, they were questioning the
termination of their employment before the completion of the project at the Cebu Super
Block, without just cause and due process. [30]
In the matter of termination reports to the DOLE, Jamin disputes DMCIs
submission that it committed only few lapses in the reportorial requirement. He
maintains that even the NLRC noted that there were no termination reports with the
DOLE Regional Office after every completion of a phase of work, although the NLRC
considered that the report is required only for statistical purposes. He, therefore,
contends that the CA committed no error in holding that DMCIs failure to submit reports
to the DOLE was an indication that he was not a project employee.
Finally, Jamin argues that as a regular employee of DMCI for almost 31 years, the
termination of his employment was without just cause and due process.
The Courts Ruling
Page 55 of 497

The procedural issue

Was DMCIs appeal filed out of time, as Jamin claims, and should have been
dismissed outright? The records support Jamins submission on the issue.
DMCI received its copy of the February 26, 2010 CA decision on March 4, 2010 (a
Thursday), as indicated in its motion for reconsideration of the decision itself, [31] not
on March 5, 2010 (a Friday), as stated in the present petition. [32] The deadline for the
filing of the motion for reconsideration was on March 19, 2010 (15 days from receipt of
copy of the decision), but it was filed only on March 22, 2010 or three days late.
Clearly, the motion for reconsideration was filed out of time, thereby rendering
the CA decision final and executory.
Necessarily, DMCIs petition for review on certiorari is also late as it had only
fifteen (15) days from notice of the CA decision to file the petition or the denial of its
motion for reconsideration filed in due time.[33] The reckoning date is March 4, 2010,
since DMCIs motion for reconsideration was not filed in due time. We see no point in
exercising liberality and disregarding the late filing as we did in Orozco v. Fifth Division of
the Court of Appeals,[34] where we ruled that [t]echnicality should not be allowed to
stand in the way of equitably and completely resolving the rights and obligations of the
parties. The petition lacks merit for its failure to show that the CA committed any
reversible error or grave abuse of discretion when it reversed the findings of
the labor arbiter and the NLRC.
As earlier mentioned, Jamin worked for DMCI for almost 31 years, initially as a
laborer and, for the most part, as a carpenter. Through all those years, DMCI treated him
as a project employee, so that he never obtained tenure. On the surface and at first
glance, DMCI appears to be correct. Jamin entered into a contract of employment
(actually an appointment paper to which he signified his conformity) with DMCI either as
a field worker, a temporary worker, a casual employee, or a project employee everytime
DMCI needed his services and a termination of employment paper was served on him
upon completion of every project or phase of the project where he worked. [35] DMCI would
then submit termination of employment reports to the DOLE, containing the names of a
number of employees including Jamin. [36] The NLRC and the CA would later on say,
however, that DMCI failed to submit termination reports to the DOLE.
The CA pierced the cover of Jamins project employment contract and declared
him a regular employee who had been dismissed without cause and without notice. To
reiterate, the CAs findings were based on: (1) Jamins repeated and successive
engagements in DMCIs construction projects, and (2) Jamins performance of activities
necessary or desirable in DMCIs usual trade or business.
We agree with the CA. In Liganza v. RBL Shipyard Corporation,[37] the Court
held that [a]ssuming, without granting[,] that [the] petitioner was initially
hired for specific projects or undertakings, the repeated re-hiring and
continuing need for his services for over eight (8) years have undeniably made
him a regular employee. We find the Liganza ruling squarely applicable to this case,
considering that for almost 31 years, DMCI had repeatedly, continuously and
successively engaged Jamins services since he was hired on December 17, 1968 or for a
Page 56 of 497

total of 38 times 35 as shown by the schedule of projects submitted by DMCI to the

labor arbiter[38] and three more projects or engagements added by Jamin, which he
claimed DMCI intentionally did not include in its schedule so as to make it appear that
there were wide gaps in his engagements. One of the three projects was local, the Ritz
Towers,[39] from July 29, 1980 to June 12, 1982, while the other two were overseas
the New Istana Project in Brunei, Darussalam, from June 23, 1982 to February 16, 1984;
[40]
and again, the New Istana Project, from January 24, 1986 to May 25, 1986.[41]
We reviewed Jamins employment contracts as the CA did and we noted that while
the contracts indeed show that Jamin had been engaged as a project employee, there
was an almost unbroken string of Jamins rehiring from December 17, 1968 up to the
termination of his employment on March 20, 1999. While the history of Jamins
employment (schedule of projects)[42] relied upon by DMCI shows a gap of almost four
years in his employment for the period between July 28, 1980 (the supposed completion
date of the Midtown Plaza project) and June 13, 1984 (the start of the IRRI Dorm IV
project), the gap was caused by the companys omission of the three projects above
mentioned.
For not disclosing that there had been other projects where DMCI engaged his
services, Jamin accuses the company of suppressing vital evidence that supports his
contention that he rendered service in the companys construction projects continuously
and repeatedly for more than three decades. The non-disclosure might not have
constituted suppression of evidence it could just have been overlooked by the
company but the oversight is unfair to Jamin as the non-inclusion of the three projects
gives the impression that there were substantial gaps not only of several months but
years in his employment with DMCI.
Thus, as Jamin explains, the Ritz Tower Project (July 29, 1980 to June 12, 1982) and
the New Istana Project (June 23, 1982 to February 16, 1984) would explain the gap
between the Midtown Plaza project (September 3, 1979 to July 28, 1980) and the IRRI
Dorm IV project (June 13, 1984 to March 12, 1985) and the other New Istana Project
(January 24, 1986 to May 25, 1986) would explain the gap between P. 516 Hanger
(September 13, 1985 to January 23, 1986) and P. 516 Maint (May 26, 1986 to November
18, 1987).
To reiterate, Jamins employment history with DMCI stands out for his continuous,
repeated and successive rehiring in the companys construction projects. In all the 38
projects where DMCI engaged Jamins services, the tasks he performed as a carpenter
were indisputably necessary and desirable in DMCIs construction business. He might not
have been a member of a work pool as DMCI insisted that it does not maintain a work
pool, but his continuous rehiring and the nature of his work unmistakably made him a
regular employee. In Maraguinot, Jr. v. NLRC,[43] the Court held that once a project or
work pool employee has been: (1) continuously, as opposed to intermittently, rehired
by the same employer for the same tasks or nature of tasks; and (2) these tasks are
vital, necessary and indispensable to the usual business or trade of the employer, then
the employee must be deemed a regular employee.
Further, as we stressed in Liganza,[44] [r]espondent capitalizes on our ruling
in D.M. Consunji, Inc. v. NLRC which reiterates the rule that the length of service of a
project employee is not the controlling test of employment tenure but whether or not
Page 57 of 497

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.
Surely, length of time is not the controlling test for project employment.
Nevertheless, it is vital in determining if the employee was hired for a specific
undertaking or tasked to perform functions vital, necessary and indispensable to the
usual business or trade of the employer. Here, [private] respondent had been a project
employee several times over. His employment ceased to be coterminous with specific
projects when he was repeatedly re-hired due to the demands of petitioners
business.[45] Without doubt, Jamins case fits squarely into the employment situation just
quoted.
The termination reports
With our ruling that Jamin had been a regular employee, the issue of whether
DMCI submitted termination of employment reports, pursuant to Policy Instructions No.
20 (Undated[46]), as superseded by DOLE Department Order No. 19 (series of 1993), has
become academic. DOLE Policy Instructions No. 20 provides in part:
Project employees are not entitled to termination pay if they are
terminated as a result of the completion of the project or any phase thereof
in which they are employed, regardless of the number of projects in which
they have been employed by a particular construction company. Moreover,
the company is not required to obtain a clearance from the Secretary of
Labor in connection with such termination. What is required of the company
is a report to the nearest Public Employment Office for statistical purposes.
[47]

To set the records straight, DMCI indeed submitted reports to the DOLE but as
pointed out by Jamin, the submissions started only in 1992. [48] DMCI explained that it
submitted the earlier reports (1982), but it lost and never recovered the reports. It
reconstituted the lost reports and submitted them to the DOLE in October 1992; thus,
the dates appearing in the reports.[49]
Is David M. Consunji, DMCIs
President/General Manager, liable
for Jamins dismissal?
While there is no question that the company is liable for Jamins dismissal, we note
that the CA made no pronouncement on whether DMCIs President/General Manager, a
co-petitioner with the company, is also liable. [50] Neither had the parties brought the
matter up to the CA nor with this Court. As there is no express finding of Mr. Consunjis
involvement in Jamins dismissal, we deem it proper to absolve him of liability in this
case.
As a final point, it is well to reiterate a cautionary statement we made
in Maraguinot,[51] thus:

Page 58 of 497

At this time, we wish to allay any fears that this decision unduly
burdens an employer by imposing a duty to re-hire a project employee even
after completion of the project for which he was hired. The import of this
decision is not to impose a positive and sweeping obligation upon the
employer to re-hire project employees. What this decision merely
accomplishes is a judicial recognition of the employment status of a project
or work pool employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool employees who
perform tasks necessary or desirable to the employers usual business or
trade.
In sum, we deny the present appeal for having been filed late and for lack of any
reversible error. We see no point in extending any liberality by disregarding the late filing
as the petition lacks merit.
WHEREFORE, premises considered, the petition is hereby DENIED for late filing
and for lack of merit. The decision dated February 26, 2010 and the resolution datedJune
3, 2010 of the Court of Appeals are AFFIRMED. Petitioner David M. Consunji is absolved
of liability in this case.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 85323 June 20, 1989
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) and EMELITO P.
PORCIUNCULA,respondents.
Apolo, Anasco & Associates for petitioner.

GRIO-AQUINO, J.:
Assailed in this petition for certiorari is the decision dated September 30, 1988 of the
National Labor Relations Commission (NLRC), affirming the decision dated August 21,
1987 of the Labor Arbiter ordering the reinstatement with back wages of the private
respondent on the ground that he was not a project employee but a member of the work
pool and that he was illegally dismissed on April 20, 1986.
Page 59 of 497

The private respondent was employed by PNCC as an oiler from November 4, 1973 until
he was terminated on April 20, 1986, on the ground of completion of the project to which
he was assigned.
The private respondent, in his complaint for illegal dismissal, alleged that he was
discharged not for cause, but because the newly designated supervisor, Reynaldo
Bonifacio, wanted to put in his own man.
The point in issue is whether or not the private respondent was a member of the work
pool, therefore, considered a regular employee (Art. 280, Labor Code), or a project
employee, whose employment was co-terminus with the projects to which he was
assigned.
After a careful consideration of the petition and the comment filed by the Solicitor
General for the respondents, We hold that the NLRC did not abuse its discretion in
affirming the Labor Arbiter's conclusion that the private respondent was a member of the
work pool and that he was illegally dismissed from his job.
Members of a work pool from which a construction company draws its
project employees, if considered employee of the construction company
while in the work pool, are non-project employees or employees for an
indefinite period. If they are employed in a particular project, the
completion of the project or any phase thereof will not mean severance of
employer-employee relationship. (Policy Instruction No. 30; Emphasis
supplied.)
.... 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 which he is employed and his
employment shall continue while such actually exists. (Art. 280, Labor
Code.)
A project employee is one whose "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." (Sec. 280,
Labor Code; Sandoval Shipping Inc. vs. NLRC, 136 SCRA 674.)
In finding that Porciuncula was a regular employee, the Labor Arbiter noted that it was
the petitioner's practice to rehire him after the completion of every project and this rehiring continued throughout Porciuncula's 13 years of employment in the company.
The Labor Arbiter also observed that the petitioner never reported the completion of its
projects and the termination of the employees (like Porciuncula) in its finished projects,
Page 60 of 497

to the nearest Public Employment Office as required by Policy Instruction No. 20 of the
Secretary of Labor. In the case of Ochoco vs. NLRC, 120 SCRA 774, the failure of the
employer to report to the nearest employment office the termination of the workers
everytime it completed a project was considered by this Court as proof that they were
not project employees.
We, therefore, find no grave abuse of discretion in the Labor Arbiter's holding so, nor in
the NLRC's affirmance of the decision.
WHEREFORE, the petition for certiorari is dismissed for lack of merit. Costs against the
petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 105359. April 22, 1993.

CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, THIRD DIVISION, PERCIVAL GRANADO (in his
capacity as Sheriff of the NLRC), NATIONAL FEDERATIONS OF LABOR UNIONS (NAFLU),
HENRY D. MONTE, ARNEL V. LAPORE, JOSE PAINANDOS, JOEL BALLEBAS, ANTONIO DE
GUZMAN, ROBERTO D. VILLA and FLORO CAGOMOC, respondents.
Quasha, Asperilla, Ancheta, Pea and Nolasco for petitioner.
Felimon G. Tercero for private respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; REGULAR EMPLOYEE; DEEMED PRESENT WHEN
THEY PERFORMED TASKS VITAL AND INDISPENSABLE TO THE EFFICIENT ADMINISTRATION
AND COMPLETION OF THE COMPANY'S VARIOUS PROJECTS. The private respondents
did not always work in the project sites. They are sometimes assigned at the Central
Office which took care of administration, engineering, auditing, and financing, or at the
Central Shop which was responsible principally for the maintenance and repair of
company trucks, tools, and equipment, and the transfer of materials to the project sites.
They also worked in the Central Warehouse where company materials were stored and
Page 61 of 497

issued. Clearly, they performed tasks vital and indispensable to the efficient
administration and completion of the company's various projects, hence, they were
regular employees, i.e., employees who perform work "usually necessary and desirable
in the employer's usual business or trade" (Art. 280, Labor Code). In the case of Magante
vs. National Labor Relations Commission, 185 SCRA 21, 27-28, we ruled that: Although
petitioner had only rendered almost two years of service, nevertheless this should not
detract from his status of being a regular employee because as correctly stated by the
labor arbiter, the determining factor of the status of complainant-petitioner or any
worker is the nature of the work performed by the latter and the place where he
performed his assignment. Moreover, if petitioner were employed as a `project
employee' private respondent should have submitted a report of termination to the
nearest public employment office every time his employment is terminated due to
completion of each construction project, as required by Policy Instruction No. 20."
DECISION
GRIO-AQUINO, J p:
This is a case where the findings of the National Labor Relations Commission (NLRC) and
the Labor Arbiter differed from each other. The Labor Arbiter held that the private
respondents were not regular, but project, employees who were validly dismissed upon
the termination of their project. The NLRC found otherwise and held the employer liable
for their illegal dismissal.
The private respondents were hired by the petitioner on different dates to work in its
various projects. Before entering upon their duties, each of them executed an
employment contract captioned "Appointment as Project Contract Worker," which
contained the following stipulations:
"1. Your status is that of a contract worker for JO #1172 CS project and such other
projects as the Company may designate and limited to the approximate period of project
requirements. The Company shall exercise its prerogative, among others transferring or
assigning you in such place of working such shift as may be necessary.
"xxx xxx xxx
"5. As a contract worker for a specific project, your employment is temporary and
terminates upon completion of the project without any need for verbal or written notice
and you are not entitled to separation or termination pay.
"xxx xxx xxx
"9. The completion of this contract or any extension or renewal thereof does not entitle
you to become regular employee of the Company. Likewise, the Company is not under
any obligation to appoint you as a regular employee not withstanding (sic) the total
duration of this contract and/or any extension or renewal thereof." (p. 1, Rollo.)

Page 62 of 497

Instead of being assigned at the job sites, the private respondents were made to work as
welder, inventory clerk, truck helper, machinist, batteryman or warehouseman either at
the Company's Central Shop, Central Warehouse, or Central Office, in Cainta, Rizal.
On November 1, 1990, the petitioner terminated the services of the private respondents
on the ground of completion of their projects.
The private respondents thereupon filed a complaint for illegal dismissal against the
company and/or its personnel coordinator, Gregorio M. Noriega.
On May 30, 1991, the Labor Arbiter rendered judgment finding that the private
respondents were contract workers, hence, their employment as coterminous with the
completion of the particular projects to which they had been assigned to work.
Nevertheless, the Labor Arbiter held that since the private respondents had spent the
best years of their lives in the service of the petitioner, they should receive separation
benefits at the rate of one-half (1/2) month pay for every year of service, a fraction of six
(6) months to be considered as one (1) whole year. The Labor Arbiter also granted their
claims for service leave pay subject to the three-year prescriptive period.
Both parties appealed to the NLRC.
On August 30, 1991, the LRC set aside the Labor Arbiter's decision and issued a
resolution:
1. declaring the complainants to be regular employees;
2. declaring their dismissal illegal;
3. ordering their reinstatement to their former positions without loss of seniority rights;
and
4. ordering the Capitol Industrial Construction Groups (now petitioner) to pay the
complainants their backwages from the date of their dismissal until actual reinstatement.
Both parties filed motions for reconsideration.
On October 15, 1991, the NLRC rendered a resolution denying petitioner's motion for
reconsideration, but modified its decision by ordering the payment of service incentive
leave pay to the employees.
The company filed this petition for certiorari alleging that the NLRC committed grave
abuse of discretion amounting to lack or excess of jurisdiction in finding that the private
respondents are regular employees of the petitioner and ordering their reinstatement
with full backwages and other benefits.
Petitioner's defense is mainly anchored on the employment contract quoted above which
s captioned "Appointment as Project Contract Worker." Petitioner contends that since
private respondents are bound by said contract which provides that they are contract
workers, their tenure of employment is coterminous with the completion of their
Page 63 of 497

assigned projects or tasks. Further, it claimed that since it maintains only one central
shop and warehouse that caters to the company's various projects, workers hired for a
particular project may also be assigned in the central shop and warehouse without
violating the contract.
The above argument of the petitioner is devoid of merit. The NLRC did not err in holding
that private respondents are regular employees entitled to security of tenure. The
evidence shows that the private respondents are not project employees.
Article 280 of the Labor Code defines regular and casual employees:
"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."
Since the private respondents worked for the petitioner not only for a specific period of
time, but long after their supposed projects had been finished, the Office of the Solicitor
General correctly pointed out that:
". . . Thus, in the cases of Roberto Villa, Joel Ballebas and Arnel Tapore, they were all
terminated in November 1990 when the projects (JO #1165 and JO #1172) for which
they were allegedly employed were completed in 1986 and June 1989, respectively (see
p. 8, Annex 'A', Petition). This circumstance belies petitioner's claim that private
respondents were hired for particular projects." (p. 146, Rollo.)
The private respondents did not always work in the project sites. They were sometimes
assigned at the Central Office which took care of administration, engineering, auditing,
and financing, or at the Central Shop which was responsible principally for the
maintenance and repair of company trucks, tools, and equipment, and the transfer of
materials to the project sites. They also worked in the Central Warehouse where
company materials were stored and issued. Clearly, they performed tasks vital and
indispensable to the efficient administration and completion of the company's various
projects, hence, they were regular employees, i.e., employees who perform work "usually
necessary and desirable in the employer's usual business or trade" (Art. 280, Labor
Code). In the case of Magante vs. National Labor Relations Commission, 185 SCRA 21,
27-28, we ruled that:
"Although petitioner had only rendered almost two years of service, nevertheless this
should not detract from his status of being a regular employee because as correctly
stated by the labor arbiter, the determining factor of the status of complainant-petitioner
or any worker is the nature of the work performed by the latter and the place where he
performed his assignment.
"xxx xxx xxx
Page 64 of 497

"Moreover, if petitioner were employed as a `project employee' private respondent

should have submitted a report of termination to the nearest public employment office
every time his employment is terminated due to completion of each construction project,
as required by Policy Instruction No. 20."
The NLRC correctly observed that:
"We view as untenable the respondents' position that the work of the complainants
assigned to the Central Shop were confined only to the repair and maintenance of
vehicles and equipment for a specific project, while those at the Central Warehouse
limited their duties to the inventory distribution and transportation of materials needed
for a particular project. What We perceive to be more in tune with the realities of the
construction industry is that the Central Shop and Central Warehouse of the respondent
are the offices or departments tasked with the repair and maintenance of vehicles and
equipment used for various projects, whether undertaken simultaneously or not and for
the inventory and distribution of materials needed for the projects. By this, We mean
that the concerns of the employees in these two offices are not limited only to a specific
project, but to all of the projects entered into by their employer.
"This in fact is the assertion of complainants in their position paper 'they perform tasks
vital and indispensable to the efficient administration and completion of the company's
several projects (emphasis supplied) which the Labor Arbiter gave a wrong interpretation
(pages 8-9 of Decision, Rollo pp. 166-167).
"What We find disturbing is the averment of the respondents in their Reply to
Complainants' Position Paper (Records, p. 136) to the effect that the contract of the
complainants, as project employees, are effective until they have attended to the
equipment backloaded to the Motor Pool in its principal address at Cainta, after which, if
they are not assigned to other projects, then their services are terminated.
"We find as being against the nature of a project employment the requirement of the
respondents for the complainants to attend to the equipment used in the projects, long
after the completion thereof, it being Our view that the inspection, repair and
maintenance of the same is the area of responsibility of those workers assigned to the
Motor Pool.
"To our mind, the services of a project employee ends with the completion of the project
or a phase thereof to which he may have been assigned, and there is no necessity to
defer the termination of the contract until after he shall have attended to the equipment
that he may have used, or for that matter, for any other task that may be required of him
by his employer.
"A rundown of the type of work and place of assignment of the complainants, viz: Floro
Cagomoc welder assigned to the Central Shop; Roberto Villa inventory clerk, Central
Warehouse; Arnel Lapore truck helper, Central Shop; Joel Ballebas truck helper,
Central Shop; Henry Monte machinist, Central Shop; and Antonio M. de Guzman
batteryman, Central Shop would disclose that the aforenamed persons were not
assigned to a specific project, their appointment papers notwithstanding.

Page 65 of 497

"Hence, We hold that the complainants, by the very nature of their work are regular nonproject employees entitled to security of tenure." (pp. 31-33, Rollo.)
These factual findings of the NLRC should be "accorded not only respect but also finality
since they are supported by substantial evidence" (Reyes & Lim Company. Inc. vs.
National Labor Relations Commission, 201 SCRA 772).
WHEREFORE, the petition for certiorari is DISMISSED for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 116781 September 5, 1997
TOMAS LAO CONSTRUCTION, LVM CONSTRUCTION CORPORATION, THOMAS and
JAMES DEVELOPERS (PHIL.), INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MARIO O. LABENDIA, SR., ROBERTO
LABENDIA, NARCISO ADAN, FLORENCIO GOMEZ, ERNESTO BAGATSOLON,
SALVADOR BABON, PATERNO BISNAR, CIRPRIANO BERNALES, ANGEL MABUHAY,
SR., LEO SURIGAO, and ROQUE MORILLO, respondents.

BELLOSILLO, J.:
From October to December 1990 private respondents individually filed complaints for
illegal dismissal against petitioners with the National Labor Relations Commission
Regional Arbitration Branch No. VIII (NLRC RAB VIII), Tacloban City. Alleging that they
were hired for various periods as construction workers in different capacities they
described their contractual terms as follows: (a) Roberto Labendia, general construction
foreman, from 1971 to 17 October 1990 at P3,700/month; (b) Narciso Adan, tireman,
from October 1981 to November 1990 at P75.00/day; (c) Florencio Gomez, welder, from
July 1983 to July 1990 at P260.00/day; (d) Ernesto Bagatsolon leadman/checker, from
June 1982 to October 1990 at P2,800/month; (e) Salvador Babon,
clerk/timekeeper/paymaster, from June 1982 to October 1990 at P3,200/month; (f)
Paterno Bisnar, road grader operator, from January 1979 to October 1990 at 105/day; (g)
Cipriano Bernales, instrument man, from February 1980 to November 1990 at
P3,200/month; (h) Angel Mabulay, Sr., dump truck driver, from August 1974 to October
1990 at P90/day; (I) Leo Surigao, payloader operator, from March 1975 to January 1978
Page 66 of 497

at P100/day; (J) Mario Labendia, Sr. surveyor/foreman, from August 1971 to July 1990 at
P2,900/month; and, (k) Roque Morillo, company watchman, from August 1983 to October
1990 at P3,200/month. 1
Within the periods of their respective employments, they alternately worked for
petitioners Tomas Lao Corporation (TLC), Thomas and James Developers (T&J) and LVM
Construction Corporation (LVM), altogether informally referred to as the "Lao Group of
Companies," the three (3) entities comprising a business conglomerate exclusively
controlled and managed by members of the Lao family.
TLC, T&J and LVM are engaged in the construction of public roads and bridges. Under
joint venture agreements they entered into among each other, they would undertake
their projects either simultaneously or successively so that, whenever necessary, they
would lease tools and equipment to one another. Each one would also allow the
utilization of their employees by the other two (2). With this arrangement, workers were
transferred whenever necessary to on-going projects of the same company or of the
others, or were rehired after the completion of the project or project phase to which they
were assigned. Soon after, however, TLC ceased its operations 2 while T&J and LVM
stayed on.
Sometime in 1989 Andres Lao, Managing Director of LVM and President of T&J, 3 issued a
memorandum 4 requiring all workers and company personnel to sign employment
contract forms and clearances which were issued on 1 July 1989 but antedated 10
January 1989. These were to be used allegedly for audit purposes pursuant to a joint
venture agreement between LVM and T&J. To ensure compliance with the directive, the
company ordered the withholding of the salary of any employee who refused to sign.
Quite notably, the contracts expressly described the construction workers as project
employees whose employments were for a definite period, i.e., upon the expiration of
the contract period or the completion of the project for which the workers was hired.
Except for Florencio Gomez 5 all private respondents refused to sign contending that this
scheme was designed by their employer to downgrade their status from regular
employees to mere project employees. Resultantly, their salaries were withheld. They
were also required to explain why their services should not be terminated for violating
company rules and warned that failure to satisfactorily explain would be construed as
"disinterest" in continued employment with the company. Since the workers stood firm in
their refusal to comply with the directives their services were terminated.
NLRC RAB VIII dismissed the complaints lodged before it, finding that private
respondents were project employees whose employments could be terminated upon
completion of the projects or project phase for which they were hired. It upheld
petitioners' contention that the execution of their employment contracts was to forestall
the eventuality of being compelled to pay the workers their salaries even if there was no
more work to be done due to the completion of the projects or project phases. The labor
Page 67 of 497

court however granted each employee a separation pay of P6,435.00 computed at onehalf (1/2) month salary for every year of service, uniformly rounded at five (5) years. 6
The decision of Labor Arbiter Gabino A. Velasquez, Jr., was reversed on appeal by the
Fourth Division of the National Labor Relations Commission (NLRC) of Cebu City which
found that private respondents were regular employees who were dismissed without just
cause and denied due process. The NLRC also overruled the fixing by the Labor Arbiter of
the term of employment of complainants uniformly at five (5) years since the periods of
employment of the construction workers as alleged in their complaints were never
refuted by petitioners. In granting monetary awards to complainants, NLRC disregarded
the veil of corporate fiction and treated the three (3) corporations as forming only one
entity on the basis of the admission of petitioners that "the three (3) operated as one (1),
intermingling and commingling all its resources, including manpower facility." 7
Petitioners now lay their cause before us and assign the following errors: (a) NLRC erred
in classifying the employees as regular instead of project employees; (b) assuming that
the workers were regular employees, NLRC failed to consider that they were terminated
for cause; (c) assuming further that the employees were illegally dismissed, NLRC erred
in awarding back wages in excess of three (3) years; and, (d) assuming finally that the
decision is correct, NLRC erred when it pierced the veil of corporate personality of
petitioner-corporations.
The main thrust of petitioners' expostulation is that respondents have no valid cause to
complain about their employment contracts since these documents merely formalized
their status as project employees. They cite Policy Instruction No. 20 of the Department
of Labor which defines project employees as those employed in connection with a
particular construction project, adding that the ruling in Sandoval Shipyards,
Inc. v. NLRC 8applies squarely to the instant case because there the Court declared that
the employment of project employees is co-terminous with the completion of the project
regardless of the number of projects in which they have worked. And as their
employment is one for a definite period, they are not entitled to separation pay nor is
their employer required to obtain clearance from the Secretary of Labor in connection
with their termination. Petitioners thus argue that their dismissal from the service of
private respondents was legal since the projects for which they were hired had already
been completed. As additional ground, they claim that Mario Labendia and Roberto
Labendia had absented themselves without leave giving management no choice but to
sever their employment.
We are not convinced. The principal test in determining whether particular employees
are "project employees" distinguished from "regular employees" is whether the "project
employees" are assigned to carry out "specific project or undertaking," the duration (and
scope) of which are specified at the time the employees are engaged for the project.
"Project" in the realm of business and industry refers to a particular job or undertaking
that is within the regular or usual business of employer, but which is distinct and
Page 68 of 497

separate and identifiable as such from the undertakings of the company. Such job or
undertaking begins and ends at determined or determinable times. 9
While it may be allowed that in the instant case the workers were initially hired for
specific projects or undertakings of the company and hence can be classified as project
employees, the repeated re-hiring and the continuing need for their services over a long
span of time (the shortest, at seven [7] years) have undeniably made them regular
employees. Thus, we held that where the employment of project employees is extended
long after the supposed project has been finished, the employees are removed from the
scope of project employees and considered regular employees. 10
While length of time may not be a controlling test for project employment, it can be a
strong factor in determining whether the employee was hired for a specific undertaking
or in fact tasked to perform functions which are vital, necessary and indispensable to the
usual business or trade of the employer. In the case at bar, private respondents had
already gone through the status of project employees. But their employments became
non-coterminous with specific projects when they started to be continuously re-hired due
to the demands of petitioners' business and were re-engaged for many more projects
without interruption. We note petitioners' own admission
[t]hese construction projects have been prosecuted by either of the three
petitioners, either individually or in a joint venture with one another. Likewise,
these construction projects have been prosecuted by either of the three
petitioners, either simultaneously, one construction project overlapping another
and/or one project commencing immediately after another project has been
completed or terminated. Perhaps because of their capacity to prosecute
government projects and their good record and performance, at least one of the
three petitioners had an on-going construction project and/or one of the three
petitioners' construction project overlapped that of another. 11
The denial by petitioners of the existence of a work pool in the company because their
projects were not continuous is amply belied by petitioners themselves who admit that

All the employees of either of the three petitioners were actually assigned to a
particular project to remain in said project until the completion or termination of
that project. However, after the completion of that particular project or when their
services are no longer needed in the project or particular phase of the project
where they were assigned, they were transferred and rehired in another on-going
project. 12
A work pool may exist although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the business, provided that
the worker shall be available when called to report for a project. Although primarily
Page 69 of 497

applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to
attain the status of regular employees. Clearly, the continuous rehiring of the same set
of employees within the framework of the Lao Group of Companies is strongly indicative
that private respondents were an integral part of a work pool from which petitioners
drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project
employees, petitioners point out that the workers were not regularly maintained in the
payroll and were free to offer their services to other companies when there were no ongoing projects. This argument however cannot defeat the workers' status of regularity.
We apply by analogy the case of Industrial-Commercial-Agricultural Workers
Organization v. CIR 13which deals with regular seasonal employees. There we held
That during the temporary layoff the laborers are free to seek other employment is
natural, since the laborers are not being paid, yet must find means of support. A
period during which the Central is forced to suspend or cease operation for a
time . . . should not mean starvation for employees and their families(emphasis
supplied).
Truly, the cessation of construction activities at the end of every project is a foreseeable
suspension of work. Of course, no compensation can be demanded from the employer
because the stoppage of operations at the end of a project and before the start of a new
one is regular and expected by both parties to the labor relations. Similar to the case of
regular seasonal employees, the employment relation is not severed by merely being
suspended.14 The employees are, strictly speaking, not separated from services but
merely on leave of absence without pay until they are reemployed. 15 Thus we cannot
affirm the argument that non-payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project employment.
Contrary to petitioners' assertion, our ruling in Sandoval Shipyards is inapplicable
considering the special circumstances attendant to the present case. In Sandoval, the
hiring of construction workers, unlike in the instant case, was intermittent and not
continuous for the "shipyard merely accepts contracts for shipbuilding or for repair of
vessels from third parties and, only on occasions when it has work contract of this nature
that it hires workers to do the job which, needless to say, lasts only for less than a year
or longer." 16
Moreover, if private respondents were indeed employed as "project employees,"
petitioners should have submitted a report of termination to the nearest public
employment office every time their employment was terminated due to completion of
each construction project. 17 The records show that they did not. Policy Instruction No. 20
Page 70 of 497

is explicit that employers of project employees are exempted from the clearance
requirement but not from the submission of termination report. We have consistently
held that failure of the employer to file termination reports after every project completion
proves that the employees are not project employees. 18 Nowhere in the New Labor Code
is it provided that the reportorial requirement is dispensed with. The fact is that
Department Order No. 19 superseding Policy Instruction No. 20 expressly provides that
the report of termination is one of the indicators of project employment. 19
We agree with the NLRC that the execution of the project employment contracts was
"farcical." 20 Obviously, the contracts were a scheme of petitioners to prevent
respondents' from being considered as regular employees. It imposed time frames into
an otherwise flexible employment period of private respondents some of whom were
employed as far back as 1969. Clearly, here was an attempt to circumvent labor laws on
tenurial security. Settled is the rule that when periods have been imposed to preclude
the acquisition of tenurial security by the employee, they should be struck down as
contrary to public morals, good customs or public order. 21 Worth noting is that
petitioners had engaged in various joint venture agreements in the past without having
to draft project employment contracts. That they would require execution of employment
contracts and waivers at this point, ostensibly to be used for audit purposes, is a suspect
excuse, considering that petitioners enforced the directive by withholding the salary of
any employee who spurned the order.
We likewise reject petitioners' justification in re-hiring private respondents i.e., that it is
much cheaper and economical to re-hire or re-employ the same workers than to train a
new set of employees. It is precisely because of this cost-saving benefit to the employer
that the law deems it fair that the employees be given a regular status. We need not
belabor this point.
The NLRC was correct in finding that the workers were illegally dismissed. The rule is that
in effecting a valid dismissal, the mandatory requirements of substantive and procedural
due process must be strictly complied with. These were wanting in the present case.
Private respondents were dismissed allegedly because of insubordination or blatant
refusal to comply with a lawful directive of their employer. But willful disobedience of the
employer's lawful orders as a just cause for the dismissal of the employees envisages
the concurrence of at least two (2) requisites: (a) the employee's assailed conduct must
have been willful or intentional, the willfulness being characterized by a wrongful and
perverse attitude; and, (b) the order violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties which he has been engaged to
discharge. 22 The refusal of private respondents was willful but not in the sense of plain
and perverse insubordination. It was dictated by necessity and justifiable reasons for
what appeared to be an innocent memorandum was actually a veiled attempt to deny
them their rightful status as regular employees. The workers therefore had no option but
to disobey the directive which they deemed unreasonable and unlawful because it would

Page 71 of 497

result in their being downsized to mere project workers. This act of self-preservation
should not merit them the extreme penalty of dismissal.
The allegation of petitioners that private respondents are guilty of abandonment of duty
is without merit. The elements of abandonment are: (a) failure to report for work or
absence without valid or justifiable reason, and, (b) a clear intention to sever the
employer-employee relationship, with the second element as the more determinative
factor manifested by some overt acts. 23 In this case, private respondents Roberto
Labendia and Mario Labendia were forced to leave their respective duties because their
salaries were withheld. They could not simply sit idly and allow their families to starve.
They had to seek employment elsewhere, albeit temporarily, in order to survive. On the
other hand, it would be the height of injustice to validate abandonment in this particular
case as a ground for dismissal of respondents thereby making petitioners benefit from a
gross and unjust situation which they themselves created. 24 Private respondents did not
intend to sever ties with petitioner and permanently abandon their jobs; otherwise, they
would not have filed this complaint for illegal dismissal. 25
Petitioners submit that since private respondents were only project employees, they are
not entitled to security of tenure. This is incorrect. In Archbuild Masters and
Construction, Inc. v. NLRC 26 we held
. . . a project employee hired for a specific task also enjoys security of tenure. A
termination of his employment must be for a lawful cause and must be done in a
manner which affords him the proper notice and hearing . . . . To allow employers
to exercise their prerogative to terminate a project worker's employment based
on gratuitous assertions of project completion would destroy the constitutionally
protected right of labor to security of tenure (emphasis supplied).
The burden of proving that an employee has been lawfully dismissed therefore lies with
the employer. In the case at bar, the assertions of petitioners were self-serving and
insufficient to substantiate their claim of proximate project completion. The services of
the employees were terminated not because of contract expiration but as sanction for
their refusal to sign the project employment forms and quitclaims.
Finding that the dismissal was without just cause, we find it unnecessary to dwell on the
non-observance of procedural due process. Suffice it to state that private respondents
were not priorly notified of their impending dismissal and that they were not provided
ample opportunity to defend themselves.
Petitioners charge as erroneous the grant to private respondents by NLRC of back wages
in excess of three (3) years or, in the alternative, to an award of separation pay if
reinstatement is no longer feasible.

Page 72 of 497

We disagree. Since the illegal dismissal was made in 1990 or after the effectivity of the
amendatory provision of RA No. 6715 on 21 March 1989, private respondents' back
wages should be computed on the basis of Art. 279 of the Labor Code which states that
"(a)n employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full back wages, inclusive
of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual
reinstatement."
Conformably with our ruling in Bustamante v. NLRC 27 the illegally dismissed employees
are entitled to full back wages, undiminished by earnings derived elsewhere during the
period of their illegal dismissal. In the event that reinstatement is no longer feasible,
back wages shall be computed from the time of illegal termination until the time of the
finality of the decision. 28 The award shall be based on the documents submitted by
private respondents, i.e. affidavits, SSS and Medicare documents, since petitioners failed
to adduce competent evidence to the contrary. The separation pay shall be equivalent to
"at least one (1) month salary or to one (1) month salary for every year of service,
whichever is higher, a fraction of at least six (6) months being considered as one whole
year." 29
Finally, public respondent NLRC did not err in disregarding the veil of separate corporate
personality and holding petitioners jointly and severally liable for private respondents'
back wages and separation pay. The records disclose that the three (3) corporations were
in fact substantially owned and controlled by members of the Lao family composed of
Lao Hian Beng alias Tomas Lao, Chiu Siok Lian (wife of Tomas Lao), Andrew C. Lao, Lao Y.
Heng, Vicente Lao Chua, Lao E. Tin, Emmanuel Lao and Ismaelita Maluto. A majority of
the outstanding shares of stock in LVM and T&J is owned by the Lao family. T&J is 100%
owned by the Laos as reflected in its Articles of Incorporation. The Lao Group of
Companies therefore is a closed corporation where the incorporators and directors
belong to a single family. Lao Hian Beng is the same Tomas Lao who owns Tomas Lao
Corporation and is the majority stockholder of T&J. Andrew C. Lao is the Managing
Director of LVM Construction, and President and Managing Director of the Lao Group of
Companies. Petitioners are engaged in the same line of business under one management
and use the same equipment including manpower services. Where it appears that [three]
business enterprises are owned, conducted and controlled by the same parties, both law
and equity will, when necessary to protect the rights of third persons, disregard the legal
fiction that the [three] corporations are distinct entities, and treat them as identical. 30
Consonant with our earlier ruling, 31 we hold that the liability of petitioners extends to the
responsible officers acting in the interest of the corporations. In view of the peculiar
circumstances of this case, we disregard the separate personalities of the three (3)
corporations and at the same time declare the members of the corporations jointly and
severally liable with the corporations for the monetary awards due to private
respondents. It should always be borne in mind that the fiction of law that a corporation
Page 73 of 497

as a juridical entity has a distinct and separate personality was envisaged for
convenience and to serve justice; therefore it should not be used as a subterfuge to
commit injustice and circumvent labor laws.
WHEREFORE, the petition is DENIED and the decision of the National Labor Relations
Commission dated 05 August 1994 is AFFIRMED. Petitioners are ordered to reinstate
private respondents to their former positions without loss of seniority rights and other
privileges with full back wages, inclusive of allowances, computed from the time
compensation was withheld up to the time of actual reinstatement. In the event that
reinstatement is no longer feasible, petitioners are directed to pay private respondents
separation pay equivalent to one month salary for every year of service, a fraction of at
least six (6) months being considered one (1) year in the computation thereof, and full
back wages computed from the time compensation was withheld until the finality of this
decision. All other claims of the parties are DISMISSED for lack of merit. Costs against
petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18873

September 30, 1963

MANILA HOTEL COMPANY, petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS, ET AL., respondents.
Government Corporate Counsel Simeon M. Gopengco and Trial Attorney Jose S. Gomez
for petitioner.
Gregorio E. Fajardo and Jesus Jaramillo for respondent Union.
Mariano B. Tuason for respondent Court.

BAUTISTA ANGELO, J.:

The Pines Hotel Employees Association filed on February 24, 1960 before the Court of
Industrial Relations a petition praying, among other things, that its employees who were
working at the Pines Hotel be paid additional compensation for overtime service
rendered due to the exigencies of the business, as well as additional compensation for
Sunday, legal holiday and nighttime work.
Page 74 of 497

The Manila Hotel filed its answer denying the material averments of the petition and
alleging, among others, that if overtime service was rendered the same was not
authorized but was rendered voluntarily, for the employees were interested in the "tips"
offered by the patrons of the hotel.
Presiding Judge Jose S. Bautista, to whom the petition was assigned, after trial, rendered
judgment stating that the employees were entitled to the additional compensation
demanded, including that for overtime work, because an employee who renders
overtime service is entitled to compensation even if he rendered it without prior
authority. A motion for reconsideration was filed on the ground that the order was
contrary to law and the evidence, but the same was denied by the industrial court en
banc.1awphl.nt
In compliance with the order of the court, the Examining Division of the Court of
Industrial Relations submitted a report in which it stated that the amount due the
employees as additional compensation for overtime and night services rendered from
January to December 31, 1958 was P32,950.69. The management filed its objection to
the report on the ground that it included 22 names of employees who were not
employees of the Pines Hotel at the time the petition was filed so that insofar as said
employees are concerned the petition merely involves a money claim which comes
under the jurisdiction of the regular courts. The trial judge, however, overruled this
objection holding that, while the 22 employees were actually not in the service at the
time of the filing of the petition, they were however subsequently employed even during
the pendency of the incident, and so their claim comes within the jurisdiction of the
Court of Industrial Relations. Hence, the present petition for review.
There is no merit in this appeal it appearing that while it is true that the 22 employees
whose claim is objected to were not actually in the service at the time the instant
petition was filed, they were however, subsequently reemployed even while the present
incident was pending consideration by the trial court. Moreover, it appears that the
questioned employees were never separated from the service. Their status is that of
regular seasonal employees who are called to work from time to time, mostly during
summer season. The nature of their relationship with the hotel is such that during off
season they are temporarily laid off but during summer season they are re-employed, or
when their services may be needed. They are not strictly speaking separated from the
service but are merely considered as on leave of absence without pay until they are reemployed. Their employment relationship is never severed but only suspended. As such,
these employees can be considered as in the regular employment of the hotel.
WHEREFORE, the order appealed from is affirmed. No costs.
Republic of the Philippines
SUPREME COURT
Manila
Page 75 of 497

EN BANC
G.R. No. L-21465

March 31, 1966

INDUSTRIAL-COMMERCIAL-AGRICULTURAL WORKERS' ORGANIZATION

(ICAWO), petitioner-appellant,
vs.
COURT OF INDUSTRIAL RELATIONS, CENTRAL AZUCARERA DE PILAR and/or
ANTONIO BELZARENA as Manager, CENTRAL AZUCARERA DE PILAR ALLIED
WORKERS ASSOCIATION (CAPAWA), respondents-appellees.
A. Velez for the petitioner.
Tirol and Tirol for the respondent.
REYES, J.B.L., J.:
Appeal from a decision of the Court of Industrial Relations (Case No.
44-ULP-Iloilo) dismissing charges for unfair labor practice.
On 9 February 1956, the petitioner, Industrial-Commercial-Agricultural Workers'
Organization (hereinafter referred to as the "ICAWO"), declared a strike against the
respondent Central Azucarera de Pilar. The strike was amicably settled the following day,
and among the provisions of the "Amicable Settlement" (Exhibit "C") reads:
That the company shall not discriminate against any worker and the same
treatment shall be accorded to workers (ICAWO affiliates) who declared a strike or
not. A petition for Certification Election will be filed by the ICAWO in view of the
other labor union, CAPAWA, with whom the company has an existing collective
bargaining contract, a union which is considered by the ICAWO as a company
union.
The CAPAWA therein referred to is the herein respondent Central Azucarera de Pilar Allied
Workers Association and the collective bargaining contract, likewise therein referred to,
entered into in 1955, provided:
The EMPLOYER agrees that in hiring unskilled employees and laborers, the
members of the WORKERS ASSOCIATION should be given preference and the
management should notify accordingly the WORKERS ASSOCIATION of any
vacancy existing in all Departments. New employees and laborers hired who are
members of the WORKERS ASSOCIATION will be on TEMPORARY STATUS and the
EMPLOYER agrees that before they will be considered regular employees and
laborers they have to become members of the CENTRAL AZUCARERA DE PILAR
ALLIED WORKERS' ASSOCIATION within thirty (30) days from the date of

Page 76 of 497

employment and if they refuse to affiliate with the said labor organization within
this time they will be immediately dismissed by the EMPLOYER;
Among the strikers were 101 seasonal workers, some of whom have worked as such for
the company since pre-war years.
On the opening of the milling season for the year 1956-1957, the respondent company
refused to re-admit these 101 seasonal workers of the ICAWO on the ground that it was
precluded by the closed-shop clause in its collective bargaining agreement with the
CAPAWA. Thus, on 8 May 1958, the ICAWO filed an unfair labor practice charge against
the company. The Court of Industrial Relations, in its decision dated 27 November 1961,
ordered the reinstatement, with back wages, of these laborers; but on a motion for
reconsideration, the said court, en banc, reversed the said decision in its resolution
dated 13 August 1962.
Not satisfied with the reversal, the ICAWO filed the present petition for certiorari to
review the industrial court's resolution.
The arguments gravitate around the status of the seasonal workers, the petitioner
contending that they are regular and old employees and, as such, they should have been
re-hired at the start, in the month of October, of each milling season, which usually lasts
5 months. The respondents, on the other hand, urge that these laborers are new, their
employment terminating at the end of each milling season and, therefore, could not be
re-admitted without the company violating the closed-shop agreement with the
CAPAWA.1wph1.t
In an almost identical case, involving practically the same parties, G.R. No. L-17422, 28
February 1962, the Court interpreted the closed shop agreement, jam quot, as referring
"to future or new employees or laborers". This interpretation, however, does not resolve
the present issue because it does not classify the seasonal workers one way or the other.
A direct precedent, however, exists in the case of Manila Hotel Company vs. Court of
Industrial Relations, et al., L-18873, 30 September 1963, wherein this Court, alluding to
certain employees in the Pines Hotel in Baguio, stated:
x x x x Their status is that of regular seasonal employees who are called to work
from time to time, mostly during summer season. The nature of their relationship
with the hotel is such that during off season they are temporarily laid off but
during summer season they are reemployed, or when their services may be
needed. They are not strictly speaking separated from the service but are merely
considered as on leave of absence without pay until they are re-employed. Their
employment relationship is never severed but only suspended. As such, these,
employees can be considered as in the regular employment of the hotel.

Page 77 of 497

The respondent company, however, relies upon the case of Hind Sugar Company vs.
Court of Industrial Relations, et al., L-13364, 26 July 1960. This citation cannot be
considered authoritative in the present case because the Hind case did not actually rule
on the temporary character of the employment of seasonal workers; instead, it affirmed
their reinstatement, which the labor court had ordered under Section 10 of the Industrial
Peace Act as a solution to a strike, without regard to the permanent or seasonal nature of
the employment of the strikers. Definitely, the Hind case did not deal with seasonal
employees that had been recalled to work year after year during the milling season,
thereby creating a reasonable expectation of continued employment; and for this reason,
the Manila Hotel case (supra) sets a rule more in accord with justice and equity under
the conditions shown by the record now before us.
Our conclusion is that petitioners, even if seasonal workers, were not "new workers"
within the scope of the closed shop contract between the sugar central and the CAPAWA
union; hence their discharge was illegal.
In filing the unfair labor practice complaint on 8 May 1958, the petitioner union, under
the circumstances, did not incur laches, because there was no work for these seasonal
workers during the off-season, from March to October. Moreover, the seat of the
prosecutor's office was in Cebu, not in Panay, and a certification election had intervened
to absorb the attention of the complainants.
For the foregoing reasons, the resolution under review is hereby set aside, and the court
of origin is directed to order the reinstatement of the 101 seasonal workers to their
former positions in the respondent sugar milling company.
With regard to the petitioners' claim for backpay, this matter should be threshed out in
the court below where the parties must be given opportunity to submit evidence to
prove or disprove the employer's good faith as well as the amounts that petitioners have
earned or should have earned during their wrongful lay off, such amounts being
deductible from the backpay due to petitioners (National Labor Union vs. Zip Venetian
Blind Co., L-15827, 31 May 1961; Aboitiz & Co. vs. C.I.R., L-8418, 29 Nov. 1962).
Let the records be returned to the Court of Industrial Relations for further proceedings, in
consonance with this opinion. So ordered.
Bengzon, C.J., Concepcion, Barrera, Regala, Makalintal, Bengzon, J.P., Zaldivar and
Sanchez, JJ., concur.
Dizon, J., is on leave.
RESOLUTION
August 23, 1966

Page 78 of 497

REYES, J.B.L., J.:

Respondents Central Azucarera de Pilar and its manager have asked this Court to
reconsider and reverse its decision of March 31, 1966. They insist that the seasonal
character of the milling activities of the respondent Central each year necessarily implies
that the employment of petitioners ceases after each milling season.
We do not find this position tenable. The cessation of the Central's milling activities at
the end of the season is certainly not permanent or definitive; it is a foreseeable
suspension of work, and both Central and laborers have reason to expect that such
activities will be resumed, as they are in fact resumed, when sugar cane ripe for milling
is again available. There is, therefore, merely a temporary cessation of the
manufacturing process due to passing shortage of raw material that by itself alone is not
sufficient, in the absence of other justified reasons, to sever the employment or labor
relationship between the parties, since the shortage is not permanent. The proof of this
assertion is the undenied fact that many of the petitioner members of the ICAWO Union
have been laboring for the Central, and reengaged for many seasons without
interruption. Nor does the Central interrupt completely its operations in the interval
between milling seasons; the office and sales force are maintained, precisely because
operations are to be later resumed.
That during the temporary layoff the laborers are considered free to seek other
employment is natural, since the laborers are not being paid yet must find means of
support. A period during which the Central is forced to suspend or cease operation for a
time (whether by reason of lack of cane or by some accident to its machinery) should not
mean starvation for the employees and their families. Of course, the stopping of the
milling at the end of each season, and before the next sugar crop is ready, being regular
and foreseen by both parties to the labor relation, no compensation is expected nor
demanded during the seasonal layoff.
Neither does the fact that the laborers assent to their medical examination at the
beginning of each milling season indicate that a new labor contract is being entered into,
in the absence of stipulation to such effect. Said examination is in the interest not only of
the Central but also of the labor force itself and is a mere precautionary measure.
The seasonal stoppage of work does not, therefore, negate the reasonable expectation of
the laborers to be subsequently allowed to resume work unless there be other justifiable
reasons for acting otherwise. We note again that in the Hind case (Hind Sugar Go. vs.
C.I.R., L-13364, July 26, 1960) the pronouncement of the Industrial Court that
reemployment of the seasonal laborers was discretionary in the employer was not in
issue before this Court. All that was declared therein was that the Company should not
be compelled to pay for work not done as it would be inconsistent with the C.I.R.'s own
pronouncement, the legal correctness of which was not being contested. In Manila Hotel
Co. vs. C.I.R., L-18873, September 30, 1963, on the contrary, it was squarely ruled that
Page 79 of 497

the employment of the seasonal laborers is not severed, but only suspended, during the
seasonal layoff.
In remanding the case to the Court of Industrial Relations for determination whether the
Central acted in good faith and the employees should be declared entitled to backpay,
and the amount due the latter, this Court took into account that these are matters
dependent upon circumstances that the C.I.R. had not previously inquired into, and
particularly the requirement of the Industrial Peace Act (Republic Act 875) in its section
5(c), that where a person is found engaging in any unfair labor practice, the Industrial
Court, besides issuing a cease and desist order, must.
take such affirmative action as will effectuate the policies of this Act,
a rule that implies exercise of judgment and discretion by the Industrial Court, based on
facts and considerations not now brought to our attention.
Wherefore, the motion for reconsideration is denied.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21696

February 25, 1967

VISAYAN STEVEDORE TRANSPORTATION COMPANY (VISTRANCO) and RAFAEL

XAUDARO, petitioners,
vs.
COURT OF INDUSTRIAL RELATIONS, UNITED WORKERS' & FARMERS'
ASSOCIATION (UWFA) VENANCIO DANO-OG, BUENAVENTURA AGARCIO and 137
others, respondents.
Pelaez, Jalandoni & Jamir for petitioners.
Luis B. Presbiterio for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.
CONCEPCION, C.J.:
Appeal by certiorari, taken by the Visayan Stevedoring Transportation Co. hereinafter
referred to as the Company and Rafael Xaudaro from an order of the Court of
Industrial Relations the dispositive part of which reads:

Page 80 of 497

The Court, finding respondents guilty of unfair labor practice as charged, directs
them to cease and desist from such unfair labor practice and to reinstate the
complainants, with back wages from the date they were laid off until reinstated.
The Company is engaged in the loading and unloading of vessels, with a branch office in
Hinigaran, Negros Occidental, under the management of said Rafael Xaudaro. Its workers
are supplied by the United Workers and Farmers Association, a labor organization
hereinafter referred to as UWFA whose men (affiliated to various labor unions) have
regularly worked as laborers of the Company during every milling season since
immediately after World War II up to the milling season immediately preceding
November 11, 1955, when the Company refused to engage the services of Venancio
Dano-og, Buenaventura, Agarcio and 137 other persons named in the complaint filed in
case No. 62-ULP-Cebu of the Court of Industrial Relations and hereinafter referred to
as the Complainants owing, they claim, to their union activities. At the behest of the
UWFA and the Complainants, a complaint for unfair labor practice was, accordingly, filed
against the Company and Xaudaro with the Court of Industrial Relations hereinafter
referred to as the CIR in which it was docketed as Case No. 62-ULP-Cebu. In due
course, its Presiding Judge issued the order appealed from, which was affirmed by the
CIR sitting en banc. Hence this petition for review by certiorari.
The issues raised in this appeal, are (1) whether there is employer-employee relationship
between the Company and the Complainants; (2) whether the Company has been guilty
of unfair labor practice; and (3) whether the order of reinstatement of Complainants,
with backpay, is a reversible error.1wph1.t
With respect to the first question, the Company maintains that it had never had an
employer-employee relationship with the Complainants, the latter's services having
allegedly been engaged by the UWFA not by the Company, and that, in any event,
whatever contractual relation there may have been between the Company and the
Complainants had ceased at the end of each milling season, so that the Company can
not be guilty of unfair labor practice in refusing to renew said relation at the beginning of
the milling season in November, 1955.
This pretense is untenable. Although Complainants, through the labor union to which
they belong, form part of UWFA, there was no independent contract between the latter,
as an organization, and the Company. After the first milling season subsequently to the
liberation of the Philippines, Complainants merely reported for work, at the beginning of
each succeeding milling season, and their services were invariably availed of by the
Company, although an officer of the UWFA or union concerned determined the laborers
who would work at a given time, following a rotation system arranged therefor.
In the performance of their duties, Complainants worked, however, under the direction
and control of the officers of the Company, whose paymaster, or disbursing officer paid
the corresponding compensation directly to said Complainants, who, in turn,
Page 81 of 497

acknowledged receipt in payrolls of the Company. We have already held that laborers
working under these conditions are employees of the Company, 1 in the same manner as
watchmen or security guards furnished, under similar circumstances, by watchmen or
security agencies,2 inasmuch as the agencies and/or labor organizations involved therein
merely performed the role of a representative or agent of the employer in the
recruitment of men needed for the operation of the latter's business. 3
As regards the alleged termination of employer-employee relationship between the
Company and the Complainants at the conclusion of each milling season, it is, likewise,
settled that the workers concerned are considered, not separated from the service, but,
merely on leave of absence, without pay, during the off-season, their employer-employee
relationship being merely deemed suspended, not severed, in the meanwhile. 4
Referring to the unfair labor practice charge against the Company, we find, with the CIR,
that said charge is substantially borne out by the evidence of record, it appearing that
the workers not admitted to work beginning from November, 1955, were precisely those
belonging to the UWFA and the Xaudaro, the Company Branch Manager, had told them
point-blank that severance of their connection with the UWFA was the remedy, if they
wanted to continue working with the Company.
As to the payment of back wages, the law5 explicitly vests in the CIR discretion to order
the reinstatement with back pay of laborers dismissed due to union activities, and the
record does not disclose any cogent reason to warrant interference with the action taken
by said Court.6
Wherefore, the order and resolution appealed from are hereby affirmed, with costs
against petitioners herein. It is so ordered.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 84272 November 21, 1991
BACOLOD-MURCIA MILLING COMPANY, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELENA CANETE, respondents.
Carlos S. Mesticampo for petitioner.
Ruben B. Garcia for private respondent.

Page 82 of 497

FERNAN, C.J.:p
At issue in this petition for certiorari is the manner of computation of the retirement pay
of private respondent Elena Canete who was in the employ of petitioner Bacolod-Murcia
Milling Company, Inc. for thirty-four (34) years.
In her complaint against petitioner Company for underpayment of retirement benefits
and moral damages, Canete alleged that on October 14, 1985, she was paid her
retirement benefits in the amount of P21,457.00, after taking into consideration her
twenty-five years of service as a seasonal worker (cane scaler) from October 6, 1951 to
April 30, 1976 and the last nine years as a a permanent employee (family planning
motivator) from May 1, 1976 to August 30, 1985. The company computed her retirement
pay in accordance with the "mixed service credit" computation under Section 9, Article
XVII of the Collective Bargaining Agreement between petitioner Company and the Allied
Workers' Association of the Philippines, Bacolod-Murcia Central Chapter (NACUSIP) of
which Canete was a member. 1
Canete claims that this was erroneous. The computation of her retirement pay should
have been based on Section 7 of the same article which provides that permanent
employees who have rendered thirty years of service or more are entitled to 100% of
one month base pay for every year of service beginning with the first year. Hence, she
was underpaid in the amount of P17,415.20.
Both the Executive Labor Arbiter of the Regional Arbitration Branch and the National
Labor Relations Commission agreed with Canete. In the assailed resolution dated
December 29, 1987, respondent Labor Tribunal affirmed the decision of the Labor Arbiter
ordering petitioner Company to pay Canete P17,415.00 representing the differential in
her retirement benefit, (Canete's last pay of P38.11 per day multiplied by 30 equals
P1,143.38 per month. This amount multiplied by 34 years equals P38,872.20.
Considering that Canete had received P21,457.00, she was underpaid of her retirement
pay in the amount of P17,415.20). 2
In the instant petition, petitioner Company contends that the Labor Tribunal committed
grave abuse of discretion in granting the retirement pay differential in favor of Canete, in
derogation of the binding effect of the Collective Bargaining Agreement despite public
respondent's pretended adherence to Section 7 of Article XVII thereof. Petitioner
maintains that for purposes of computing Canete's retirement benefits, public
respondent should not have relied primarily on Section 7 of Article XVII of the CBA which
provides:

Page 83 of 497

Sec 7. Benefit. The benefit under this plan is the cash equivalent in
accordance with the following schedule for permanent employees:
Years of Service Retirement Pay
20 years 50 % of 1 month's base pay
per year of service
beginning with the first
year
21
22
23
24
25
26
27
28
29
30

"
"
"
"
"
"
"
"
"
"

55% -do60% -do65% -do70% -do75% -do80% -do85% -do90% -do95% -do100% -do-

The pay referred to shall be construed to be the last rate of the employee
upon retirement.
In case of death, however, the amount shall not be less than P500.00.
because while Canete served as a permanent employee for nine years, prior to that, she
was only a seasonal worker for twenty five years.
Petitioner submits that in determining the correct retirement pay, Canete's twenty-five
year service as a seasonal laborer should have been taken into account and divided by
two in accordance with the mixed service credit computation under Section 9 which
states:
Sec. 9. Computation of benefit for Seasonal Employees Except as
provided for in Sections 3, 5 and 6 in this Article, seasonal employees may
qualify under voluntary retirement upon having established 20 years of
seasonal service.
For purposes, however, of computing the benefit due seasonal employees,
the formula is as follows

Page 84 of 497

Number of years of seasonal service, multiplied by the percentage of a

month's base pay per schedule under Section 7, divided by two (2) equals
the amount of retirement benefit.
Provided, finally, that in cases of mixed service credit, only the services
corresponding to seasonal employment shall be divisible by two (2).
(Emphasis supplied).
The petition is meritorious.
While under prevailing jurisprudence, 3 Canete may be considered as in regular
employment even during those years when she was merely a seasonal worker, that legal
conclusion will hold true only in cases involving the determination of an employeremployee relationship or security of tenure. But for retirement purposes, the distinction
between a seasonal and a regular worker must be drawn in view of the materiality of the
length of service being rendered by the employee in a year. To equate the seasonable
worker with a regular employee grant him the same retirement benefits is grossly unfair
to the regular employee who has rendered service throughout the entire year.
Indeed, by the very nature of his work, the seasonal laborer cannot enjoy the same
retirement privileges as the regular worker. The seasonal laborer works only for a fraction
of year. And more often than not, he is allowed by his employer to seek employment
elsewhere during off-season or temporary lay-off for economic necessity. This is the setup endemic peculiar to the sugar industry which is precisely the reason why the CBA
in the case at bar has differentiated among the three types of employees of petitioner
Company, namely, the seasonal worker, the regular worker and the mixed seasonal and
regular worker. To follow the unrealistic interpretation given by respondent Labor Tribunal
will negate and render inutile and superfluous the difference recognized by said
Agreement because all employees would then retire under Section 7 as all of them are
considered regular. This completely ignores the indubitable fact that there are employees
like Canete who worked in the fields as seasonal workers but were later promoted and
became members of the regular work force. It is exactly for Canete and those similarly
situated that the stipulation on mixed service credit has been incorporated in the CBA.
And at the risk of being redundant, it must be stressed that CBA is the law between the
parties and when not contrary to law, morals and public policy, must be given effect.
While it may be a laudable gesture for the Court to "lean over backwards" in favor of
labor, such magnanimity must not go as far as to cause a clear injustice to management
which is entitled under the law to as much protection and concern as labor.
WHEREFORE, the petition is granted. The questioned resolution by respondent National
Labor Relations Commission dated December 29, 1987 is hereby REVERSED and SET
ASIDE. The complaint filed by private respondent Elena Canete for retirement benefits

Page 85 of 497

and payment of moral damages against petitioner Bacolod-Murcia Milling Company, Inc.
is ordered DISMISSED. This decision is immediately executory. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 104690 February 23, 1994

ZENAIDA GACO, petitioner,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION and ORIENT LEAF
TOBACCO CORPORATION, respondents.
Marita B. Balloguing for petitioner.
Gregorio Alcaraz, Jr. for private respondent.

NOCON, J.:
It may appear that the work in private respondent Orient Leaf Tobacco Corporation is
seasonal, however, the records reveal that petitioner Zenaida Gaco was repeatedly rehired, sufficiently evidencing the necessity and indispensability of her services to the
former's business or trade. 1 Furthermore, she has been employed since 1974 up to the
end of the season in 1989. Owing to her length of service, she became a regular
employee, by operation of law, one year after she was employed. 2 Being a regular
employee, she enjoys security of tenure in the sense that she cannot be dismissed from
employment except for just or authorized cause. 3
Briefly stated, the antecedent facts are:
Petitioner was hired by private respondent on April 17, 1974 for the position of Picker. In
1975, after a year of service, she was promoted to the position of Production Recorder.
She held this position for a period of fourteen (14) years until the end of private
respondent's working season in 1989. In April, 1990, when petitioner reported for work at

Page 86 of 497

the start of the working season for that year, she found out that her position was already
occupied by another employee and that she was being demoted to the position of Picker.
Petitioner believed that, having been with private respondent for fifteen (15) years
without any derogatory record, her demotion was not justified. Considering it as
constructive dismissal, petitioner thus refused to report for work and filed a complaint
before the Labor Arbiter for payment of separation pay.
Private respondent raised the defense that the demotion of petitioner was effected on a
valid ground, that is, gross inefficiency. It described her work, as follows:
. . . she was assigned as the production recorder. This job assignment is not
too difficult nor complicated. All she has to do is to record correctly and
accurately weights on tags placed inside tobacco containers as against the
Production Reports which she accomplishes. In other words, the weights
appearing on the tags must be correctly recorded on her Production Report.
This is very important because the said Production Report, among other
things, will be the basis in the preparation of the delivery Orders when the
Respondent corporation effects the delivery of its tobacco to its buyers,
both local and foreign. To illustrate, if the weight appearing on the Delivery
Orders is less than what appears on the tags inside the container, the
difference in the weight represents the loss to the respondent. Conversely,
if the weight appearing on the Delivery Order is more than what appears on
the tags inside the container the difference can be the basis for the
respondent's customer to demand a refund and a possible damage suit. In
both cases, the respondent corporation stands to lose, particularly its own
credibility. This is how serious mistakes in the weights may result. 4
It is in this particular job assignment that she manifested said gross inefficiency,
committing the same mistakes frequently in spite of her attention being called
repeatedly and advised to take the necessary corrective measures.
On July 31, 1991, the Labor Arbiter rendered judgment favorable to petitioner, the
dispositive portion of which, reads:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered:
1.) Declaring the demotion of complainant to be unjustified;
2.) Ordering respondent Orient Leaf Tobacco Corporation to pay
complainant her backwages to be computed from April 1990, the time her
demotion was effected, up to July 31, 1991, and separation pay in lieu of
reinstatement, to be computed from April 1974, the date of hiring, up to July
31, 1991, as follows:
Page 87 of 497

a.) Backwages P35,490.00

b.) Separation Pay 40,222.00

T o t a l P75,712.00
3.) Dismissing the charge of unfair labor practice for want of merit.
SO ORDERED. 5
The Labor Arbiter declared that petitioner's demotion was unjustified and she was not
accorded due process by private respondent:
. . .The evidence, consisting of a series of memoranda, are all dated March
20, 1990, before complainant reported for the next working season. This
would indicate that these memoranda were prepared as an afterthought.
And this observation is bolstered by the fact that the reported inaccurate
recording of complainant, which was made (the) basis for the claimed
inefficiency, is not substantially supported. The alleged reports made by
complainant's supervisor and the Senior Accounting Clerk of the Production
Department (Annexes "B" and "C", Respondent's Position Paper), being both
dated March 20, 1990, can very well be merely simulated reports done to
justify the otherwise unjustified action they were about to implement.
Respondent failed to submit even a single copy of the alleged erroneous
(sic), "dirty and untidy" reports of complaint.
We cannot rely on the documentary evidence presented by the respondent
as the same were (sic) but communications between the officers of the
company.
True, there were reports made by complainant's direct superiors regarding
her gross inefficiency from which respondent based its action (Annexes "A"
to "C", Ibid.). Yes, management's decision to approve the recommendation
to demote complainant was based on valid grounds (Annex "D", Ibid.). But
the truthfulness of the supposed valid grounds is here being attacked. And
all of these transpired from the initial report to the time the management
decided to implement its decision to demote her without complainant's
participation and knowledge at any stage. The records are bereft of any
showing that complainant was notified in advance of respondent's
impending action and the reason or reasons thereof before it was actually
effected. Neither does the record show that complainant was afforded any
opportunity to be heard.
xxx xxx xxx
Page 88 of 497

While due process required by law is applied on dismissals, the same is also
applicable to demotions likewise affect the employment of a worker whose
right to continued employment, under the same terms and conditions, is
also protected by law. Moreover, considering that demotion is, like
dismissal, also a punitive action, the employee being demoted should as in
cases of dismissals, be given the chance to contest the same.
xxx xxx xxx
Gauged against the foregoing well-established factual and settled legal
considerations, the demotion of complainant is definitely unjustified and,
having been found to be have been in bad faith, must be declared as
constituting constructive dismissal.
This finds further support in the fact that when complainant Gaco refused to
report for work as Picker, they immediately promoted somebody to that
position and offered her the lower position of Reject Piler and, when
complainant again refused to report, they offered a much lower position
from the Relief Crew, a very positive indication of constructive dismissal.
Unjustified demotion, in effect, constitutes constructive dismissal, which is
illegal, and which would entitle complainant to reinstatement and payment
of backwages. 6
On appeal before public respondent National Labor Relations Commission by private
respondent, the aforementioned decision was modified. The dispositive portion of its
decision dated January 27, 1992 reads:
WHEREFORE, the appealed Decision is hereby MODIFIED by computing the
separation pay in accordance with the above or in the total amount of
P15,015.00 and electing the award of backwages.
SO ORDERED. 7
While it concurred with the finding of the Labor Arbiter that the demotion of petitioner
was unjustified, it expressed the contrary view that there was no constructive dismissal:
. . . We could not countenance the arbitrary and unilateral declaration of
complaint not to report for work for what she perceived to be unjust. Such
open defiance against the exercise of management's prerogative even if it
be conceded to be unjust would wreck havoc on the natural and orderly
business structure and would encourage anarchism. An employee should
recognize the prerogative of management to transfer, demote or even to

Page 89 of 497

dismiss to protect its business subject however, to such restraints as the

law provides. 8
Hence the present petition.
Petitioner imputes grave abuse of discretion on the part of respondent NLRC in:
1) deleting the award of backwages;
2) computing the separation pay on the basis of one-half (1/2) month pay for every
twelve (12) months of service; and
3) not awarding moral damages and attorney's fees to petitioner.
Petitioner argues that she should be awarded backwages because she was dismissed
illegally. Respondent NLRC had no basis in computing the separation pay at one-half
(1/2) month pay for every year of service. In numerous labor cases decided by this Court,
the basis for computation thereof is one (1) month pay for every year of service. As a
normal consequence of having been dismissed illegally and forced to litigate, she should
be awarded moral damages and attorney's fees.
The Office of the Solicitor General supports entirely the decision of respondent NLRC. It
maintains that petitioner is not entitled to backwages since private respondent did not
terminate her services. Rather, it was petitioner who terminated her employment by
refusing to report for work despite several demands made upon her private respondent
to do so. Respondent NLRC had sufficient basis in its computation of the separation pay.
Inasmuch as petitioner was demoted without due process, appropriate sanction (in the
form of separation pay) should be meted against private respondent. Nevertheless, the
sanction must be mitigated by the fact that: a) she refused to return to work without just
reason after repeated requests by private respondent; b) her union acquisced to her
demotion c) her work is seasonal in nature. There is no justification for her claim for
award of moral damages and attorney's fees.
After a judicious review of all the pleadings in this case vis-a-vis the questioned decision,
this Court finds merit in the petition and holds that respondent NLRC gravely abused its
discretion when it modified the decision of the Labor Arbiter.
The case of Philippine Japan Active Carbon Corporation, et al. v. NLRC, et al., 9 which was
cited in the recent case of Lemery Savings and Loan Bank, et al. v. NLRC. et
al., 10 defines constructive dismissal as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as, an offer involving a demotion in rank
and a diminution in pay. As we have stated previously, both the Labor Arbiter and
respondent NLRC arrived at a factual finding that petitioner was demoted to her former
position without any justifiable cause. However, they differed in the conclusions they
Page 90 of 497

derived therefrom: the Labor Arbiter considered petitioner's demotion as constructive

dismissal whereas respondent NLRC held that constructive dismissal could not deduced
from the circumstances. On the basis of the foregoing jurisprudence defining the term
constructive dismissal, we sustain the ruling of the Labor Arbiter and his rationalization
thereon. Consequently, petitioner is entitled to her full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from the time her
compensation was withheld from her up to the time of her actual reinstatement. 11 In
ascertaining the total amount of backwages payable to her, we enunciated in the case
of Pines City Educational Center, et al. v. NLRC, et al. 12the doctrine that:
. . . we go back to the rule prior to the Mercury Drug rule that the total
amount derived from employment elsewhere by the employee from the
date of reinstatement , if any, should be deducted therefrom. . . .
However, we shall not follow Article 279 of the Labor Code to the letter regarding the
period of backwages in view of the peculiar circumstances of the present case, namely,
"there is now a strained relationship between (petitioner) and (private respondent) and
(petitioner) prays for payment of separation pay in lieu of reinstatement." 13 Instead, the
period thereof shall be reckoned from the time her compensation was withheld from her,
or in April, 1990 up to the finality of our decision.
Respondent NLRC reduced the amount of separation pay, as follows:
Under the foregoing circumstances, complainant should be reinstated
without backwages; however, since she already manifested her desire not
to work for respondent anymore, she should instead be granted separation
pay in lieu of reinstatement, further asking into consideration her long
service with respondent. It appearing that the work at the respondent's
company is seasonal in nature, the separation pay should be computed on
the basis of one-half (1/2) month pay for every twelve (12) months of
service, or a total of eleven (11) constructive years. (Rollo 40) 14
Again, we sustain the ruling of the Labor Arbiter granting separation pay in the amount
of one (1) month to pay for every year of service. This has been our consistent ruling in
numerous decisions awarding separation pay to an illegally dismissed employee in lieu of
reinstatement. 15 It should be emphasized that separation pay is being awarded in this
case for this reason, a fact which the Office of the Solicitor General overlooked.
We note that the issued regarding award of moral damages and attorney's fees to
petitioner is being raised only in the proceedings before this Court, thus, she cannot
impute grave abuse of discretion on the part of respondent NLRC on this aspect.
WHEREFORE, the petition is hereby GRANTED. The decision of the National Labor
Relations Commission dated January 27, 1992 is SET ASIDE and the decision of the Labor
Page 91 of 497

Arbiter dated July 31, 1991 is REINSTATED subject to the modification that the period of
backwages should be from April, 1990 up to the finality of this decision less earnings
elsewhere, if any, during this period whereas the period of separation pay should be from
April, 1974 up to the finality of this decision.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 100333 March 13, 1997

HILARIO MAGCALAS, PROSPERO MARINDA, CELSO GAMALO, EPIFANIO OMEGA,
VIRGILIO CAMPOS, ANTONIO LLAGAS, BERNARD BENDANILLO,
SHALDYAUTENCIO, CIRIACO REYES, JUANITO DE LEON, EDMUNDO GUZMAN,
ALFREDO SANTOS, BENEDICTO DAGCUTAN, NORBIE LOPENA, ISMAEL ALONZO,
ELMER BALETA, GENITO DALMERO, and CESAR LEDESMA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and KOPPEL, INC., respondents.

PANGANIBAN, J.:
May regular employment be restricted to a definite or fixed term? Upon the expiration of
such term, may the employment be deemed terminated upon payment of separation
pay? The respondent NLRC answered these questions in the affirmative but the labor
arbiter held otherwise that such termination constituted illegal dismissal, thereby
entitling the petitioners to reinstatement, backwages and attorney's fees.
This divergence of position between the NLRC and the labor arbiter will now be ruled
upon by this Court as it resolves this petition for certiorari challenging the Decision 1 and
Resolution 2 of public respondent 3 promulgated on April 5, 1991, and May 13, 1991,
respectively. The Decision of public respondent reversed that of the labor arbiter while
the Resolution denied the motion for reconsideration. The dispositive portion of the
impugned Decision reads: 4

Page 92 of 497

WHEREFORE, premises considered, the appealed decision is hereby set

aside, and a new judgment is entered, ordering the respondent to pay
separation pay to herein complainants, as explained above.
On the other hand, the dispositive portion of the reversed decision of the labor
arbiter 5 reads: 6
WHEREFORE, in view of all the foregoing considerations, judgment is hereby
rendered, ordering the respondent to reinstate all the individual
complainants named in the above entitled case to their former positions
without loss of seniority rights and privileges, and to pay them backwages
from the time of their dismissal/termination to their actual reinstatement,
plus attorney's fee equivalent to Ten Percent (10%) of the total monetary
award; the claim for legal interest is dismissed for lack of merit.
The Facts
The facts are set out in the decision of the labor arbiter, as follows:

In their basic complaint and counter position paper, the complainants

alleged (inter alia) that they were all regular employees of the respondent
company, having rendered continuous services in various capacities,
ranging from leadman, tinsmith, tradeshelper to general clerk; that the
respondent has been engaged in the business of installing air conditioning
(should be air-conditioning) and refrigeration equipment in its different
projects and jobsites where the complainants have been assigned; that the
complainants have worked for a number of years, the minimum of which
was one and a half years and the maximum (was) eight years under several
supervisors; that on August 30, 1988, they were dismissed (en masse)
without prior notice and investigation, and that their dismissals were
effected for no other cause than their persistent demands for payment of
money claims (as) mandated by law.
On the other hand, the respondents interposed the defense of
contract/project employment and averred the following statement of facts
in support thereof:
The respondent company is engaged in the business of
manufacturing and installation of air(-)conditioning and
refrigeration equipments (sic).
The manufacturing aspect of its operation is handled by its
regular employees, while the installation aspect, by reason of

Page 93 of 497

its intermittence, is carried out by its project or contract

employees.
The installation of the air(-)conditioning equipment at the
Asian Development Bank Building and (the) Interbank building
was awarded to the respondent herein. The complainants
herein were among the contract employees hired by the
respondent to install the air(-)conditioning equipment at the
Asian Development Bank and Interbank projects. Their specific
assignments were as follows:
Name Position Project
1. HILARIO MAGCALAS Leadman Asian Dev. Bank
2. PROSPERO MARINDA Tinsmith Asian Dev. Bank
3. VIRGILIO CAMPOS Tradeshelper " " "
4. ANTONIO LLAGAS " " " "
5. BERNARD BENDANILLO " " " "
6. ISMAEL ALONZO " " " "
7. SHALDY AUTENCIO " " " "
8. CIRIACO REYES " Interbank
9. CELSO GAMALO " "
10. EPIFANIO OMEGA " "
11. EDMUNDO GUZMAN " "
12. ALFREDO SANTOS " "
13. JUANITO DE LEON " "
14. BENEDICTO DAGCUTAN " "
15. ELMER BALETA " "
16. GENITO DALMERO " "
17. CESAR LEDESMA Tinsmith "
18. NOR(B)IE LOPENA General Clerk "
The aforesaid employees were engaged to work on (sic) the
installation projects until August 31, 1988, when their task was
expected to be completed. This is evidenced by their
respective employment contracts, copies of which are hereto
attached as ANNEXES 1 to 18.
With the completion of their task on August 31, 1988 in their
respective installation projects, the employment of the
complainants (ipso facto) expired as they had no more work to
do. They now claim that they were illegally dismissed.

Page 94 of 497

Reply by the respondent and rejoinder by the complainants were

subsequently filed, after which the case was considered as submitted for
decision based on the pleadings and evidences (sic) on record.
As earlier stated, public respondent reversed the decision of the labor arbiter favorable
to herein petitioners. Hence, this petition for certiorari.
The Issues
Petitioners raise and argue the following issues in their Memorandum:

(a) whether (p)etitioners (were) regular workers under the contemplation of

Art. 280 of the Labor Code; and,
(b) whether (p)etitioners' termination and/or cessation of their
employments on August 30th, (sic) 1988 were justified under the
contemplation of Art. 279 of the Labor Code as amended.
Petitioners contend that they were regular employees because "(t)he job of installing
an(d)/or repairing its manufactured units and equipments (sic) to its different customers
are not merely adjunct but are necessary activities of (p)rivate (r)espondent's daily
business operations." 9 They maintain that their employment is regular because of "the
nature of the activities (they) performed," 10 regardless of the stipulation in their job
contracts. Petitioners argue that the phrase "specific project or undertaking" in Article
280 of the Labor Code means "special type of venture or undertaking" that is not
"usually necessary or desirable in the employer's business operation and
activities". 11 Petitioners add that doubts as to their employment status must be resolved
in their favor. 12
The Solicitor General ("Sol. Gen."), invoking the case of Orbos vs. Civil Service
Commission, 13 sided with petitioners. He argues that "(t)o say that petitioners (were)
regular employees and yet subject to a definite or fixed term is incongruous,
inconsistent, or illogical. . . . . Indeed, a worker is either regular or casual; (i)f he is
employed only for a specific project or undertaking, then he is considered a casual
employee and may be dismissed at the time of the completion of the project." 14 Besides,
the "(r)ecords cannot deny that petitioners worked continuously, without a single day of
interruption, in not just one, but on the various jobsites assigned to them. Some of them
have even worked continuously for eight (8) years, without any stoppage." 15 Even
admitting that petitioners were project employees, the Sol. Gen. states that "no iota of
proof was ever presented by private respondent to refute petitioners' claim that the ADB
and Interbank projects were still in operation when they were terminated or, vice-versa,
to support its claim that these projects were already terminated." 16

Page 95 of 497

On the other hand, private respondent contends that certiorari is not proper in this case.
"The findings and conclusions of fact and law of the respondent NLRC are supported by
substantial evidence and were not arrived at arbitrarily." 17 It adds that "petitioners
were project or contract workers who were hired whenever private respondent was able
to obtain sub-contracts for the installation of air(-)conditioning and ventilation system or
refrigeration equipment in construction or building projects . . . . They were last hired in
the Asian Development Bank and Interbank air(-)conditioning and ventilation system
projects which were completely turned over in August 1989 and (on) November 13,
1989, respectively. (Please see Annexes '2' and '3' hereof). 18
Because of the position taken by the Sol. Gen., public respondent filed its own Comment.
It argues that "the factual findings of respondent Commission (were) based on
substantial evidence and supported by the clear letter of the law as well as pertinent
jurisprudence on the matter." 19 Thus, public respondent contends that the petition
should be dismissed and the challenged judgment should be upheld as a proper exercise
of the powers conferred upon it by law. 20
Public respondent ruled against petitioners thus:

21

A cursory reading of the Collective Bargaining Agreement between the

respondent company and the Koppel Employees Association shows that it
recognized Contract Employees as one of the three categories of employees
in the Company. Article IV, Section 1, of the said Collective Bargaining
Agreement defines a "Contract Employee" as "one hired on individual
employment contract basis to perform work on specific projects or as
indicated in his contract of employment. The duration of such employment
is determined by and indicated in his contract of employment." (Record,
page 49)
Article 280 of the Labor Code provides:
Art. 280. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements 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 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. (Emphasis supplied)
The above provision is intended for all industries except the construction
industry. Policy Instruction No. 20 was precisely promulgated for the reason
Page 96 of 497

that the problems of regularity of employment in the construction industry

has continued to plague it. The policy implements the exception to Article
280 of the Labor Code. (Magante v. NLRC, 185 SCRA 21)
Complainant herein were engaged by the respondent to handle the
installation of air(-)conditioning and refrigeration equipments (sic) in the
construction projects at the Asian Development Bank and Interbank
buildings. As the nature and character of their work is necessary or
desirable of (sic) the usual business of the respondent, which is to
manufacture and install air(-) conditioning and refrigeration equipments
(sic) in buildings, complainants' jobs can be categorized as regular workers
(should be work) but subject to a definite or fixed term. But their services
were not terminated at the end of the project or contract. As the ADB and
Interbank projects have been completed, their lay-off has resulted in the
termination of their employment for lack of work; hence, they are entitled to
separation pay equivalent to one month pay or one-half month pay for
every year of service, whichever is greater, and a fraction of six months or
more to be considered as one year.
The Court's Ruling
We find for petitioners.
First Issue: Are Petitioners Regular Workers?
In certiorari proceedings under Rule 65, this Court does not, as a rule, evaluate the
sufficiency of evidence upon which the labor arbiter and public respondent based their
determinations. The inquiry is limited essentially to whether or nor said public
respondent acted without or in excess of its jurisdiction or with grave abuse of
discretion. 22 However, where the findings of the NLRC are contrary to those of the
tribunal below, the Court in the exercise of its equity jurisdiction may wade into and
reevaluate such findings, 23 as in the present instance.
In this case, Public Respondent NLRC did not sufficiently indicate the evidentiary basis for
its reversal of the labor arbiter's decision. After citing provisions in the collective
bargaining agreement (CBA) concerning contract workers and Policy Instruction No. 20,
public respondent correctly stated that petitioners were performing work necessary or
desirable in the usual business of private respondent. From this undisputed fact, the
NLRC jumped to strange and strained inferences. First, it held that the employment of
the petitioners was subject to fixed terms. It then leapt to the non-sequitur conclusion
that petitioners were project employees. Going further, it held that they were entitled to
separation pay, overlooking that under the very law it invoked, "project employees are
not entitled to termination pay." 24 This convolution of facts and law cannot reverse the

Page 97 of 497

decision of the labor arbiter which is grounded on documentary evidence submitted by

the parties.
Indeed, an examination of the assailed Decision reveals that public respondent failed to
back up its conclusions with substantial evidence, or that which a reasonable mind may
accept as adequate to justify a conclusion. This quantum of evidence is required to
establish a fact in cases before administrative and quasi-judicial bodies. 25
Thus, a mere provision in the CBA recognizing contract employment does not sufficiently
establish that petitioners were ipso facto contractual or project employees. In the same
vein, the invocation of Policy No. 20 governing the employment of project employees in
the construction industry does not, by itself, automatically classify private respondent as
part of the construction industry and entitle it to dismiss petitioners at the end of each
project. These facts cannot be presumed; they must be supported by substantial
evidence.
On the other hand, private respondent did not even allege, much less did it seek to
prove, that petitioners had been hired on a project-to-project basis during the entire
length of their employment. Rather, it merely sought to establish that petitioners had
been hired to install the air-conditioning equipment at Asian Development Bank and
Interbank and that they were legally dismissed upon the conclusion of these projects.
Private respondent did not even traverse, and public respondent did not controvert, the
labor arbiter's finding that petitioners were continuously employed without interruption,
from the date of their hiring up to the date of their dismissal, in spite of the alleged
completion of the so-called projects in which they had been hired. 26 The undisputed
finding of the labor arbiter on this continuous employment of petitioners is worth
quoting: 27
(T)he record discloses that the complainants worked not only in one special
project, either at the Asian Development Bank or the Interbank building, as
the evidence of the respondent tends to prove, but also variably in other
projects/jobsites contracted by Koppel Incorporated: such as the PNB on
Roxas Boulevard, Manila; MIA now NAIA; PICC; and San Miguel Complex on
Ortigas Avenue, Pasig, Metro Manila. Some of them, after their tour of duty
on these different jobsites were reassigned to the respondent's plant at
Koppel Compound, Para()aque, Metro Manila, as shown by the individual
complainants(') affidavits attached to their position paper. A close
examination of the record further reveals that the "special projects" at the
Asian Development Bank and Interbank to which the complainants were last
assigned by the respondent were still in operation before their alleged
termination from employment. Under these factual milieu, we believe that
they had been engaged to work and perform activities which were
necessary and desirable in the air(-) conditioning and refrigeration
Page 98 of 497

installation/repair business of the respondent employer, especially where,

as in this case, the very nature of such trade indicates that it can hardly fall
under the exception of Policy Instruction No. 20 which applies only to the
construction industry. For this reason, and considering the facts narrated in
the complainants(') sworn statements were neither disputed nor refuted by
contrary evidence by the respondent, it becomes apparent and
increasing(ly) clear that indeed they would and ought to be classified as
regular employees. . . . (Emphasis supplied.)
Petitioners were hired on different dates. Some of them worked for eight (8) years, while
others for only one and a half (1 1/2) years. Private respondent, on the other hand,
insisted that petitioners were hired on per-project basis. Private respondent, however, did
not present any evidence to show the termination of the employment contracts at the
end of each project. Only before public respondent and in this petition did private
respondent allege, through a photocopy of an affidavit 28 of Mr. Jose Lecaros, the General
Manager of Koppel, Inc., that the Asian Development Bank and the Interbank projects
had been completed. This affidavit as well as the other annexes 29 cannot be given
weight in this petition because this Court is not a trier of facts. In any case, private
respondent had not proved, by the said affidavit, that the termination of each project had
invariably resulted in the dismissal of its alleged project employees.
Regular employees cannot at the same time be project employees. Article 280 of the
Labor Code states that regular employees are those whose work is necessary or
desirable to the usual business of the employer. The two exceptions following the
general description of regular employees refer to either project or seasonal employees. It
has been ruled in the case of ALU-TUCP vs. National Labor Relations Commission that: 30
In the realm of business and industry, we note that "project" could refer to
one or the other of at least two (2) distinguishable types of activities. Firstly,
a project could refer to particular job or undertaking that is within the
regular or usual business of the employer company, but which is distinct
and separate, and identifiable as such, from the other undertakings of the
company. Such job or undertaking begins and ends at determined or
determinable times. The typical example of this first type of project is a
particular construction job or project of a construction company. A
construction company ordinarily carries out two or more discrete (should be
distinct) identifiable construction projects: e.g., a twenty-five-storey hotel in
Makati; a residential condominium building in Baguio City; and a domestic
air terminal in Iloilo City. Employees who are hired for the carrying out of
one of these separate projects, the scope and duration of which has been
determined and made known to the employees at the time of employment,
are properly treated as "project employees," and their services may be
lawfully terminated at completion of the project." (Emphasis supplied).

Page 99 of 497

The employment of seasonal employees, on the other hand, legally ends upon
completion of the project or the season, thus: 31
Clearly, therefore, petitioners being project employees, or to use the correct
term, seasonal employees, their employment legally ends upon completion
of the project or the season. The termination of their employment cannot
and should not constitute an illegal dismissal.
In terms of terminating employment, this Court has already distinguished project from
regular employees, to wit:32
The basic issue is thus whether or not petitioners are properly characterized
as "project employees" rather than "regular employees" of NSC. This issue
relates, of course, to an important consequence: the services of project
employees are co-terminous with the project and may be terminated upon
the end or completion of the project for which they were hired. 33 Regular
employees, in contrast, are legally entitled to remain in the service of their
employer until that service is terminated by one or another of the
recognized modes of termination of service under the Labor Code. 3l
The overwhelming fact of petitioners' continuous employment as found by the labor
arbiter ineludibly shows that the petitioners were regular employees. On the other hand,
we find that substantial evidence, applicable laws and jurisprudence do not support the
ruling in the assailed Decision that petitioners were project employees. The Court here
reiterates the rule that all doubts, uncertainties, ambiguities and insufficiencies should
be resolved in favor of labor. It is a well-entrenched doctrine that in illegal dismissal
cases, the employer has the burden of proof. This burden was not discharged in the
present case.
Second Issue: Is Ground for Dismissal Valid?
As regular employees, petitioners' employment cannot be terminated at the whim of the
employer. For a dismissal of an employee to be valid, two requisites must be met: (1) the
employee is afforded due process, meaning, he is given notice of the cause of his
dismissal and an adequate opportunity to be heard and to defend himself; and (2) the
dismissal is for a valid cause as indicated in Article 282 35 of the Labor Code. 36 The
services of petitioners werepurportedly terminated at the end of the ADB and Interbank
projects, but this could not have been a valid cause for, as discussed above, they were
regular and not project employees. Thus, the Court does not hesitate to conclude that
petitioners were illegally dismissed.
As a consequence of their illegal termination, petitioners are entitled to reinstatement
and backwages in accordance with the Labor Code. The backwages however are to be
computed only for three years from August 30, 1988, the date of their dismissal, without
Page 100 of 497

deduction or qualification. Where the illegal dismissal transpired before the effectivity of
RA 6715, 37 or before March 21, 1989, the award of backwages in favor of the dismissed
employees is limited to three (3) years without deduction or qualification. 38
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and
Resolution are REVERSED and SET ASIDE and the decision of the labor arbiter is
REINSTATED, with backwages to be computed as above discussed. No costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 118475. November 29, 2000]
ELVIRA ABASOLO, ANTONIO ABAY, PURIFICACION ABAY, CATALINA ABELLERA,
DANIEL ABELLERA, ELSIE ABELLERA, LOURDES ADUSE, PACITA ALAMAN,
REYNALDO ALBAY, ROGELIO ALBAY, EMERITA ALCOY, ERLINDA ALEGRE,
CORAZON ALOOT, IMELDA ALOOT, ROWENA ALOOT, SHIRLEY JULIANA
ALOOT, ADORACION ANTALAN, ESTRELLA ANTOLIN, EPIFANIA ANTONIO,
CARMELITA AQUINO, CECENIA ASPIRAS, EMILIANA ASPIRAS, ANA BELEN
ASPREC, MELENCIO ASPURIA, ILUMINADA ASTRO, CARMELITA ASUNCION,
FLORENTINA AVENA, EMILIA BACQUIL, GLORIA BAGALAN, BENJAMIN
BALANAG, CLARITA BALANAG, CONSUELO BALANAG, DOLORES BALANAG,
CANDIDA BALANGA, CLARITA BALANGA, FRANCISCA BALANGA, CORAZON
BALANGUE,
MILDRED
BALANGUE,
ERLINDA
BALDERAS,
MANUEL
BALLESIL, ERLINDA BAMBAO, ROSEMARIE BASIO, AMALIA BATARIO,
CONCHITA BATARIO, CORAZON BATARIO, ERLINDA BATARIO, GLORIA
BATARIO, PEDRO BATARIO, JR., REBECCA BATARIO, PERLA BAUTISTA,
SHIRLEY BAUTISTA, ANGELISA BAYANI, MORGAN BEGALAN, FRANCISCA
BERBON, BERNARD VISITACION, EVELYN BIASON, VERONICA BLANDO,
UFENIA BLANZA, AMBROSIA BOADO, CARLOS BOADO, LOLITA BORJE,
MARILOU BUNGAY, RODRIGO BURGOS, AMELITA CABALBAG, ERNESTO
CABALBAG, ELVIRA CABUGON, JOSEFINA CACANINDIN, CORAZON
CACAYARA, JAIME CACHERO, JULIET CALLANO, ANDRES CALUZA, TERESITA
CALUZA, ISABEL COMADRO, EDITA CARBONEL, LOLITA CARILLA,
BIENVENIDA CARINO, DELIA CARINO, LOLITA CARINO, AMARIO CARREON,
ARMELINDA CARREON, ERLINDA CARREON, FECIDAD CARREON, JOSE
CARREON, MA. VICTORIA CARREON, BENJAMIN CASALLO, DEMETRIA
CASEM, ALBERTO CASIM, GLORIA CASIM, FLORIDA CATUNGAL, ESTER
CAVINTA, REMEDIOS CAVINTA, ROSALINDA CAVINTA, JULITA CAYABYAB,
IRENE CELESTE CARMELITA CHAN, ESMENIA CORDERO, LYDIA CORPUZ,
JOVA CORTEZ, NORA CORTEZ, MAGDALENA CUDAL, GENOVA DACANAY,
SABINA BACLAN, CORAZON DANAO, ELISA DASALLA, AGNES BIBIANA DE
CASTRO, ANITA DE CASTRO, EDITHA DE CASTRO, NIDA DE CASTRO,
Page 101 of 497

CORAZON DE JESUS, JOSE DE JESUS, MERLA DE JESUS, MILAGROS DE

VERA, APOLINARIO DOLATRE, CAMILO DOLOR, JR., LOLITA DOLOR, WILMA
DOMINGO, OLYMPIA DOMONOON, BASILIO DULATRE, BASILIO DULATRE,
IMELDA DULATRE, LETICIA DULATRE, MARTINA DULATRE, RODRIGO
DULATRE, JR., ROGELIO DULATRE, TRIFONA DULATRE, CONSOLACION
DULAY, CRESILDA DULAY, DANILO DULAY, EDITHA DULAY, ELENA G.
DULAY, ERLINDA DULAY, ESTRELLA DULAY, ESTELITA DULAY, ESTRELITA P.
DULAY, EVANGELINE DULAY, FELICIDAD DULAY, FELISA DULAY, GINA
DULAY, GINA DULAY, GLORIA DULAY, GUILLERMO DULAY, JAIME DULAY,
LETICIA DULAY, LOLITA DULAY, LUIS DULAY, MARIA G. DULAY, MILAGROS
DULAY, REMEDIOS DULAY, ROBERTO DULAY, SOTERO DULAY, TERESITA
DULAY, TERESITA G. DULAY, TERESITA M. DULAY, THERESITA DULAY,
VALENTIN DULAY, EDITHA DUMO, REMEDIOS DY, RIA MAPILI, VICTORIO
MAPILI, ROBERTO MARAMBA, SUSANA MARAMBA, ANDRES MARCOS,
LANIA MARCOS, AURORA MARGASA, ARSENIA MARIGZA, LOLITA
MARQUEZ, ANA MARIA MARZAN, ANGELITA MEDINA, ADELINA MEDRIANO,
ELIZABETH MEDRIANO, HERMINIA M. MEDRIANO, ROSALINDA MEDRIANO,
CLEOFE MELANA, LOLITA MELENDEZ, LOURDES MIGUEL, EMILIA G.
MILANES, JOSE MILANES, LILIA MILO, LILIAN MILO, FELICIDA MORION,
EVELYN MOSTER, ADORACION MUNAR, ELEONORA MUNAR, IMELDRA
NAVARRO, TERESITA NAVERIDA, ANITA NINOBLA, AURELIA NINOBLA,
CARMELITA NINOBLA, MARCELA NINOBLA, MYRNA NISPERO, JOSEFINA
NUTO, LANY OBSRA, ELENA OCAMPO, SYLVIA OLINARES, ROSITA
OPENIANO, TRINIDAD ORDUNA, ROSALINDA ORDONEZ, JESSIE ORIBELLO,
REMEDIOS ORIBELLO, TERESITA ORIBELLO, HILARIO ORACION, AVELINA
ORTILLA, MAGDALENA ORTILLA, MARIETTA ORTILLA, LEONORA PADER,
AMALIA PADILLA, ARCELITA PADILLA, EVELYN PADILLA, FELICIDA ORTILLA,
JOSELYN PADILLA, JOSEPHINE PADILLA, VIRGINIA PADILLA, CLARITA PAIS,
EDUARDO PANIS, JESUS PANIS, JOSE PANIS, TEOFILA PANIS, VIOLETA
PARADO, ROSITA PAROCHA, CARMELITA PASCUA, LUCIA PAYUMO, MARIA
PICAR, REYNALDA PILARCA, LUZVIMINDA QUERO, ALEJANDRA QUEZADA,
TEODORO QUEZADA, ARLENE QUIBAN, AIDA QUINDARA, JUANITA
QUINONES, GLORIA RABOT, EFREN RACELIS, ERLINDA RACELIS, IMELDA
RACELIS, REMEDIOS RACELIS, SUSANA RACELIS, TERESITA RACELIS,
FLORITA RAQUEL, ALMA RAMIREZ, CARMEN RAMIREZ, ROSEMARIE
RAMIREZ, GEMMA RAMOS, JUANITA RAMOS, IMELITA REYES, VICTORIA A.
RIVERA, VIRGINIA RIVERA, LYDIA ROBLES, EMILIA RONQUILLO, ROSALLA
ROSETE, FORTUNATO RUIZ, GLORIA RUIZ, RICARDO RUIZ, ROSALINDA
RUIZ, ROLIE RUIZ, DANILO RULLA, EDITHA RULLA, MARITES RULLA,
ANTONIO RULLAMOS, BERNADETEE RULLAMAS, JULITA R. RULLAMAS,
SOLEDAD RULLAMAS, CELILIA RULLAN, NAPOLEON RULLAN, NORA
RULLAN, WARLITO RULLAN, AURORA RULLODA, GLORIA RULLODA,
REMEDIOS RULLODA, LETICIA RUMATAY, FELY RUNAS, RIZALITO RUNAS,
DOMINGA SABADO, JOSE SACDAL, CLARITA SALAZAR, GLORIA SALTING,
Page 102 of 497

PURITA SAMSON, ESTRELLITA SERRANO, GEMMA SIABABA, SUSANA

SIABANA,
PERLITA
SOBREMONTE,
CARMEN
SOBREVILLA,
RUBIE
SOLOMON, MONICA SORIANO, ERLINDA SUGUITAN, JULITA SUCNET, FEDEL
TACIO, LETICIA TAGARA, JOSEFINA TALENG, MARILY TAMONDON, NIEVEZ
TAMONDON, GLORI TANGALIN, LEONARDO TANGALIN, MYRNA TANGALIN,
NOEMA TANGALIN, NORMA TANGALIN, CRISTETA TEANAN, RUFINA
TRANCIA, ALMA TRINIDAD, GLORIA TUGADE, TERESITA TUMBAGA, ALICIA
UBONGEN, ZENAIDA UCOL, ADELA UGAY, AMAILIA UGAY, ESTELLA UGAY,
HONORATO UGAY, JULIETA UGAY, LOURDES UGAY, PURIFICACION UGAY,
ROSEMARIE UGAY, RUFINA UGAY, ANGELITO UMEL, JOSEFINA VALDEZ,
ALFREDO VERCELES, JOSIE VERCELES, HELEN VILLANUEVA, SALVACION
VILLAROSA, DOMINGO YARANON, FELIMON YARANON, FELIX YARANON,
MONICA YARES, CONSOLACION YARIZ, DEMETRIA YARIZ, IMELDA YARIZ,
MARGARITA ZARATE, ESMERALDA ABAD, LOURDES ABELLERA, MILAGROS
ADUBE, JOSEPHINE ARIAS, ERLINDA ASPERIN, EMELDA ASUNCION, LILIA
ASUNCION, VIOLETA ASUNCION, ROSA BALAGOT, ADORACION BALANAG,
ALICA J. BALANAG, GLECERIA BALANGA, CORAZON BAMBICO, RICARDO
BAIARIO, ADELA BAUTISTA, CORAZON BRAVO, DINAH BULATAO, MARILOU
BUNGAY, LORETO BURGOS, EVELYN CABUNIAS, CARLITO CACAYURAN,
ISABEL CAMACHO, LUCRECIA CARREON, ALFREDO CASEM, HERA CASEM,
MELY
CASEM,
NATIVIDAD CASIPIT,
MARILYN CASTILLO, NENITA
CASTANEDA, CARMELITA CAVINTA, LEONIDA CAVINTA, LEONILA CAVINTA,
MELANIE CHAVEZ, LORETO CORTEZ, HERMANA DACANAY, MARIETTA
DACANAY, MARITES G. DACANAY, MARIO DALAZA, AIDA DANAO, EVA
DANAO, MARGIE DE GUZMAN, NATIVIDAD DE CASTRO, NATIVIDAD DELA
CRUZ, LORETA DIFUNTORUM, LOLITA DISTOR, ADELINA DOMONDON,
HELEN DULATRE, IMELDA M. DULATRE, JOSE N. DULATRE, LYDIA A.
DULATRE, MERLY DULATRE, CONCEPCION DULAY, DOMINGA DULAY, ELENA
C. DULAY, ERLINDA DULAY, ORPILINA R. DULAY, PABLO A. DULAY, RENATO
DULAY, NORMA EISMA, EDNA ESTOQUE, TEOFILO FAJARDO, ADELINA
FONTANILLA, TERESITA FORONDA, MARGARITA FREDELUCES, RUFINA
GALESTE, MARISSA GALI, LUZVIMINDA GAMBOA, CLEOFE GARCIA,
ERLINDA GAPASIN, JULITA GATCHALIAN, MARISSA GATCHALIAN, ALFONSO
HALOG, TERESITA IBASAN, RICARDO JUGO, ELMA JULOYA, ELENITA
LACUATA, EPIFANIA LACUATA, SEBASTIAN LACUATA, JOSEFINA LARON,
PEDRO LEGASPI, DOLORES LUCENA, FLORDELIZA MABANTA, PERLITA
MACAGBA, CESAR MAGLAYA, ERNA MAGNO, GLORIA MAGNO, BONA P.
MAMARIL, CONCEPCION MAMARIL, MARCELINA MAMARIL, TERESITA
MAMARIL, ESTINILIE MANGADANG, HERMOGENES MANGADANG, LETICIA
MANGADANG,
LYDIA
MANGADANG,
SHIRLEY
MANGADANG,
SONIA MANGADANG, TRINIDAD MANGADANG, VICTORIANO MANGADANG,
CRESTITA D. MANZANO, ERLINDA MAPALO, FABIAN F. MAPANAO, LYDIA
MAPILE, RUMO MASON, SUSANA MEDRIANO, DOLORES MILAN, ANTONIO
G. MUNAR, MARINA NINIALBA, CORAZON B. NINOBLE, SUSAN ORIBELLO,
Page 103 of 497

JOVENCIO ORLINO, CHARITO ORPILLA, FERDINAND PADILLA, LETECIA

PAGADUAN, BERLINA PALMONES, ARISTON PANIS, PATRICIO PANIS, PRIMO
PANIS, REMEDIOS B. PANIS, EMELITO PERALTA, GLORIA RAMIREZ,
DOMINGA RAMOS, GERTRUDES RAMOS, DOROTEO REFUERZO, JR.,
JUANITA REFUERZO, FLORENCIO REGACHO, MAGDALENA REBACHO,
ADELINA REYES, DELIA REYES, EUFENIA RIVERA, LEONORA RIVERA,
ROSEMARIE ROSIMO, VICTORIA RUALO, DANILO RULLAN, AURORA
RULLODA, SERAFICA RULLODA, ZENAIDO P. RULLODA, IMELDA RUNAS,
REMEDIOS SANTOS, DOMINADOR TABABA, ROSENDA TABAO, JOSEFINA
TALENS, REVELINA TORCEDO, RUFINA TUMBANGA, JULITA F. UGAY,
BRENDA VILLANUEVA, GLORIA VILORIA, FLORIDA YARIS, MARGARITA
ZARATE, FERNANDO SACDAL, ANICETA MANONGDO and BEATRIZ
UGAY, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, LABOR
ARBITER RICARDO N. OLAIREZ, LA UNION TOBACCO REDRYING
CORPORATION and SEE LIN CHAN, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for certiorari seeking to annul two Resolutions of the National
Labor Relations Commission (NLRC), Third Division, dated July 6, 1994 [1] and September
23, 1994[2], in its affirmance of the Decision [3] of Labor Arbiter Ricardo N. Olairez dated
December 29, 1993 dismissing petitioners consolidated complaint for separation pay for
lack of merit.
The facts are as follows:
Private respondent La Union Tobacco Redrying Corporation (LUTORCO), which is
owned by private respondent See Lin Chan, is engaged in the business of buying, selling,
redrying and processing of tobacco leaves and its by-products. Tobacco season starts
sometime in October of every year when tobacco farmers germinate their seeds in plots
until they are ready for replanting in November. The harvest season starts in midFebruary. Then, the farmers sell the harvested tobacco leaves to redrying plants or do
the redrying themselves. The redrying plant of LUTORCO receives tobacco for redrying
at the end of February and starts redrying in March until August or September.
Petitioners have been under the employ of LUTORCO for several years until their
employment with LUTORCO was abruptly interrupted sometime in March 1993 when
Compania General de Tabaccos de Filipinas (also known as TABACALERA) took over
LUTORCOs tobacco operations. New signboards were posted indicating a change of
ownership and petitioners were then asked by LUTORCO to file their respective
applications for employment with TABACALERA. Petitioners were caught unaware of the
sudden change of ownership and its effect on the status of their employment, though it
Page 104 of 497

was alleged that TABACALERA would assume and respect the seniority rights of the
petitioners.
On March 17, 1993, the disgruntled employees instituted before the NLRC Regional
Arbitration Branch No. 1, San Fernando, La Union a complaint [4] for separation pay
against private respondent LUTORCO on the ground that there was a termination of
their employment due to the closure of LUTORCO as a result of the sale and turnover to
TABACALERA. Other equally affected employees filed two additional complaints [5], also
for separation pay, which were consolidated with the first complaint.
Private respondent corporation raised as its defense that it is exempt from paying
separation pay and denied that it terminated the services of the petitioners; and that it
stopped its operations due to the absence of capital and operating funds caused
by losses incurred from 1990 to 1992 and absence of operating funds for 1993, coupled
with adverse financial conditions and downfall of prices. [6] It alleged further that
LUTORCO entered into an agreement with TABACALERA to take over LUTORCOs tobacco
operations for the year 1993 in the hope of recovering from its serious business losses
in the succeeding tobacco seasons and to create a continuing source of income for the
petitioners.[7] Lastly, it manifested that LUTORCO, in good faith and with sincerity, is
willing to grant reasonable and adjusted amounts to the petitioners, as financial
assistance, if and when LUTORCO could recover from its financial crisis. [8]
On December 29, 1993, Labor Arbiter Ricardo N. Olairez rendered his decision
dismissing the complaint for lack of merit. In upholding private respondent LUTORCOs
position, the Labor Arbiter declared that the petitioners are not entitled to the benefits
under Article 283[9] of the Labor Code since LUTORCO ceased to operate due to serious
business losses and, furthermore, TABACALERA, the new employer of the petitioner has
assumed the seniority rights of the petitioners and other employment liabilities of the
LUTORCO.[10]
Petitioners appealed[11] then the decision of the Labor Arbiter to the public
respondent NLRC where it was assigned to the Third Division.
In its Opposition to Appeal [12] dated February 5, 1994 private respondent LUTORCO
presented new allegations and a different stand for denying separation pay. It alleged
that LUTORCO never ceased to operate but continues to operate even after TABACALERA
took over the operations of its redrying plaint in Aringay, La Union. Petitioners were not
terminated from employment but petitioners instead refused to work with TABACALERA,
despite the notice to petitioners to return to work in view of LUTORCOs need for workers
at its Agoo plant which had approximately 300,000 kilos of Virginia tobacco for
processing and redrying. Furthermore, petitioners are not entitled to separation pay
because petitioners are seasonal workers.

Page 105 of 497

Adopting
these
arguments
of
private
respondent,
the
NLRC,
in
a
[13]
Resolution
dated July 6, 1994, affirmed the dismissal of the consolidated complaints
for separation pay. Public respondent held that petitioners are not entitled to the
protection of Article 283 of the Labor Code providing for separation pay since there was
no closure of establishment or termination of services to speak of. It declared that there
was no dismissal but a non-hiring due mainly to [petitioners] own volition. [14] Moreover,
the benefits of Article 283 of the Labor Code apply only to regular employees, not
seasonal workers like petitioners. [15] Inasmuch as public respondent in its
Resolution[16] dated September 23, 1994 denied petitioners motion for reconsideration,
petitioners now assail the correctness of the NLRCs resolution via the instant petition.
Petitioners anchor their petition on the following grounds, to wit:
I.

PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN
RULING THAT THERE WAS NO DISMISSAL OR TERMINATION OF
SERVICES.

II. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN
RULING THAT PETITIONERS WERE NOT REGULAR EMPLOYEES.
III. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN
NOT AWARDING SEPARATION PAY TO THE PETITIONERS.
Petitioners vigorously maintain that they are regular workers of respondent LUTORCO
since they worked continuously for many years with LUTORCO, some of them even for
over 20 years, and that they performed functions necessary and desirable in the usual
business of LUTORCO.[17] According to them, the fact that some of them work only during
the tobacco season does not affect their status as regular workers since they have been
repeatedly called back to work for every season, year after year. [18] Thus, petitioners take
exception to the factual findings and conclusions of the NLRC, stressing that the
conclusions of the NLRC were based solely on the new theory advanced by private
respondent LUTORCO only on appeal, that is, that it was only LUTORCOs tobacco redrying operation that was sold, and hence, diametrically opposed to its theory before the
Labor Arbiter, i.e., that it is the entire company (LUTORCO) itself that was sold.
Private respondent LUTORCO, on the other hand, insists that petitioners employment
was not terminated; that it never ceased to operate, and that it was petitioners
themselves who severed their employer-employee relationship when they chose
employment with TABACALERA because petitioners found more stability working with
TABACALERA than with LUTORCO.[19] It likewise insists that petitioners are seasonal
workers since almost all of petitioners never continuously worked in LUTORCO for any
Page 106 of 497

given year[20] and they were required to reapply every year to determine who among
them shall be given work for the season. To support its argument that petitioners are
seasonal workers, private respondent LUTORCO cites the case of Mercado, Sr. v.
NLRC[21] wherein this Court held that the employment of [seasonal workers] legally ends
upon the completion of the xxx season.
Clearly, the crux of the dispute boils down to two issues, namely, (a) whether
petitioners employment with LUTORCO was terminated, and (b) whether petitioners are
regular or seasonal workers, as defined by law. Both issues are clearly factual in nature
as they involved appreciation of evidence presented before the NLRC whose finding of
facts and conclusions thereon are entitled to respect and finality in the absence of proof
that they were arrived at arbitrarily or capriciously. [22] In the instant case, however,
cogent reasons exist to apply the exception, to wit:
First, upon a thorough review, the records speak of a sale to TABACALERA in 1993
under conditions evidently so concealed that petitioners were not formally notified of the
impending sale of LUTORCOs tobacco re-drying operations to TABACALERA and its
attendant consequences with respect to their continued employment status under
TABACALERA. They came to know of the fact of that sale only when TABACALERA took
over the said tobacco re-drying operations. Thus, under those circumstances, the
employment of petitioners with respondent LUTORCO was technically terminated when
TABACALERA took over LUTORCOs tobacco re-drying operations in 1993. [23]
Moreover, private respondent LUTORCOs allegation that TABACALERA assured the
seniority rights of petitioners deserves scant consideration inasmuch as the same is not
supported by documentary evidence nor was it confirmed by TABACALERA. Besides,
there is no law requiring that the purchaser of an entire company should absorb the
employees of the selling company. The most that the purchasing company can do, for
reasons of public policy and social justice, is to give preference to the qualified separated
employees of the selling company, who in its judgment are necessary in the continued
operation of the business establishment. In the instant case, the petitioner employees
were clearly required to file new applications for employment. In reality then, they were
hired as new employees of TABACALERA.
Second, private respondent LUTORCOs contention that petitioners themselves
severed the employer-employee relationship by choosing to work with TABACALERA is
bereft of merit considering that its offer to return to work was made more as an
afterthought when private respondent LUTORCO later realized it still had tobacco leaves
for processing and redrying. The fact that petitioners ultimately chose to work with
TABACALERA is not adverse to petitioners cause. To equate the more stable work with
TABACALERA and the temporary work with LUTORCO is illogical. Petitioners untimely
separation in LUTORCO was not of their own making and therefore, not construable as
resignation therefrom inasmuch as resignation must be voluntary and made with the
intention of relinquishing the office, accompanied with an act of relinquishment. [24]
Page 107 of 497

Third, the test of whether or not an employee is a regular employee has been laid
down in De Leon v. NLRC,[25] in which this Court held:
The primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer. The test is whether the former is
usually necessary or desirable in the usual business or trade of the employer. The
connection can be determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. Also if the
employee has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity
to the business. Hence, the employment is considered regular, but only with respect to
such activity, and while such activity exists.
Thus, the nature of ones employment does not depend solely on the will or word of
the employer. Nor on the procedure for hiring and the manner of designating the
employee, but on the nature of the activities to be performed by the employee,
considering the employers nature of business and the duration and scope of work to be
done.[26]
In the case at bar, while it may appear that the work of petitioners is seasonal,
inasmuch as petitioners have served the company for many years, some for over 20
years, performing services necessary and indispensable to LUTORCOs business, serve as
badges of regular employment.[27] Moreover, the fact that petitioners do not work
continuously for one whole year but only for the duration of the tobacco season does not
detract from considering them in regular employment since in a litany of cases [28] this
Court has already settled that seasonal workers who are called to work from time to time
and are temporarily laid off during off-season are not separated from service in said
period, but are merely considered on leave until re-employed.
Private respondents reliance on the case of Mercardo v. NLRC is misplaced
considering that since in said case of Mercado, although the respondent company
therein consistently availed of the services of the petitioners therein from year to year, it
was clear that petitioners therein were not in respondent companys regular
employ. Petitioners therein performed different phases of agricultural work in a given
year. However, during that period, they were free to contract their services to work for
other farm owners, as in fact they did. Thus, the Court ruled in that case that their
employment would naturally end upon the completion of each project or phase of farm
work for which they have been contracted.
All the foregoing considered, the public respondent NLRC in the case at bar erred in
its total affirmance of the dismissal of the consolidated complaint, for separation pay,
against private respondents LUTORCO and See Lin Chan considering that petitioners are
Page 108 of 497

regular seasonal employees entitled to the benefits of Article 283 of the Labor Code
which applies to closures or cessation of an establishment or undertaking, whether it be
a complete or partial cessation or closure of business operation. [29]
In the case of Philippine Tobacco Flue-Curing & Redrying Corporation v. NLRC [30] this
Court, when faced with the question of whether the separation pay of a seasonal worker,
who works for only a fraction of a year, should be equated with the separation pay of a
regular worker, resolved that question in this wise:
The amount of separation pay is based on two factors: the amount of monthly salary
and the number of years of service. Although the Labor Code provides different
definitions as to what constitutes one year of service, Book Six [31] does not specifically
define one year of service for purposes of computing separation pay. However, Articles
283 and 284 both state in connection with separation pay that a fraction of at least six
months shall be considered one whole year. Applying this case at bar, we hold that the
amount of separation pay which respondent members xxx should receive is one-half
(1/2) their respective average monthly pay during the last season they worked multiplied
by the number of years they actually rendered service, provided that they worked for at
least six months during a given year.
Thus, in the said case, the employees were awarded separation pay equivalent to one (1)
month, or to one-half (1/2) month pay for every year they rendered service, whichever is
higher, provided they rendered service for at least six (6) months in a given year. As
explained in the text of the decision in the said case, month pay shall be understood as
average monthly pay during the last season they worked. [32] An award of ten percent
(10%) of the total amount due petitioners as attorneys fees is legally and morally
justifiable under Art. 111 of the Labor Code, [33] Sec. 8, Rule VIII, Book III of its
Implementing Rules,[34] and par. 7, Art. 2208[35] of the Civil Code.[36]
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolutions dated
July 6, 1994 and September 23, 1994 of public respondent NLRC are REVERSED and SET
ASIDE. Private respondent La Union Tobacco Redrying Corporation is ORDERED: (a) to
pay petitioners separation pay equivalent to one (1) month, or one-half (1/2) month pay
for each year that they rendered service, whichever is higher, provided that they
rendered service for at least six (6) months in a given year, and; (b) to pay ten percent
(10%) of the total amount due to petitioners, as and for attorneys fees. Consequently,
public respondent NLRC is ORDERED to COMPUTE the total amount of separation pay
which each petitioner who has rendered service to private respondent LUTORCO for at
least six (6) months in a given year is entitled to receive in accordance with this decision,
and to submit its compliance thereon within forty-five (45) days from notice of this
decision.
SO ORDERED.

Page 109 of 497

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 127395 December 10, 1998

PHILIPPINE TOBACCO FLUE-CURING & REDRYING CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LIGAYA LUBAT, MARY JANE ESTARIS,
EUFRECINA JAVIER, OFELIA PLANDEZ, EDGARDO FORMENTO, CRESCENCIA TIU,
MA. VICTORIA LEON, GELLEN EULALIA, AIDA LICUDO, LUCINA LURIS, ERLINDA
BORCE, DOMINGA AYALA, CARMELITA APANTO, AIDA ALBANIEL, SALVACION
SORIO, PETRONILA SAMSON, ERLINDA CARANAY, ROSALIE TIU, MILAGROS
QUISMUNDO, LUZ DELA CRUZ, VIVIAN DERLA, IRENE ENIEGO, VICENTA GARCIA,
YOLANDA IGNACIO, ADORACION LADERA, GLORIA MENDEZ, LEONILA MENDOZA,
REBECCA MORALES, TERESITA TIU, EMELITA QUILANO, JULIETA PEDRIGAL,
ANTONIA REYES, JOSEFA ROSALES, FRANCISCA TISMO, NORMA AGUIRRE,
CAROLINA AVISO, AMELIA BAUTISTA, ROSA BORJA, APOLONIA CASTILLO,
CARMELITA CAYETANO, ROSELFIDA CENTINA, PATRIA BUSTILLO, FELICIAD
CIPRIANO, MARINA CORPUZ, MATILDE CORPUZ, JOSEFINA CUENZA, BIENVENIDA
DE GUZMAN, EUGENIA DELA CRUZ, MARIA PINEDA, PANCHITA NARCA,
CRISANTA MULAWIN, VIRGINIA MENGOLIO, ROSARIO OSMA, ARCELI MADRILEJO,
CRISTOPHER LABADOR, CANDELARIA LAZONA, ANGELITA LESTINGYO,
CARMELITA ESPIRITU, HELEN ESTARIS, ROSA JAPSON, ARDIONELA LAZONA,
ARIEL ULTRA, REYNANTE TUMBUCON, ANTENOR REMOLLINO, ALEXANDER
REMOLLINO, ARNALDO NAPALIT, MACARIO MORIEL, JOSELITO LICUDO, PATERNO
LAVALLA, JERRY LICUDO, CESAR SAMSON, EDUARDO ESGUERRA JR., RAMISES
CENTARAN, JUAN BUSTILLO, ROLANDO ALBANIEL, REYNALDO AQUINO, JAIME
ESGUERRA, ARMANDO JAPSON, FERNANDO ESGUERRA, CARLITO ENIEGO,
REYNALDO DAYOT, MARCELO DAYOT, RODOLFO CERBITE, ARTEMIO BOQUILLA,
PASCUAL AGUJA, ERIC AGUJA, CELESTINA AQUINO, REYNALDO BARQUIN,
FELOMENA BEGONIA, ROSITA BAGONIA, REGINA BENITEZ, EDGARDO BERGANO,
RODOLFO BORROMEO, LUDIVICO DALAY, ASCILIPIADES GOYENA, REMEDIO
GOYENA, OSCAR EMNACE, GERTRUDES GUIAO, LOLITA MUSNE, ALBERTO
PARAMA, LUNINGNING PERALTA, AMELIA RANCHES, ERNESTO SAN JUAN,
LIWAYWAY SAN JUAN, RICARDO TRIUMFANTE, LORENA TORCIDO, PRISCILLA
VILLASIN, LUZVIMINDA VILLEGAS, ROSILE VERSOZA, CHARITO ISIDRO, PETER
LABAYNE, and SHIRLEY LUBAT, respondents.

Page 110 of 497

PANGANIBAN, J.:
This case involves two groups of seasonal workers who claimed separation benefits after
the closure of petitioner's tobacco processing plant in Balintawak, Metro Manila and the
transfer of its tobacco operations to Candon, Ilocos Sur. Petitioner refuses to grant
separation pay to the workers belonging to the first batch (referred to as the Lubat
group), because they had not been given work during the preceding year and, hence,
were no longer in its employ at the time it closed its Balintawak plant. Likewise, it claims
exemption from awarding separation pay to the second batch (the Luris group), because
the closure of its plant was due to "serious business losses," as defined in Article 283 of
the Labor Code.
In resolving this controversy, this Court issues the following rulings: (1) the aforecited
Article 283 applies to both complete and partial cessation of operations; (2) "serious
business losses" that would have exempted petitioner from paying separation benefits
were not proven by its "recasted financial statements"; (3) the employer's refusal to
rehire the first batch of employees had no legal justification and was thus an illegal
dismissal; and (4) the second batch of employees are entitled to the separation pay
provided by the Labor Code "in cases of closure . . . not due to serious business losses."
The Case
The foregoing point encapsulate our ruling on the present Petition for Certiorari, assailing
the August 30, 1996 Decision of the National Labor Relations Commission (NLRC) 1 in
NLRC NCR Case No. 00-08-06061-94 and NLRC Case No. 08-06082-94, the dispositive
portion of which reads:
WHEREFORE, the instant appeals are hereby dismissed for lack of merit. 2
The NLRC upheld the November 27, 1995 Decision of the labor arbiter

which disposed:

As . . . data o[n] their salary rates were not indicated on record, the claims
of complainants Milagros Calubayan, Carmencita Cruz, Armando Goyena,
Erlinda Nakpil, Pacita Narca, Virgilio Punzalan, Roberto Reduta, Maritess
Medina, Nestor Medina, and Dominga Siababa can not be ascertained, and
therefore, the same should be dismissed but without prejudice.
With respect to the other claims of the above Luris group including their
charge of illegal dismissal, they are hereby dismissed for lack of merit. 4
The Facts
The facts are summarized in the challenged NLRC Decision as follows:

Page 111 of 497

These refer to the consolidated cases for payment of separation pay lodged
by [the] Lubat Group, and for illegal dismissal and underpayment of
separation pay by [the] Luris group, with prayers for damages and
attorney's fees against the above respondents.
The record reveals that all complainants in both cases were former workers
of respondent with their respective periods of employment and latest wages
stated in the parties' pleadings/[a]nnexes.
On August 1, 1994, due to supposed serious financial reverses and losses
suffered by respondent and its desire to prevent further losses, a notice of
permanent closure of its red[r]ying operations at Balintawak, Quezon City
and transfer [of] the same to Candon, Ilocos Sur was served to the DOLE.
On August 3, 1994, complainants were also notified of the said decision to
close and transfer.
On August 16, 1994, their separation benefits were given to them but
allegedly [based on] wrong computation when management did not
consider 3/4 of their length of service as claimed by complainants (Luris
group).
While the Lubat group were not granted . . . separation pay as their
previous seasonal service [was] not continuous, and as of August, 1994,
they were not employed ther[e]with as declared by respondent
Based on the complaint and from the above facts, the issues are as follows:
1) Whether or not the Lubat Group are entitled to the payment of
separation pay[:]
2) Whether or not the Luris Group can be legally awarded separation pay
differentials[,] or whether or not the computation adopted by respondent in
granting complainants' separation pay is erroneous[;] and
3) Whether or not the Luris group can be properly allowed backwages and
damages by reason of their alleged illegal dismissal, and for both groups,
attorney's fees[.]
In [its] position paper respondent maintains that [the] Lubat group are not
entitled to separation pay for the reason that they were not among those
separated or could not have been separated from employment on August 3,
1994 due to such closure and transfer as they were not employed or did not

Page 112 of 497

report for work at the plant for the 1994 tobacco season as shown by [the]
company's records.
As to the Luris group, although being questioned by this group, respondent
considers the following formula in determining the length of service in years
as basis for computing the separation pay of this group to be fair and
reasonable and . . . supported by Article 283 of the Labor Code, as
amended, such as the total number of working days actually worked over
total number of working days in a year (303 days), multipl[ied] by the daily
rate and further multipl[ied] by 15 days.
Respondent explains that this is so because complainants' nature of work is
seasonal as they are employed every year only during the tobacco season
which may fall within the months of February to November but actually
work for a period of less [than] six (6) months for each season. The law
qualifies tenure for purposes of separation benefits as based on "service"
and not "employment".
With these considerations, respondent claims that complainants' relief for
separation pay differentials must fail.
On the charge of illegal dismissal by the Luris group, respondent asserts
that complainants were separated from employment for [a] just cause that
is the closure of its REDRYING operations at the Balintawak Plant and the
transfer of the same to Candon, Ilocos Sur which was authorized by the law
and the parties' CBA.
The decision of management to close and transfer its tobacco processing
and REDRYING operations was based on the fact that it had consistently
incurred a net loss from these operations, its principal line of business,
although its audited financial statement showed a net profit after tax from
1990 to 1993 based on over-all operations.
Moreover, respondent points out that as the Luris group and the DOLE were
served a written notice at least one (1) month before the intended date of
closure effective on Sept. 15, 1994, the due process requirement was met.
Viewed from the above, respondent cannot prosper.
On the other hand, the Lubat group declare that originally there were seven
complainants but eight were added.

Page 113 of 497

Being seasonal workers, they were hired by respondent to operate the

Balintawak factory from January to September, averaging 6 to 8 months
annually.
As alleged by them, when they reported for their annual shift, respondent
refused to extend them assignment for no apparent reason up to the end of
the season in August, 1994. When they ask[ed] for separation pay,
respondent told them that because they were not in the payroll for 1994, no
such benefit would be paid to them.
It is their contention that complainants are entitled to separation pay [of] at
least one-half month pay for every year of service[,] as they were illegally
dismissed[,] to be computed each season ranging from 6 to 8 months
[which] should be considered as one year, contrary to the respondent's
basis which is the total no. of days they actually rendered service.
To back up the above, complainants cite a case wherein the Supreme Court
held that seasonal employees are not strictly speaking, separated from the
service but merely considered on leave of absence without pay until
reemployed. Their employment relationship is never severed but only
suspended.
For the prosecution of this case, complainants were forced to hire the
services of counsel for which they claim . . . attorney's fees.
As far as the Luris group are concerned, they state that they were factory
workers of respondents numbering one hundred (100) whose names,
periods of employment and latest salaries are contained in the lists
attached to their position paper.
As claimed by this group, on August 3, 1994, respondents told them that
their services were already terminated and all of them dismissed as the
factory would be transferred to Candon, Ilocos Sur.
Letter-notices dated August 3, 1994, (Annexes F, F-1 and F-2 to their
position paper) showing that the date when they were notified of the
closure was the same date they were instantly dismissed although it is
admitted in the notice that their decision to transfer was made as early as
March 5, 1994.
Furthermore, complainants question the basis of the computations of their
separation benefits which should include the period when there [was] no
work to be done in a year. [B]ecause of necessity, they received the short

Page 114 of 497

amount as their separation pay by way of voucher but "under protest" as

shown in Annexes C-C-1 to C-5 to their pleading.
With the sudden transfer of the machiner[y] of respondents without giving
them advance notice leaving them with insufficient separation pay,
complainants experienced serious anxiety and wounded feelings for which
they p[r]ay for damages including attorney's fees.
Consequently, complainants also pray for backwages, allowance and other
benefits from the date of their illegal dismissal up to the final disposition of
the case.
Furthermore, complainants maintain that since the company is being
transferred to the province, the former's separation may be considered
compulsory retirement under R.A. 7641, providing for one-half month pay
benefit for every year of service, and under Section 3, Rule V, Book III of the
Labor Code, as amended for which they also demand payment thereof;
Complainants also submitted the computation of their differential in
separation pay (addendum and supplemental addendum to their position
paper) Annex "G", "G-1" to "G-4".
To state the facts simply, there are two groups of employees, namely, the Lubat group
and the Luris group. The Lubat group is composed of petitioner's seasonal employees
who not rehired for the 1994 tobacco season. At the start of that season, they were
merely informed that their employment had been terminated at the end of the 1993
season. They claimed that petitioner's refusal to allow them to report for work without
mention of any just or authorized cause constituted illegal dismissal. In their Complaint,
they prayed for separation pay, back wages, attorney's fees and moral damages.
On the other hand, the Luris group is made up of seasonal employees who worked during
the 1994 season. On August 3, 1994, they received a notice informing them that, due to
serious business losses, petitioner planned to close its Balintawak plant and transfer its
tobacco processing and redrying operations to Ilocos Sur. Although the closure was to be
effective September 15, 1994, they were no longer allowed to work starting August 4,
1994. Instead, petitioner awarded them separation pay computed according to the
following formula:
total no. of days actually worked
x daily rate x 15 days
total no. of working days in one year

Page 115 of 497

In their Complaint, they claimed that the computation should be based not on the
above mathematical equation, but on the actual number of years served. In
addition, they contended that they were illegally dismissed, and thus they prayed
for back wages.
Against these factual antecedents, the labor arbiter ordered the petitioner to pay
complainant's separation pay differential plus attorney's fees in the total amount of
P3,092,896.76. Dissatisfied with said Decision, Philippine Tobacco and the complainants
filed their respective appeals before the NLRC. 5
As noted earlier, the NLRC affirmed the labor arbiter's Decision. Before this Court, only
Philippine Tobacco filed the present recourse, as the complainants did not question the
NLRC Decision. 6
Ruling of the NLRC
The NLRC agreed with the labor arbiter that the closure by petitioner herein of its
operations at Balintawak and its transfer thereof to Ilocos Sur were due to serious
financial losses. Nonetheless, both labor agencies held that the Luris and Lubat groups
were entitled to separation pay equivalent to one-half (1/2) month salary for every of
service, provided that the employee worked at least one month in a given year.
The NLRC further ruled that private respondents were not entitled to back wages and
damages, since the closure of the factory and the termination of their employment were
due to a legally recognized cause.
Issues
Petitioner raises the following issues:
A
SUBSTANTIAL AND UNDISPUTED EVIDENCE ON RECORD PROVES THAT THE
CLOSURE OF PETITIONER'S OPERATION WAS DUE TO SERIOUS BUSINESS
LOSSES AND FINANCIAL REVERSES. PRIVATE RESPONDENTS ARE NOT
LEGALLY ENTITLED TO SEPARATION PAY. THE PAYMENT OF SEPARATION PAY
TO THE LURIS GROUP IS BASED ONLY ON PETITIONER'S LIBERALITY.
B
EVEN ASSUMING THAT PETITIONER'S CLOSURE WAS NOT DUE TO SERIOUS
BUSINESS LOSSES AND FINANCIAL REVERSES. THE LUBAT GROUP WORKERS
ARE STILL NOT ENTITLED [TO] SEPARATION PAY. THE LUBAT GROUP WERE
NOT EMPLOYED WITH PETITIONER AT THE TIME OF PETITIONER'S CLOSURE.
Page 116 of 497

C
EVEN ASSUMING THAT THE LURIS GROUP IS ENTITLED TO SEPARATION PAY.
PETITIONER MUST NOT AND CANNOT BE LEGALLY COMPELLED TO PAY MORE
THAN THE AMOUNTS ALREADY GIVEN TO THE [SAID] LURIS GROUP. 7
In the Court's view, there issues must be tackled: First, did petition we prove "serious
business losses," its justification for the nonpayment of separation pay? Second, was the
dismissal of the employees valid? Third, how should the separation pay of illegally
dismissed seasonal employees be computed?
The Court's Ruling
The petition is not meritorious.
First Issue:
Serious Business Losses Not Proven
Petitioner asserts that it submitted before the labor arbiter a Statement of Income and
Expenses, as well as a recasted version thereof, showing that it had suffered serious
business losses in its tobacco processing and redrying operations. Citing Articles 283 of
the Labor Code, it concludes that it is not obligated to award separation pay to its
dismissed workers (whether belonging to the Lubat or the Luris group), because the
closure of its tobacco business was due to an authorized cause.
Petitioner further claims that it complied with the procedural requirement in closing the
aforementioned aspect of its business. It filed at the DOLE on August 2, 1994, a Petition
for Closure. On August 3, 1994, it also sent to its employees letters informing them of its
desire to close its tobacco operations in Balintawak effective September 15, 1994. The
fact that it did award separation pay to private respondents was solely out of generosity,
and not out of legal duty.
Art. 283 of the labor Code, which we quote below, prescribes the requisites and the
procedure for an employee's dismissal arising from the closure or cessation of operation
of the establishment.
Art. 283. Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
Page 117 of 497

intended date thereof. In case of termination due to the installation of labor

saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
It must be noted that the present case involves the closure of merely a unit or division,
not the whole business of an otherwise viable enterprise. Although Article 283 uses the
phrase "closure or cessation of operation of an establishment or undertaking," this Court
previously ruled in Coca-Cola Bottlers (Phil.), Inc. v. NLRC that said statutory provision
applies in cases of both complete and partial cessation of the business operation:
. . . Ordinarily, the closing of a warehouse facility and the termination of the
services of employees there assigned is a matter that is left to the
determination of the employer in the good faith exercise of its management
prerogatives. The applicable law in such a case is Article 283 of the Labor
Code which permits "closure or cessation of operation of an establishment
or undertaking not due to serious business losses or financial reverses,"
which, in our reading, includes both the complete cessation of operations
and the cessation of only part of a company's business. 8
In Somerville Stainless Steel Corporation v. NLRC, 9 the Court held that "[t]he 'loss'
referred to in Article 283 cannot be just any kind or amount of loss; otherwise, a
company could easily feign excuses to suit its whims and prejudices or to rid itself of
unwanted employees. To guard against this possibility of abuse, the Court laid down the
following standard which a company must meet to justify retrenchment:
. . . Firstly, the losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be forestalled by
retrenchment is clearly shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment would appear to be
seriously in question. Secondly, the substantial loss apprehended must be
reasonably imminent, as such imminence can be perceived objectively and
in good faith by the employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is after all a drastic recourse
with serious consequences for the livelihood of the employees retired or
otherwise laid off. Because of the consequential nature of retrenchment, it
must, thirdly, be reasonably necessary and likely to effectively prevent the
expected losses. The employer should have taken other measures prior or
Page 118 of 497

parallel to retrenchment to forestall losses, i.e., cut other costs other than
labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites
or so-called "golden parachutes," can scarcely claim to be retrenching in
good faith to avoid losses. To impart operational meaning to the
constitutional policy of providing "full protection" to labor, the employers
prerogative to bring down labor costs by retrenching must be exercised
essentially as a measure of last resort, after less drastic means e.g.,
reduction of both management and rank-and-file bonuses and salaries,
going on reduced time, improving manufacturing efficiencies, trimming of
marketing and advertising costs, etc. have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled, must
be proved by sufficient and convincing evidence. The reason for requiring
this quantum of proof is readily apparent: any less exacting standard of
proof would render too easy the abuse of this ground for termination of
services of employees. . . .
To repeat, petitioner did not actually close its entire business. It merely transferred or
relocated its tobacco processing and redrying operations. Moreover, it was also engaged
in, among others, corn and rental operations, which were unaffected by the closure of its
Balintawak plant.
Tested against the aforecited standards, we hold that herein petitioner was not able to
prove serious financial losses arising from its tobacco operations. A close examination of
its Statement of Income and Expenses and its recasted version thereof, which were
presented in support of its contention, suggests its failure to show business losses.
In the recasted Statement, petitioner tried to prove that there was a net loss from its
tobacco processing and redrying operations. It did so by subtracting all of its selling,
administrative and interest expenses for a given year from the earning in
its tobacco sales for the corresponding year. This formula, however, is at best illogical
and misleading. Petitioner would have us believe that all of its expenses selling,
administrative and interest expenses resulted only from its tobacco processing and
redrying operations, and that it incurred no expenses in its other profit centers.
On the contrary, the Statement of Income and Expenses shows that the selling and
administrative expenses pertain not only to the tobacco business of petitioner, but also
to its corn and rental operations, and that the interest expenses pertain to all of its
business operations. In fact, the aforementioned Statement shows that there was a net
gain from operations in each year covered by the report. In other words, the recasted
financial statement effectively modified the Statement of Income and Expenses by

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deducting form the tobacco operationsalone the operating costs pertaining

to all business of petitioner.
The contention of petitioner that tobacco was its main business does not justify the
devious contents of the recasted financial statement. It is difficult to accept that it could
not have incurred any expenses in its other operations. Common sense revolts against
such proposition.
Misleading is petitioner's argument that "public respondent cannot recognize petitioner's
aforesaid Statement as the 'normal and reliable method of proof of the profit and loss',
and at the same time inconsistently assert that the same does not show that the losses
were serious or incurred solely by petitioner's tobacco operations." 10 An audited financial
statement is indeed the normal method of proof. But this norm does not compel this
Court to accept thecontents of the said documents blindly and without thinking. As
stated already, the above documents failed to show that petitioner had incurred from its
tobacco operations serious losses sufficient to justify the termination of the employment
of its workers sans separation pay.
Defective Notice
Art. 283 of the Labor Code also requires the employer to furnish both the employee and
the Department of Labor and Employment a written Notice of Closure at least one month
prior to closure. True, in the present case the Notices of Termination were given to the
employees on August 3, 1994, and the intended date of closure was September 15,
1994. However, the employees were in fact not allowed to work after August 3, 1994.
Therefore, the termination notices to the employees were given in violation of the
requisite one-month prior notice under Article 283 of the Labor Code.
Petitioner contention that the tobacco season was about to end anyway is without merit,
because the law clearly provides, without any qualification, that the employees must be
given one-month notice prior to closure. At the very least, respondent members of the
Luris group were deprived of work for the remaining days of the 1994 tobacco season.
Petitioner could have easily complied with the aforesaid requirement by sending the
notices earlier. In fact, according to petitioner, the decision to cease its tobacco
operations was made as early as March 5, 1994; hence, petitioner had plenty of time
within which to send the notices.
Given the illogical and misleading entries in the Statement of Income and Expenses, as
well as the recasted version thereof, and the defective Notice of Closure, this Court holds
that petitioner was not able to establish that the closure of its business operations in its
Balintawak plant was in fact due to serious financial losses. Therefore, under the last two
sentences of Article 283 of the Labor Code, the dismissed employees belonging to the
Luris group are entitled to separation pay "equivalent to one (1) month pay or at least

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one half (1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year."
Second Issue:
Lubat Group Illegally Dismissed
Petitioner relies upon our ruling in Mercado v. NLRC 11 that the "employment [of seasonal
employees] legally ends upon completion of the . . . season," a statement which was
subsequently reiterated in Magcalas v.
NLRC. 12 Thus, petitioner argues that it was not obliged to rehire the members of the
Lubat group for the 1994 season, because their employment had been terminated at the
end of the 1993 season. Since they were not employed for the 1994 season when the
Balintawak plant was closed, it follows that petitioner has no obligation to award them
separation pay due to the said closure.
We are not persuaded. From the facts, we are convinced that petitioner illegally
dismissed the members of the Lubat group when it refused to allow them to work during
the 1994 season.
This Court has previously ruled in Manila Hotel Company v. CIR 13 that seasonal workers
who are called to work from time to time and are temporarily laid of during off-season
are not separated from service in said period, but are merely considered on leave until
reemployed, viz.:
The nature of their relationship . . . is such that during off season they are
temporarily laid off but during summer season they are re-employed, or
when their services may be needed. They are not strictly speaking
separated from the service but are merely considered as on leave of
absence without pay until they are re-employed.
The above doctrine was echoed by this Court in Industrial-Commercial-Agricultural
Workers' Organization (ICAWO) v. CIR 14 and Visayan Stevedore Transportation Company
v. CIR. 15
Petitioner claims that the aforecited ruling has been superseded by Article 280 of the
Labor Code, which took effect on November 1, 1974. We disagree. There is no clear
conflict between the above doctrine and Article 280 of the Labor Code. In fact, the same
doctrine was reiterated by this Court in Tacloban Sagkahan Rice and Corn Mills Co. v.
NLRC 16 in 1990, which was promulgated after the labor Code took effect. Furthermore,
in Bacolod-Murcia Milling Co, Inc. v. NLRC, 17 this Court considered a seasonal workers "in
regular employment" in cases involving the determination of an employer-employee
relationship and security of tenure. The Court ruled:

Page 121 of 497

While under prevailing jurisprudence, Canete may be considered as in

regular employment even during those years when she was merely a
seasonal worker, that legal conclusion will hold true only in cases involving
the determination of an employer-employee relationship or security of
tenure.
Again in Gaco v. NLRC, petitioner therein was a seasonal worker employed and
repeatedly rehired in a business enterprise similar to that of petitioner herein. Finding
that he was in regular employment and thus entitled to separation pay for having been
constructively dismissed, the Court stated:
I may appear that the work in private respondent Orient Leaf Tobacco
Corporation is seasonal, however, the records reveal that petitioner Zenaida
Gaco was repeatedly re-hired, sufficiently evidencing the necessity and
indispensability of her services to the former's business or trade.
Furthermore, she has been employed since 1974 up to the end of the
season in 1989. Owing to her length of service, she became a regular
employee, by operation of law, one year after she was employed. 18
From the foregoing, it follows that the employer-employee relationship between herein
petitioner and members of the Lubat group was not terminated at the end of the 1993
season. From the end of the 1993 season until the beginning of the 1994 season, they
were considered only on leave but nevertheless still in the employ of petitioner.
The facts in the above-mentioned cases are different from those in Mercado v.
NLRC 19 and in Magcalas v. NLRC.20 In Mercado, although respondent constantly availed
herself of petitioners' services from year to year, it was clear from the facts therein that
they were not in her regular employ. Petitioners therein performed different phases of
agricultural work in a given year. However, during that period that period, they were free
to work for other farm owners, and in fact they did. In other words, they worked for
respondent, but were nevertheless free to contract their services with other farm owners.
The Court was thus emphatic when it ruled that petitioners were mere project
employees, who could be hired by other farm owners. As such, their employment would
naturally end upon the completion of each project or each phase of farm work which has
been contracted. In Magcalas v. NLRC, the Court merely cited the aforequoted ruling to
explain the difference among regular, project and seasonal employees. In fact, it
concluded that the employees therein were regular and not project employees.
From the peculiar facts of Mercado and Magcalas, it is clear that the ruling therein is not
inconsistent with Manila Hotel, Gaco and other cases. It is noteworthy that
the ponente in Mercado concurred in the Court's ruling in Gacoawarding to the seasonal
employee separation pay for every year of service.

Page 122 of 497

Prescinding from the above, we hold that petitioner is liable for illegal dismissal and
should be responsible for the reinstatement of the Lubat group and the payment of their
back wages. However, since reinstatement is no longer possible as petitioner has already
closed its Balintawak plant, respondent members of the said group should instead be
awarded normal separation pay (in lieu of reinstatement) equivalent to at least one
month pay, or one month pay for every year of service, whichever is higher. It must be
stressed that the separation pay being awarded to the Lubat group is due to illegal
dismissal; hence, it is different from the amount of separation pay provided for in Article
283 in case of retrenchment to prevent losses or in case of closure or cessation of the
employer's business, in either of which the separation pay is equivalent to at least one
(1) month or one-half (1/2) month pay for every year of service, whichever is higher.
However, despite the fact that the respondent members of the Lubat group were entitled
to separation pay equivalent to at least one (1) month pay, or one (1) month pay for
every year of service, whichever is higher, they cannot receive more than the amount
awarded to them in the NLRC Decision at least one (1) month or one-half (1/2) month
pay for every year of service, whichever is higher because they did not appeal from
the said Decision. 21 Therefore, no affirmative award can be given to them. In the same
manner, although respondents should have been entitled to back wages because
petitioner illegally deprived them of work during the 1994 season, no such award can
given to them, since they did not appeal the NLRC Decision. The elementary norms of
due process prevent the grant of such awards, as the employer was not given notice that
its filing of its own Petition for Certiorari would put it in jeopardy of such relief.
Third Issue:
Amount of Separation Pay
Petitioner posits that the separation pay of a seasonal worker, who works for only a
fraction of a year, should not be equated with that of a regular worker. Positing that the
total number of working days in one year is 303 days, petitioner submits the following
formula for the computation of a seasonal worker's separation pay:
Total No. of Days Actually Worked
x Daily Rate x 15 days

22

Total No. of Working Days In One Year

Agreeing with the labor arbiter and the NLRC, private respondents, on the other hand,
claim that their separation pay should be based on the actual number of years they have
been in petitioner's service. They cite the law on service incentive leave, 23 the
implementing rules regarding the 13th month pay, 24 Manila Hotel v.

Page 123 of 497

CIR, 25 and Chartered Bank v. Ople 26 which allegedly stated that "each season in a year
in a year should be construed as one year of service." 27
The amount of separation pay is based on two factors: the amount of monthly salary and
the number of years of service. Although the Labor Code provides different definitions as
to what constitutes "one year of service," Book Six 28 does not specifically define "one
year of service" for purposes of computing separation pay. However, Articles 283 and
284 both state in connection with separation pay that a fraction of at least six months
shall be considered one whole year. Applying this to the case at bar, we hold that the
amount of separation pay which respondent members of the Lubat and Luris groups
should receive is one-half (1/2) their respective average monthly pay during the last
season they worked multiplied by the number of years they actually rendered service,
provided that they worked for at least six months during a given year. 29
The formula that petitioner proposes, wherein a year of work is equivalent to actual work
rendered for 303 days, is both unfair and inapplicable, considering that Articles 283 and
284 provide that in connection with separation pay, a fraction of at least six months shall
be considered one whole year. Under these provisions, an employee who worked for only
six months in a given year which is certainly less than 303 days is considered to
have worked for one whole year.
In the same manner, Chartered Bank v. Ople, 30 which private respondents cite, does not
support their cause. The said case ruled that regular workers and those who are paid by
the month are both entitled to holiday pay. On the other hand, the law on service
incentive leave pay 31 does not necessarily apply to retirement benefits or separation
pay. Likewise, the provision regarding the 13th month pay 32 is not applicable to
separation pay. In fact, an employee who worked for a single month in a year is entitled
to a 13th month pay equivalent to only 1/12 of his or her monthly salary. Finally, Manila
Hotel Company v. CIR 33 did not rule that seasonal workers are considered at work during
off season with regard to the computation of separation pay. Said case merely held that,
in regard to season workers, the employer-employee relationship is not severed during
off-season but merely suspended.
WHEREFORE, the assailed Decision of Respondent NLRC is hereby AFFIRMED WITH THE
MODIFICATION that private respondents are hereby awarded separation pay equivalent
to one (1) month, or to one-half (1/2) month pay 34 for each year that they rendered
service, whichever is higher, provided that they rendered service for at least six (6)
months in a given year. The separation pay to be awarded to members of the Luris group
shall be taken from the amount which petitioner has already awarded to them, and any
excess need not be refunded by the workers. The ten percent (10%) attorney's fees
given by the NLRC and the labor arbiter shall be based on the award modified herein.
SO ORDERED.

Page 124 of 497

THIRD DIVISION

ROWELL
CORPORATION,

INDUSTRIAL

G.R. No. 167714

Petitioner,
Present:

YNARES-SANTIAGO, J.,
airperson,
- versus -

AUSTRIA-MARTINEZ,
CALLEJO, SR.,*
CHICO-NAZARIO, and
NACHURA, JJ.

HON. COURT OF APPEALS and JOEL

TARIPE,
Respondents.

Promulgated:

March 7, 2007

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

DECISION

CHICO-NAZARIO, J.:

Page 125 of 497

Ch

This case is a Petition for Review under Rule 45 of the 1997 Revised Rules of Civil
Procedure seeking to set aside the Decision [1] and Resolution[2] of the Court of Appeals in
CA-G.R. SP No. 74104, entitled, Rowell Industrial Corp., and/or Edwin Tang vs. National
Labor Relations Commission and Joel Taripe, dated 30 September 2004 and 1 April 2005,
respectively, which affirmed the Resolutions [3] of the National Labor Relations
Commission (NLRC) dated 7 June 2002 and 20 August 2002, finding herein respondent
Joel Taripe (Taripe) as a regular employee who had been illegally dismissed from
employment by herein petitioner Rowell Industrial Corp. (RIC), thereby ordering
petitioner RIC to reinstate respondent Taripe with full backwages, subject to the
modification of exonerating Edwin Tang, the RIC General Manager and Vice President,
from liability and computing the backwages of herein respondent Taripe based on the
prevailing salary rate at the time of his dismissal. The NLRC Resolutions reversed the
Decision[4] of the Labor Arbiter dated 29 September 2000, which dismissed respondent
Taripes complaint.

Petitioner RIC is a corporation engaged in manufacturing tin cans for use in

packaging of consumer products, e.g., foods, paints, among other things. Respondent
Taripe was employed by petitioner RIC on 8 November 1999 as a rectangular power
press machine operator with a salary of P223.50 per day, until he was allegedly
dismissed from his employment by the petitioner on 6 April 2000.

The controversy of the present case arose from the following facts, as summarized
by the NLRC and the Court of Appeals:

On [17 February 2000], [herein respondent Taripe] filed a [C]omplaint

against [herein petitioner RIC] for regularization and payment of holiday
pay, as well as indemnity for severed finger, which was amended on [7 April
2000] to include illegal dismissal. [Respondent Taripe] alleges that
[petitioner RIC] employed him starting [8 November 1999] as power press
machine operator, such position of which was occupied by [petitioner RICs]
regular employees and the functions of which were necessary to the latters
business. [Respondent Taripe] adds that upon employment, he was made
to sign a document, which was not explained to him but which was made a
condition for him to be taken in and for which he was not furnished a
copy. [Respondent Taripe] states that he was not extended full benefits
granted under the law and the [Collective Bargaining Agreement] and that
on [6 April 2000], while the case for regularization was pending, he was
summarily dismissed from his job although he never violated any of the
[petitioner RICs] company rules and regulations.

[Petitioner RIC], for [its] part, claim[s] that [respondent Taripe] was a
contractual employee, whose services were required due to the increase in
the demand in packaging requirement of [its] clients for Christmas season
and to build up stock levels during the early part of the following year; that
Page 126 of 497

on [6 March 2000], [respondent Taripes] employment contract

expired. [Petitioner RIC] avers that the information update for union
members, which was allegedly filled up by [respondent Taripe] and
submitted by the Union to [petitioner] company, it is stated therein that in
the six (6) companies where [respondent Taripe] purportedly worked, the
latters reason for leaving was finished contract, hence, [respondent
Taripe] has knowledge about being employed by contract contrary to his
allegation that the document he was signing was not explained to
him. [Petitioner RIC] manifest[s] that all benefits, including those under the
[Social Security System], were given to him on [12 May 2000]. [5]

On 29 September 2000, the Labor Arbiter rendered a Decision dismissing

respondent Taripes Complaint based on a finding that he was a contractual employee
whose contract merely expired. The dispositive portion of the said Decision reads, thus:

WHEREFORE, premises considered, judgment is hereby rendered

declaring this complaint of [herein respondent Taripe] against [herein
petitioner RIC] and Mr. Edwin Tang for illegal dismissal DISMISSED for lack
of merit. However, on ground of compassionate justice, [petitioner RIC and
Mr. Edwin Tang] are hereby ordered to pay [respondent Taripe] the sum of
PHP5,811.00 or one months salary as financial assistance and holiday pay
in the sum of PHP894.00, as well as attorneys fees of 10% based on holiday
pay (Article 110, Labor Code).[6]

Aggrieved, respondent Taripe appealed before the NLRC. In a Resolution dated 7

June 2002, the NLRC granted the appeal filed by respondent Taripe and declared that his
employment with the petitioner was regular in status; hence, his dismissal was
illegal. The decretal portion of the said Resolution reads as follows:

WHEREFORE, premises considered, [herein respondent Taripes]

appeal is GRANTED. The Labor Arbiters [D]ecision in the above-entitled
case is hereby REVERSED. It is hereby declared that [respondent Taripes]
employment with [herein petitioner RIC and Mr. Edwin Tang] is regular in
status and that he was illegally dismissed therefrom.

[Petitioner RIC and Mr. Edwin Tang] are hereby ordered to reinstate
[respondent Taripe] and to jointly and severally pay him full backwages
from the time he was illegally dismissed up to the date of his actual
reinstatement, less the amount of P1,427.67. The award of P894.00 for
Page 127 of 497

holiday pay is AFFIRMED but the award of P5,811.00 for financial

assistance is deleted. The award for attorneys fees is hereby adjusted to
ten percent (10%) of [respondent Taripes] total monetary award. [7]

Dissatisfied, petitioner RIC moved for the reconsideration of the aforesaid

Resolution but it was denied in the Resolution of the NLRC dated 20 August 2002.

Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997
Revised Rules of Civil Procedure before the Court of Appeals with the following
assignment of errors:

I.
THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS
IN EXCESS OF ITS JURISDICTION WHEN IT MISINTERPRETED ARTICLE
280 OF THE LABOR CODE AND IGNORED JURISPRUDENCE WHEN IT
DECIDED THAT [RESPONDENT TARIPE] IS A REGULAR EMPLOYEE AND
THUS, ILLEGALLY DISMISSED.
II.
THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS
IN EXCESS OF ITS JURISDICTION WHEN IT ORDERED [EDWIN TANG] TO
(sic) JOINTLY AND SEVERALLY LIABLE FOR MONETARY CLAIMS OF
[RESPONDEN TARIPE].
III.
THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS
IN EXCESS OF ITS JURISDICTION WHEN IT ORDERED PAYMENT OF
MONETARY CLAIMS COMPUTED ON AN ERRONEOUS WAGE RATE. [8]

The Court of Appeals rendered the assailed Decision on 30 September 2004,

affirming the Resolution of the NLRC dated 7 June 2002, with modifications. Thus, it
disposed

WHEREFORE, the Resolutions dated [7 June 2002] and [20 August

2002] of [the NLRC] are affirmed, subject to the modification that [Edwin
Tang] is exonerated from liability and the computation of backwages of
[respondent Taripe] shall be based on P223.50, the last salary he received. [9]

A Motion for Reconsideration of the aforesaid Decision was filed by petitioner RIC,
but the same was denied for lack of merit in a Resolution [10] of the Court of Appeals
dated 1 April 2005.
Page 128 of 497

Hence, this Petition.

Petitioner RIC comes before this Court with the lone issue of whether the Court of
Appeals misinterpreted Article 280 of the Labor Code, as amended, and ignored
jurisprudence when it affirmed that respondent Taripe was a regular employee and was
illegally dismissed.

Petitioner RIC, in its Memorandum, [11] argues that the Court of Appeals had
narrowly interpreted Article 280 of the Labor Code, as amended, and disregarded a
contract voluntarily entered into by the parties.

Petitioner RIC emphasizes that while an employees status of employment is

vested by law pursuant to Article 280 of the Labor Code, as amended, said provision of
law admits of two exceptions, to wit: (1) those employments which have 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 employment; and (2) when the work or
services to be performed are seasonal; hence, the employment is for the duration of the
season. Thus, there are certain forms of employment which entail the performance of
usual and desirable functions and which exceed one year but do not necessarily qualify
as regular employment under Article 280 of the Labor Code, as amended.

The Petition is unmeritorious.

A closer examination of Article 280 of the Labor Code, as amended, is imperative

to resolve the issue raised in the present case.

In declaring that respondent Taripe was a regular employee of the petitioner and,
thus, his dismissal was illegal, the Court of Appeals ratiocinated in this manner:

In determining the employment status of [herein respondent Taripe],

reference must be made to Article 280 of the Labor Code, which provides:

xxxx

Page 129 of 497

Thus, there are two kinds of regular employees, namely: (1) those
who are engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; and (2) those who
have rendered at least one year of service, whether continuous or broken,
with respect to the activity in which they are employed. [Respondent
Taripe] belonged to the first category of regular employees.

The purported contract of employment providing that [respondent

Taripe] was hired as contractual employee for five (5) months only, cannot
prevail over the undisputed fact that [respondent Taripe] was hired to
perform the function of power press operator, a function necessary or
desirable in [petitioners] business of manufacturing tin cans. [Herein
petitioner RICs] contention that the four (4) months length of service of
[respondent Taripe] did not grant him a regular status is inconsequential,
considering that length of service assumes importance only when the
activity in which the employee has been engaged to perform is not
necessary or desirable to the usual business or trade of the employer.

As aptly ruled by [the NLRC]:

In the instant case, there is no doubt that [respondent Taripe], as

power press operator, has been engaged to perform activities which are
usually necessary or desirable in [petitioner RICs] usual business or trade
of manufacturing of tin cans for use in packaging of food, paint and
others. We also find that [respondent Taripe] does not fall under any of the
abovementioned exceptions. Other that (sic) [petitioner RICs] bare
allegation thereof, [it] failed to present any evidence to prove that he was
employed for a fixed or specific project or undertaking the completion of
which has been determined at the time of his engagement or that
[respondent Taripes] services are seasonal in nature and that his
employment was for the duration of the season. [12]

Article 280 of the Labor Code, as amended, provides:

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
Page 130 of 497

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 activity
exists. [Emphasis supplied]

The aforesaid Article 280 of the Labor Code, as amended, classifies employees
into three categories, namely: (1) regular employees or those whose work is necessary
or desirable to the usual business of the employer; (2) project employees or those
whose 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; and (3) casual employees or those who
are neither regular nor project employees. [13]

Regular employees are further classified into: (1) regular employees by nature of
work; and (2) regular employees by years of service. [14] The former refers to those
employees who perform a particular activity which is necessary or desirable in the usual
business or trade of the employer, regardless of their length of service; while the latter
refers to those employees who have been performing the job, regardless of the nature
thereof, for at least a year.[15]

The aforesaid Article 280 of the Labor Code, as amended, however, does not
proscribe or prohibit an employment contract with a fixed period. It does not necessarily
follow that where the duties of the employee consist of activities usually necessary or
desirable in the usual business of the employer, the parties are forbidden from agreeing
on a period of time for the performance of such activities. There is nothing essentially
contradictory between a definite period of employment and the nature of the employees
duties.[16] What Article 280 of the Labor Code, as amended, seeks to prevent is the
practice of some unscrupulous and covetous employers who wish to circumvent the law
that protects lowly workers from capricious dismissal from their employment. The
aforesaid provision, however, should not be interpreted in such a way as to deprive
employers of the right and prerogative to choose their own workers if they have
sufficient basis to refuse an employee a regular status. Management has rights which
should also be protected.[17]
Page 131 of 497

In the case at bar, respondent Taripe signed a contract of employment prior to his
admission into the petitioners company. Said contract of employment provides, among
other things:

4. That my employment shall be contractual for the period of five (5)

months which means that the end of the said period, I can (sic) discharged
unless this contract is renewed by mutual consent or terminated for cause.
[18]

Based on the said contract, respondent Taripes employment with the petitioner is
good only for a period of five months unless the said contract is renewed by mutual
consent. And as claimed by petitioner RIC, respondent Taripe, along with its other
contractual employees, was hired only to meet the increase in demand for packaging
materials during the Christmas season and also to build up stock levels during the early
part of the year.

Although Article 280 of the Labor Code, as amended, does not forbid fixed term
employment, it must, nevertheless, meet any of the following guidelines in order that it
cannot be said to circumvent security of tenure: (1) that the fixed period of employment
was knowingly and voluntarily agreed upon by the parties, without any force, duress or
improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent; or (2) it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms with no moral dominance
whatever being exercised by the former on the latter.[19]

In the present case, it cannot be denied that the employment contract signed by
respondent Taripe did not mention that he was hired only for a specific undertaking, the
completion of which had been determined at the time of his engagement. The said
employment contract neither mentioned that respondent Taripes services were seasonal
in nature and that his employment was only for the duration of the Christmas season as
purposely claimed by petitioner RIC. What was stipulated in the said contract was that
respondent Taripes employment was contractual for the period of five months.

Likewise, as the NLRC mentioned in its Resolution, to which the Court of Appeals
agreed, other than the bare allegations of petitioner RIC that respondent Taripe was hired
only because of the increase in the demand for packaging materials during the
Christmas season, petitioner RIC failed to substantiate such claim with any other
evidence. Petitioner RIC did not present any evidence which might prove that respondent
Page 132 of 497

Taripe was employed for a fixed or specific project or that his services were seasonal in
nature.

Also, petitioner RIC failed to controvert the claim of respondent Taripe that he was
made to sign the contract of employment, prepared by petitioner RIC, as a condition for
his hiring. Such contract in which the terms are prepared by only one party and the
other party merely affixes his signature signifying his adhesion thereto is called contract
of adhesion.[20] It is an agreement in which the parties bargaining are not on equal
footing, the weaker partys participation being reduced to the alternative to take it or
leave it.[21] In the present case, respondent Taripe, in need of a job, was compelled to
agree to the contract, including the five-month period of employment, just so he could
be hired. Hence, it cannot be argued that respondent Taripe signed the employment
contract with a fixed term of five months willingly and with full knowledge of the impact
thereof.

With regard to the second guideline, this Court agrees with the Court of Appeals
that petitioner RIC and respondent Taripe cannot be said to have dealt with each other
on more or less equal terms with no moral dominance exercised by the former over the
latter. As a power press operator, a rank and file employee, he can hardly be on equal
terms with petitioner RIC. As the Court of Appeals said, almost always, employees
agree to any terms of an employment contract just to get employed considering that it is
difficult to find work given their ordinary qualifications.[22]

Therefore, for failure of petitioner RIC to comply with the necessary guidelines for
a valid fixed term employment contract, it can be safely stated that the aforesaid
contract signed by respondent Taripe for a period of five months was a mere subterfuge
to deny to the latter a regular status of employment.

Settled is the rule that the primary standard of determining regular employment is
the reasonable connection between the particular activity performed by the employee in
relation to the casual business or trade of the employer. The connection can be
determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. [23]

Given the foregoing, this Court agrees in the findings of the Court of Appeals and
the NLRC that, indeed, respondent Taripe, as a rectangular power press machine
operator, in charge of manufacturing covers for four liters rectangular tin cans, was
holding a position which is necessary and desirable in the usual business or trade of
petitioner RIC, which was the manufacture of tin cans. Therefore, respondent Taripe was
a regular employee of petitioner RIC by the nature of work he performed in the
company.

Page 133 of 497

Respondent Taripe does not fall under the exceptions mentioned in Article 280 of
the Labor Code, as amended, because it was not proven by petitioner RIC that he was
employed only for a specific project or undertaking or his employment was merely
seasonal. Similarly, the position and function of power press operator cannot be said to
be merely seasonal. Such position cannot be considered as only needed for a specific
project or undertaking because of the very nature of the business of petitioner
RIC. Indeed, respondent Taripe is a regular employee of petitioner RIC and as such, he
cannot be dismissed from his employment unless there is just or authorized cause for his
dismissal.

Well-established is the rule that regular employees enjoy security of tenure and
they can only be dismissed for just cause and with due process, notice and hearing.
[24]
And in case of employees dismissal, the burden is on the employer to prove that the
dismissal was legal. Thus, respondent Taripes summary dismissal, not being based on
any of the just or authorized causes enumerated under Articles 282, [25] 283,[26] and
284[27] of the Labor Code, as amended, is illegal.

Before concluding, we once more underscore the settled precept that factual
findings of the NLRC, having deemed to acquire expertise in matters within its
jurisdiction, are generally accorded not only respect but finality especially when such
factual findings are affirmed by the Court of Appeals; [28] hence, such factual findings are
binding on this Court.

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

Decision and Resolution of the Court of Appeals dated 30 September 2004 and 1 April
2005, respectively, which affirmed with modification the Resolutions of the NLRC dated 7
June 2002 and 20 August 2002, respectively, finding herein respondent Taripe as a
regular employee who had been illegally dismissed from employment by petitioner RIC,
are hereby AFFIRMED. Costs against petitioner RIC.

SO ORDERED.
Republic of the Philippines
Supreme Court
Manila
SECOND DIVISION

ROBINSONS GALLERIA/ROBINSONS
Page 134 of 497

G.R. No. 177937

SUPERMARKET CORPORATION and/or

JESS MANUEL,

Present:

Petitioners,
CARPIO, J.,
Chairperson,
NACHURA,
- versus -

LEONARDO-DE CASTRO,*
ABAD, and
MENDOZA, JJ.

IRENE R. RANCHEZ,

Promulgated:

Respondent.
January 19, 2011

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

DECISION

NACHURA, J.:

Page 135 of 497

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court, assailing the Decision[1] dated August 29, 2006 and the Resolution [2] dated May 16,
2007 of the Court of Appeals (CA) in CA-G.R. SP No. 91631.

Page 136 of 497

The Facts

The facts of the case are as follows.

Respondent
was
a
probationary
employee
of
petitioner
Robinsons
Galleria/Robinsons Supermarket Corporation (petitioner Supermarket) for a period of five
(5) months, or from October 15, 1997 until March 14, 1998. [3] She underwent six (6)
weeks of training as a cashier before she was hired as such on October 15, 1997. [4]

Two weeks after she was hired, or on October 30, 1997, respondent reported to her
supervisor the loss of cash amounting to Twenty Thousand Two Hundred Ninety-Nine
Pesos (P20,299.00) which she had placed inside the company locker. Petitioner Jess
Manuel (petitioner Manuel), the Operations Manager of petitioner Supermarket, ordered
that respondent be strip-searched by the company guards. However, the search on her
and her personal belongings yielded nothing. [5]

Respondent acknowledged her responsibility and requested that she be allowed to

settle and pay the lost amount. However, petitioner Manuel did not heed her request and
instead reported the matter to the police. Petitioner Manuel likewise requested the
Quezon City Prosecutors Office for an inquest. [6]

On November 5, 1997, an information for Qualified Theft was filed with the Quezon
City Regional Trial Court. Respondent was constrained to spend two weeks in jail for
failure to immediately post bail in the amount of Forty Thousand Pesos (P40,000.00).[7]

On November 25, 1997, respondent filed a complaint for illegal dismissal and
damages.[8]

On March 12, 1998, petitioners sent to respondent by mail a notice of termination

and/or notice of expiration of probationary employment dated March 9, 1998. [9]

On August 10, 1998, the Labor Arbiter rendered a decision, [10] the fallo of which
reads:

CONFORMABLY WITH THE FOREGOING, judgment is hereby

rendered dismissing the claim of illegal dismissal for lack of merit.
Page 137 of 497

Respondents are ordered to accept complainant to her former or

equivalent work without prejudice to any action they may take in the
premises in connection with the missing money ofP20,299.00.

SO ORDERED.[11]

In dismissing the complaint for illegal dismissal, the Labor Arbiter ratiocinated that
at the time respondent filed the complaint for illegal dismissal, she was not yet
dismissed by petitioners. When she was strip- searched by the security personnel of
petitioner Supermarket, the guards were merely conducting an investigation. The
subsequent referral of the loss to the police authorities might be considered routine.
Respondents non-reporting for work after her release from detention could be taken
against her in the investigation that petitioner supermarket would conduct. [12]

On appeal, the National Labor Relations Commission (NLRC) reversed the decision
of the Labor Arbiter in a decision [13] dated October 20, 2003. The dispositive portion of
the decision reads:

WHEREFORE, the appealed decision is SET ASIDE. The respondents

are hereby ordered to immediately reinstate complainant to her former or
equivalent position without loss of seniority rights and privileges and to pay
her full backwages computed from the time she was constructively
dismissed on October 30, 1997 up to the time she is actually reinstated.

SO ORDERED.[14]

In reversing the decision of the Labor Arbiter, the NLRC ruled that respondent was
denied due process by petitioners. Strip-searching respondent and sending her to jail for
two weeks certainly amounted to constructive dismissal because continued employment
had been rendered impossible, unreasonable, and unlikely. The wedge that had been
driven between the parties was impossible to ignore. [15] Although respondent was only a
probationary employee, the subsequent lapse of her probationary contract of
employment did not have the effect of validly terminating her employment because
constructive dismissal had already been effected earlier by petitioners. [16]

Petitioners filed a motion for reconsideration, which was denied by the NLRC in a
resolution[17] dated July 21, 2005.
Page 138 of 497

Petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before
the CA. On August 29, 2006, the CA rendered a Decision, the dispositive portion of which
reads:

WHEREFORE, premises considered, the challenged Decision of the

National Labor Relations Commission is AFFIRMED with MODIFICATION in
that should reinstatement be no longer possible in view of the strained
relation between the parties, Petitioners are ordered to pay Respondent
separation pay equivalent to one (1) month pay in addition to backwages
from the date of dismissal until the finality of the assailed decision.

SO ORDERED.[18]

Petitioners filed a motion for reconsideration. However, the CA denied the same in
a Resolution dated May 16, 2007.

Hence, this petition.

Petitioners assail the reinstatement of respondent, highlighting the fact that she
was a probationary employee and that her probationary contract of employment lapsed
on March 14, 1998. Thus, her reinstatement was rendered moot and academic.
Furthermore, even if her probationary contract had not yet expired, the offense that she
committed would nonetheless militate against her regularization. [19]

Page 139 of 497

On the other hand, respondent insists that she was constructively dismissed by
petitioner Supermarket when she was strip-searched, divested of her dignity, and
summarily thrown in jail. She could not have been expected to go back to work after
being allowed to post bail because her continued employment had been rendered
impossible, unreasonable, and unlikely. She stresses that, at the time the money was
discovered missing, it was not with her but locked in the company locker. The company
failed to provide its cashiers with strong locks and proper security in the work place.
Respondent argues that she was not caught in the act and even reported that the money
was missing. She claims that she was denied due process. [20]

The Issue

The sole issue for resolution is whether respondent was illegally terminated from
employment by petitioners.

The Ruling of the Court

We rule in the affirmative.

There is probationary employment when 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.[21]

A probationary employee, like a regular employee, enjoys security of tenure.

However, in cases of probationary employment, aside from just or authorized causes
of termination, an additional ground is provided under Article 281 of the Labor Code, i.e.,
the probationary employee may also be terminated for failure to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the
employee at the time of the engagement. Thus, the services of an employee who has
been engaged on probationary basis may be terminated for any of the following: (1) a
just or (2) an authorized cause; and (3) when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by the employer.[23]
[22]

Article 277(b) of the Labor Code mandates that subject to the constitutional right
of workers to security of tenure and their right to be protected against dismissal, except
for just and authorized cause and without prejudice to the requirement of notice under
Article 283 of the same Code, the employer shall furnish the worker, whose employment
is sought to be terminated, a written notice containing a statement of the causes of
Page 140 of 497

termination, and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of a representative if he so desires, in accordance with
company rules and regulations pursuant to the guidelines set by the Department of
Labor and Employment.

In the instant case, based on the facts on record, petitioners failed to accord
respondent substantive and procedural due process. The haphazard manner in the
investigation of the missing cash, which was left to the determination of the police
authorities and the Prosecutors Office, left respondent with no choice but to cry
foul. Administrative investigation was not conducted by petitioner Supermarket. On the
same day that the missing money was reported by respondent to her immediate
superior, the company already pre-judged her guilt without proper investigation, and
instantly reported her to the police as the suspected thief, which resulted in her
languishing in jail for two weeks.

As correctly pointed out by the NLRC, the due process requirements under the
Labor Code are mandatory and may not be supplanted by police investigation or court
proceedings. The criminal aspect of the case is considered independent of the
administrative aspect. Thus, employers should not rely solely on the findings of the
Prosecutors Office. They are mandated to conduct their own separate investigation, and
to accord the employee every opportunity to defend himself. Furthermore, respondent
was not represented by counsel when she was strip-searched inside the company
premises or during the police investigation, and in the preliminary investigation before
the Prosecutors Office.

Respondent was constructively dismissed by petitioner Supermarket effective

October 30, 1997. It was unreasonable for petitioners to charge her with abandonment
for not reporting for work upon her release in jail. It would be the height of callousness to
expect her to return to work after suffering in jail for two weeks. Work had been rendered
unreasonable, unlikely, and definitely impossible, considering the treatment that was
accorded respondent by petitioners.

As to respondents monetary claims, Article 279 of the Labor Code provides that
an employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges, to full backwages, inclusive of
allowances, and to other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.
However, due to the strained relations of the parties, the payment of separation pay has
been considered an acceptable alternative to reinstatement, when the latter option is no
longer desirable or viable. On the one hand, such payment liberates the employee from
what could be a highly oppressive work environment. On the other, the payment
releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust.[24]
Page 141 of 497

Thus, as an illegally or constructively dismissed employee, respondent is entitled

to: (1) either reinstatement, if viable, or separation pay, if reinstatement is no longer
viable; and (2) backwages. These two reliefs are separate and distinct from each other
and are awarded conjunctively.[25]

In this case, since respondent was a probationary employee at the time she was
constructively dismissed by petitioners, she is entitled to separation pay and backwages.
Reinstatement of respondent is no longer viable considering the circumstances.

However, the backwages that should be awarded to respondent shall be reckoned

from the time of her constructive dismissal until the date of the termination of her
employment, i.e., from October 30, 1997 to March 14, 1998. The computation should
not cover the entire period from the time her compensation was withheld up to the time
of her actual reinstatement. This is because respondent was a probationary employee,
and the lapse of her probationary employment without her appointment as a regular
employee of petitioner Supermarket effectively severed the employer-employee
relationship between the parties.
In all cases involving employees engaged on probationary basis, the employer
shall make known to its employees the standards under which they will qualify as regular
employees at the time of their engagement. Where no standards are made known to an
employee at the time, he shall be deemed a regular employee, [26] unless the job is selfdescriptive, like maid, cook, driver, or messenger. However, the constitutional policy of
providing full protection to labor is not intended to oppress or destroy management.
[27]
Naturally, petitioner Supermarket cannot be expected to retain respondent as a
regular employee considering that she lost P20,299.00 while acting as a cashier during
the probationary period. The rules on probationary employment should not be used to
exculpate a probationary employee who acts in a manner contrary to basic knowledge
and common sense, in regard to which, there is no need to spell out a policy or standard
to be met.[28]

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of

the Court of Appeals in CA-G.R. SP No. 91631 is hereby AFFIRMED with
theMODIFICATION that petitioners are hereby ordered to pay respondent Irene R.
Ranchez separation pay equivalent to one (1) month pay and backwages from October
30, 1997 to March 14, 1998.

Costs against petitioners.

SO ORDERED
Page 142 of 497

THIRD DIVISION

MAGIS YOUNG
ACHIEVERSLEARNING CENTER and

G.R. No. 178835

MRS. VIOLETA T. CARIO,

Present:

Petitioners,
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
- versus -

CHICO-NAZARIO,
NACHURA, and
PERALTA, JJ.

Promulgated:
ADELAIDA P. MANALO,
Respondent.

February 13, 2009

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

DECISION

NACHURA, J.:

This is a petition for review on certiorari of the Decision dated January 31, 2007
and of the Resolution dated June 29, 2007 of the Court of Appeals (CA) in CA-G.R. SP No.
93917 entitled Magis Young Achievers Learning Center and Violeta T. Cario v. National
Labor Relations Commission, 3rd Division, Quezon City, and Adelaida P. Manalo.

Page 143 of 497

The pertinent facts are as follows:

On April 18, 2002, respondent Adelaida P. Manalo was hired as a teacher and
acting principal of petitioner Magis Young Achievers Learning Center with a monthly
salary of P15,000.00.

It appears on record that respondent, on March 29, 2003, wrote a letter of

resignation addressed to Violeta T. Cario, directress of petitioner, which reads:

Dear Madame:

I am tendering my irrevocable resignation effective April 1, 2003 due

to personal and family reasons.

I would like to express my thanks and gratitude for the opportunity,

trust and confidence given to me as an Acting Principal in your prestigious
school.

God bless and more power to you.

Sincerely yours,

(Signed)
Mrs. ADELAIDA P. MANALO[1]

On March
petitioner, viz.:

31,

Dear Mrs. Manalo:

Page 144 of 497

2003,

respondent

received

letter

of

termination

from

Greetings of Peace!

The Board of Trustees of the Cario Group of Companies, particularly that of

Magis Young Achievers Learning Center convened, deliberated and came
up with a Board Resolution that will strictly impose all means possible to
come up with a cost-cutting scheme. Part of that scheme is a systematic
reorganization which will entail streamlining of human resources.

As agreed upon by the Board of Directors, the position of PRINCIPAL will be

abolished next school year. Therefore, we regret to inform you that we can
no longer renew your contract, which will expire on March 31, 2003. Thus,
thank you for the input you have given to Magis during your term of office
as Acting Principal. The function of the said position shall be delegated to
other staff members in the organization.

Hoping for your understanding on this matter and we pray for your future
endeavors.

Very truly yours,

(Signed)
Mrs. Violeta T. Cario
School Directress

Noted by:

(Signed)
Mr. Severo Cario
President[2]

On April 4, 2003, respondent instituted against petitioner a Complaint [3] for illegal
dismissal and non-payment of 13 th month pay, with a prayer for reinstatement, award of
full backwages and moral and exemplary damages.
Page 145 of 497

In her position paper,[4] respondent claimed that her termination violated the
provisions of her employment contract, and that the alleged abolition of the position of
Principal was not among the grounds for termination by an employer under Article
282[5] of the Labor Code. She further asserted that petitioner infringed Article 283 [6] of
the Labor Code, as the required 30-day notice to the Department of Labor and
Employment (DOLE) and to her as the employee, and the payment of her separation pay
were not complied with. She also claimed that she was terminated from service for the
alleged expiration of her employment, but that her contract did not provide for a fixed
term or period. She likewise prayed for the payment of her 13 th month pay under
Presidential Decree (PD) No. 851.

Petitioner, in its position paper, [7] countered that respondent was legally
terminated because the one-year probationary period, from April 1, 2002 to March 3,
2003, had already lapsed and she failed to meet the criteria set by the school pursuant
to the Manual of Regulation for Private Schools, adopted by the then Department of
Education, Culture and Sports (DECS), paragraph 75 of which provides that:

(75) Full-time teachers who have rendered

satisfactory service shall be considered permanent.

three

years

of

On December 3, 2003, Labor Arbiter (LA) Renell Joseph R. dela Cruz rendered a
Decision[8] dismissing the complaint for illegal dismissal, including the other claims of
respondent, for lack of merit, except that it ordered the payment of her 13 th month pay in
the amount of P3,750.00. The LA ratiocinated in this wise:

It is our considered opinion [that] complainant was not dismissed,

much less, illegally. On the contrary, she resigned. It is hard for us to
imagine complainant would accede to sign a resignation letter as a
precondition to her hiring considering her educational background. Thus, in
the absence of any circumstance tending to show she was probably coerced
her resignation must be upheld. x x x

x x x The agreement (Annex 1 to Respondents [petitioners]

Position Paper; Annex A to Complainants Position Paper) by its very nature
and terms is a contract of employment with a period (from 01 April 2002 to
31 March 2003, Annex 1 to Respondents Position Paper). Complainants
observation that the space reserved for the duration and effectivity of the
contract was left blank (Annex A to Complainants [respondents] Position
Paper) to our mind is plain oversight. Read in its entirety, it is a standard
Page 146 of 497

contract which by its very terms and conditions speaks of a definite period
of employment. The parties could have not thought otherwise. The
notification requirement in the contract in case of termination before the
expiration of the period confirms it. x x x

On appeal, on October 28, 2005, the National Labor Relations Commission (NLRC),
Third Division,[9] in its Decision[10] dated October 28, 2005, reversed the Arbiters
judgment. Petitioner was ordered to reinstate respondent as a teacher, who shall be
credited with one-year service of probationary employment, and to pay her the amounts
ofP3,750.00 and P325,000.00 representing her 13th month pay and backwages,
respectively. Petitioners motion for reconsideration was denied in the NLRCs
Resolution[11]dated January 31, 2006.

Imputing grave abuse of discretion on the part of the NLRC, petitioner went up to
the CA via a petition for certiorari. The CA, in its Decision dated January 31, 2007,
affirmed the NLRC decision and dismissed the petition. It likewise denied petitioners
motion for reconsideration in the Resolution dated June 29, 2007. Hence, this petition
anchored on the following grounds

I. THE COURT OF APPEALS ERRED WHEN IT CONCLUDED THAT THE

RESIGNATION OF RESPONDENT MANALO DID NOT BECOME EFFECTIVE DUE
TO ALLEGED LACK OF ACCEPTANCE;

II. THE COURT OF APPEALS ERRED WHEN

RESPONDENT MANALO IS A PERMANENT EMPLOYEE;

IT

RULED

THAT

III. THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE

CONTRACT OF EMPLOYMENT BETWEEN PETITIONER AND RESPONDENT DID
NOT STIPULATE A PERIOD.[12]

Before going to the core issues of the controversy, we would like to restate basic
legal principles governing employment of secondary school teachers in private schools,
specifically, on the matter of probationary employment.

A probationary employee or probationer is one who is on trial for an employer,

during which the latter determines whether or not he is qualified for permanent
Page 147 of 497

employment. The probationary employment is intended to afford the employer an

opportunity to observe the fitness of a probationary employee while at work, and to
ascertain whether he will become an efficient and productive employee. While the
employer observes the fitness, propriety and efficiency of a probationer to ascertain
whether he is qualified for permanent employment, the probationer, on the other hand,
seeks to prove to the employer that he has the qualifications to meet the reasonable
standards for permanent employment. Thus, the word probationary, as used to describe
the period of employment, implies the purpose of the term or period, not its length. [13]

Indeed, the employer has the right, or is at liberty, to choose who will be hired and
who will be declined. As a component of this right to select his employees, the employer
may set or fix a probationary period within which the latter may test and observe the
conduct of the former before hiring him permanently. [14]

But the law regulates the exercise of this prerogative to fix the period of
probationary employment. While there is no statutory cap on the minimum term of
probation, the law sets a maximum trial period during which the employer may test
the fitness and efficiency of the employee.

The general rule on the maximum allowable period of probationary employment is

found in Article 281 of the Labor Code, which states:

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 at the time of his engagement. An employee
who is allowed to work after a probationary period shall be considered a
regular employee.

This upper limit on the term of probationary employment, however, does not apply to all
classes of occupations.

For academic personnel in private schools, colleges and universities,

probationary employment is governed by Section 92 of the 1992 Manual of Regulations
for Private Schools[15] (Manual), which reads:

Page 148 of 497

Section 92. Probationary Period. Subject in all instances to

compliance with the Department and school requirements, the probationary
period for academic personnel shall not be more than three (3) consecutive
years of satisfactory service for those in the elementary and secondary
levels, six (6) consecutive regular semesters of satisfactory service for
those in the tertiary level, and nine (9) consecutive trimesters of
satisfactory service for those in the tertiary level where collegiate courses
are offered on a trimester basis. [16]

This was supplemented by DOLE-DECS-CHED-TESDA Order No. 1 dated February 7, 1996,

which provides that the probationary period for academic personnel shall not be more
than three (3) consecutive school years of satisfactory service for those in the
elementary and secondary levels.[17] By this supplement, it is made clear that the period
of probation for academic personnel shall be counted in terms of school years, and not
calendar years.[18] Then, Section 4.m(4)[c] of the Manual delineates the coverage of
Section 92, by defining the term academic personnel to include:

(A)ll school personnel who are formally engaged in actual teaching service
or in research assignments, either on full-time or part-time basis; as well as
those who possess certain prescribed academic functions directly
supportive of teaching, such as registrars, librarians, guidance counselors,
researchers, and other similar persons. They include school officials
responsible for academic matters, and may include other school
officials.[19]

The reason for this disparate treatment was explained many years ago
in Escudero v. Office of the President of the Philippines, [20] where the Court declared:

However, the six-month probationary period prescribed by the

Secretary of Labor is merely the general rule. x x x

It is, thus, clear that the Labor Code authorizes different

probationary periods, according to the requirements of the
particular job. For private school teachers, the period of probation is
governed by the 1970 Manual of Regulations for Private Schools x x x.[21]

Page 149 of 497

The probationary period of three years for private school teachers was, in fact, confirmed
earlier in Labajo v. Alejandro,[22] viz.:

The three (3)-year period of service mentioned in paragraph 75 (of

the Manual of Regulations for Private Schools) is of course the maximum
period or upper limit, so to speak, of probationary employment allowed in
the case of private school teachers. This necessarily implies that a regular
or permanent employment status may, under certain conditions, be
attained in less than three (3) years. By and large, however, whether or not
one has indeed attained permanent status in ones employment, before the
passage of three (3) years, is a matter of proof.

Over the years, even with the enactment of a new Labor Code and the revision of
the Manual, the rule has not changed.

Thus, for academic personnel in private elementary and secondary schools, it is

only after one has satisfactorily completed the probationary period of three (3) school
years and is rehired that he acquires full tenure as a regular or permanent employee. In
this regard, Section 93 of the Manual pertinently provides:

Sec. 93. Regular or Permanent Status. - Those who have served the
probationary period shall be made regular or permanent. Full-time teachers
who have satisfactorily completed their probationary period shall be
considered regular or permanent.

Accordingly, as held in Escudero, no vested right to a permanent appointment shall

accrue until the employee has completed the prerequisite three-year period necessary
for the acquisition of a permanent status. Of course, the mere rendition of service for
three consecutive years does not automatically ripen into a permanent appointment. It
is also necessary that the employee be a full-time teacher, and that the services he
rendered are satisfactory.[23]

The common practice is for the employer and the teacher to enter into a contract,
effective for one school year. At the end of the school year, the employer has the option
not to renew the contract, particularly considering the teachers performance. If the
Page 150 of 497

contract is not renewed, the employment relationship terminates. If the contract is

renewed, usually for another school year, the probationary employment
continues. Again, at the end of that period, the parties may opt to renew or not to renew
the contract. If renewed, this second renewal of the contract for another school year
would then be the last year since it would be the third school year of probationary
employment. At the end of this third year, the employer may now decide whether to
extend a permanent appointment to the employee, primarily on the basis of the
employee having met the reasonable standards of competence and efficiency set by the
employer. For the entire duration of this three-year period, the teacher remains under
probation. Upon the expiration of his contract of employment, being simply on
probation, he cannot automatically claim security of tenure and compel the employer to
renew his employment contract. [24] It is when the yearly contract is renewed for the third
time that Section 93 of the Manual becomes operative, and the teacher then is entitled
to regular or permanent employment status.

It is important that the contract of probationary employment specify the period or

term of its effectivity. The failure to stipulate its precise duration could lead to the
inference that the contract is binding for the full three-year probationary period. [25]

All this does not mean that academic personnel cannot acquire permanent
employment status earlier than after the lapse of three years. The period of probation
may be reduced if the employer, convinced of the fitness and efficiency of a probationary
employee, voluntarily extends a permanent appointment even before the three-year
period ends. Conversely, if the purpose sought by the employer is neither attained nor
attainable within the said period, the law does not preclude the employer from
terminating the probationary employment on justifiable ground; [26] or, a shorter
probationary period may be incorporated in a collective bargaining agreement. [27] But
absent any circumstances which unmistakably show that an abbreviated probationary
period has been agreed upon, the three-year probationary term governs.

Be that as it may, teachers on probationary employment enjoy security of

tenure. In Biboso v. Victorias Milling Co., Inc.,[28] we made the following pronouncement:

This is, by no means, to assert that the security of tenure protection

of the Constitution does not apply to probationary employees. x x x During
such period, they could remain in their positions and any circumvention of
their rights, in accordance with the statutory scheme, is subject to inquiry
and thereafter correction by the Department of Labor.

The ruling in Biboso simply signifies that probationary employees enjoy security of
tenure during the term of their probationary employment. As such, they cannot be
Page 151 of 497

removed except for cause as provided by law, or if at the end of every yearly contract
during the three-year period, the employee does not meet the reasonable standards set
by the employer at the time of engagement. But this guarantee of security of tenure
applies only during the period of probation. Once that period expires, the constitutional
protection can no longer be invoked.[29]

All these principles notwithstanding, we do not discount the validity of fixed-term

employment where

the fixed period of employment was agreed upon knowingly and voluntarily
by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances
vitiating his consent, or where it satisfactorily appears that the employer
and employee dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter. [30]

It does not necessarily follow that where the duties of the employees consist of activities
usually necessary or desirable in the usual business of the employer, the parties are
forbidden from agreeing on a period of time for the performance of such activities.
[31]
Thus, in St. Theresas School of Novaliches Foundation v. NLRC, [32] we held that a
contractual stipulation providing for a fixed term of nine (9) months, not being contrary
to law, morals, good customs, public order and public policy, is valid, binding and must
be respected, as it is the contract of employment that governs the relationship of the
parties.

Now, to the issues in the case at bench.

There should be no question that the employment of the respondent, as teacher,

in petitioner school on April 18, 2002 is probationary in character, consistent with
standard practice in private schools. In light of our disquisition above, we cannot
subscribe to the proposition that the respondent has acquired regular or permanent
tenure as teacher. She had rendered service as such only from April 18, 2002 until
March 31, 2003. She has not completed the requisite three-year period of probationary
employment, as provided in the Manual. She cannot, by right, claim permanent status.

There should also be no doubt that respondents appointment as Acting Principal is

merely temporary, or one that is good until another appointment is made to take its
place.[33] An acting appointment is essentially a temporary appointment, revocable at
will. The undisturbed unanimity of cases shows that one who holds a temporary
Page 152 of 497

appointment has no fixed tenure of office; his employment can be terminated any time
at the pleasure of the appointing power without need to show that it is for cause.
[34]
Further, in La Salette of Santiago v. NLRC, [35] we acknowledged the customary
arrangement in private schools to rotate administrative positions, e.g., Dean or Principal,
among employees, without the employee so appointed attaining security of tenure with
respect to these positions.

We are also inclined to agree with the CA that the resignation of the
respondent[36] is not valid, not only because there was no express acceptance thereof by
the employer, but because there is a cloud of doubt as to the voluntariness of
respondents resignation.

Resignation is the voluntary act of an employee who finds himself in a situation

where he believes that personal reasons cannot be sacrificed in favor of the exigency of
the service, and that he has no other choice but to dissociate himself from employment.
[37]
Voluntary resignation is made with the intention of relinquishing an office,
accompanied by the act of abandonment. [38] It is the acceptance of an employees
resignation that renders it operative.[39]

Furthermore, well-entrenched is the rule that resignation is inconsistent with the

filing of a complaint for illegal dismissal. [40] To be valid, the resignation must be
unconditional, with the intent to operate as such; there must be a clear intention to
relinquish the position.[41] In this case, respondent actively pursued her illegal dismissal
case against petitioner, such that she cannot be said to have voluntarily resigned from
her job.

What is truly contentious is whether the probationary appointment of the

respondent on April 18, 2002 was for a fixed period of one (1) year, or without a fixed
term, inasmuch as the parties presented different versions of the employment
agreement. As articulated by the CA:

In plain language, We are confronted with two (2) copies of an agreement,

one with a negative period and one provided for a one (1) year period for its
effectivity. Ironically, none among the parties offered corroborative
evidence as to which of the two (2) discrepancies is the correct one that
must be given effect. x x x.[42]

The CA resolved the impass in this wise:

Page 153 of 497

Under this circumstance, We can only apply Article 1702 of the Civil Code
which provides that, in case of doubt, all labor contracts shall be construed
in favor of the laborer. Then, too, settled is the rule that any ambiguity in a
contract whose terms are susceptible of different interpretations must be
read against the party who drafted it. In the case at bar, the drafter of the
contract is herein petitioners and must, therefore, be read against their
contention.[43]

We agree with the CA.

In this case, there truly existed a doubt as to which version of the employment
agreement should be given weight. In respondents copy, the period of effectivity of the
agreement remained blank. On the other hand, petitioners copy provided for a one-year
period, surprisingly from April 1, 2002 to March 31, 2003, even though the pleadings
submitted by both parties indicated that respondent was hired on April 18, 2002. What is
noticeable even more is that the handwriting indicating the one-year period in
petitioners copy is different from the handwriting that filled up the other needed
information in the same agreement.[44]

Thus, following Article 1702 of the Civil Code that all doubts regarding labor
contracts should be construed in favor of labor, then it should be respondents copy
which did not provide for an express period which should be upheld, especially when
there are circumstances that render the version of petitioner suspect. This is in line with
the State policy of affording protection to labor, such that the lowly laborer, who is
usually at the mercy of the employer, must look up to the law to place him on equal
footing with his employer.[45]

In addition, the employment agreement may be likened into a contract of

adhesion considering that it is petitioner who insists that there existed an express period
of one year from April 1, 2002 to March 31, 2003, using as proof its own copy of the
agreement. While contracts of adhesion are valid and binding, in cases of doubt which
will cause a great imbalance of rights against one of the parties, the contract shall be
construed against the party who drafted the same. Hence, in this case, where the very
employment of respondent is at stake, the doubt as to the period of employment must
be construed in her favor.

The other issue to resolve is whether respondent, even as a probationary

employee, was illegally dismissed. We rule in the affirmative.
Page 154 of 497

As above discussed, probationary employees enjoy security of tenure during the

term of their probationary employment such that they may only be terminated for cause
as provided for by law, or if at the end of the probationary period, the employee failed to
meet the reasonable standards set by the employer at the time of the employees
engagement. Undeniably, respondent was hired as a probationary teacher and, as such,
it was incumbent upon petitioner to show by competent evidence that she did not meet
the standards set by the school. This requirement, petitioner failed to discharge. To
note, the termination of respondent was effected by that letter stating that she was
being relieved from employment because the school authorities allegedly decided, as a
cost-cutting measure, that the position of Principal was to be abolished. Nowhere in
that letter was respondent informed that her performance as a school teacher was less
than satisfactory.

Thus, in light of our ruling of Espiritu Santo Parochial School v. NLRC [46] that, in the
absence of an express period of probation for private school teachers, the three-year
probationary period provided by the Manual of Regulations for Private Schools must
apply likewise to the case of respondent. In other words, absent any concrete and
competent proof that her performance as a teacher was unsatisfactory from her hiring
on April 18, 2002 up to March 31, 2003, respondent is entitled to continue her three-year
period of probationary period, such that from March 31, 2003, her probationary
employment is deemed renewed for the following two school years. [47]

Finally, we rule on the propriety of the monetary awards. Petitioner, as employer,

is entitled to decide whether to extend respondent a permanent status by renewing her
contract beyond the three-year period. Given the acrimony between the parties which
must have been generated by this controversy, it can be said unequivocally that
petitioner had opted not to extend respondents employment beyond this
period. Therefore, the award of backwages as a consequence of the finding of illegal
dismissal in favor of respondent should be confined to the three-year probationary
period. Computing her monthly salary of P15,000.00 for the next two school years
(P15,000.00 x 10 months x 2), respondent already having received her full salaries for
the year 2002-2003, she is entitled to a total amount of P300,000.00.[48] Moreover,
respondent is also entitled to receive her 13 th month pay correspondent to the said two
school years, computed as yearly salary, divided by 12 months in a year, multiplied by 2,
corresponding to the school years 2003-2004 and 2004-2005, or P150,000.00 / 12
months x 2 = P25,000.00. Thus, the NLRC was correct in awarding respondent the
amount of P325,000.00 as backwages, inclusive of 13th month pay for the school years
2003-2004 and 2004-2005, and the amount of P3,750.00 as pro-rated 13th month pay.

WHEREFORE, the petition is DENIED. The assailed Decision dated January 31,
2007 and the Resolution dated June 29, 2007 of the Court of Appeals are AFFIRMED.

Page 155 of 497

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-63316 July 31, 1984
ILUMINADA VER BUISER, MA. CECILIA RILLOACUA and MA. MERCEDES P.
INTENGAN, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of the
Ministry of Labor & Employment, and GENERAL TELEPHONE DIRECTORY,
CO., respondents.
Jimenez, Apolo & Leynes Law Office for petitioners.
The Solicitor General for respondent Deputy Minister.
Abad, Legayada & Associates for private respondent.

GUERRERO, J.:
This is a petition for certiorari seeking to set aside the Order of the Deputy Minister of
Labor and Employment, affirming the Order of the Regional Director, National Capital
Region, in Case No. NCR-STF-5-2851-81, which dismissed the petitioners' complainant for
alleged illegal dismissal and unpaid commission.
Petitioners were employed by the private respondent GENERAL TELEPHONE DIRECTORY
COMPANY as sales representatives and charged with the duty of soliciting
advertisements for inclusion in a telephone directory.
The records show that petitioners Iluminada Ver Buiser and Ma. Mercedes P. Intengan
entered into an "Employment Contract (on Probationary Status)" on May 26, 1980 with
private respondent, a corporation engaged in the business of publication and circulation
of the directory of the Philippine Long Distance Telephone Company. Petitioner Ma.
Cecilia Rillo-Acuna entered into the same employment contract on June 11, 1980 with
the private respondent.
Page 156 of 497

Among others, the "Employment Contract (On Probationary Status)" included the
following common provisions:
l. The company hereby employs the employee as telephone representative
on a probationary status for a period of eighteen (18) months, i.e. from May
1980 to October 1981, inclusive. It is understood that darung the
probationary period of employment, the Employee may be terminated at
the pleasure of the company without the necessity of giving notice of
termination or the payment of termination pay.
The Employee recognizes the fact that the nature of the telephone sales
representative's job is such that the company would be able to determine
his true character, conduct and selling capabilities only after the publication
of the directory, and that it takes about eighteen (18) months before his
worth as a telephone saw representative can be fully evaluated inasmuch
as the advertisement solicited by him for a particular year are published in
the directory only the following year.
Corollary to this, the private respondent prescribed sales quotas to be accomplished or
met by the petitioners. Failing to meet their respective sales quotas, the petitioners were
dismissed from the service by the private respondent. The records show that the private
respondent terminated the services of petitioners Iluminada Ver Buiser and Cecilia RilloAcuna on May 14, 1981 and petitioner Ma. Mercedes P. Intengan on May 18, 1981 for
their failure to meet their sales quotas.
Thus, on May 27, 1981, petitioners filed with the National Capital Region, Ministry of
Labor and Employment, a complaint for illegal dismissal with claims for backwages,
earned commissions and other benefits, docketed as Case No. NCR-STF-5-2851-81.
The Regional Director of said ministry, in an Order dated September 21, 1982, dismissed
the complaints of the petitioners, except the claim for allowances which private
respondent was ordered to pay. A reconsideration of the Order was sought by the
petitioners in a motion filed on September 30, 1982. This motion, however, was treated
as an appeal to the Minister of Labor.
On appeal, Deputy Minister Vicente Leogardo, Jr. of the Ministry of Labor issued an Order
dated January 7, 1983, affirming the Regional Director's Order dated September 21,
1982, wherein it ruled that the petitioners have not attained permanent status since
private respondent was justified in requiring a longer period of probation, and that the
termination of petitioners' services was valid since the latter failed to meet their sales
quotas.

Page 157 of 497

Hence, this petition for certiorari on the alleged ground that public respondent
committed grave abuse of discretion amounting to lack of jurisdiction. Specifically,
petitioners submit that:
1. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that the probationary employment of
petitioners herein is eighteen (18) months instead of the mandated six (6) months under
the Labor Code, and in consequently further ruling that petitioners are not entitled to
security of tenure while under said probation for 18 months.
2. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that petitioners were dismissed for a
just and valid cause.
3. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that petitioners are not entitled to
the commissions they have earned and accrued during their period of employment.
Petitioners contend that under Articles 281-282 of the Labor Code, having served the
respondent company continuously for over six (6) months, they have become
automatically regular employees notwithstanding an agreement to the contrary. Articles
281-282 read thus:
Art. 282. Probationary Employment. Probationary employment shall not
exceed six (6) months from the date the employee started working, unless
it iscCovered 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. (As amended by PD 850).
Art. 281. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements 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.

Page 158 of 497

An employment shall be deemed to be casual if it is not covered by the

preceeding 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. (As amended by PD 850).
It is petitioners' submission that probationary employment cannot exceed six (6) months,
the only exception being apprenticeship and learnership agreements as provided in the
Labor Code; that the Policy Instruction of the Minister of Labor and Employment nor any
agreement of the parties could prevail over this mandatory requirement of the law; that
this six months prescription of the Labor Code was mandated to give further efficacy to
the constitutionally-guaranteed security of tenure of workers; and that the law does not
allow any discretion on the part of the Minister of Labor and Employment to extend the
probationary period for a longer period except in the aforecited instances. Finally,
petitioners maintain that since they are regular employees, they can only be removed or
dismissed for any of the just and valid causes enumerated under Article 283 of the Labor
Code.
We reject petitioners' contentions. They have no basis in law.
Generally, the probationary period of employment is limited to six (6) months. The
exception to this general rule is When the parties to an employment contract may agree
otherwise, such as when the same is established by company policy or when the same is
required by the nature of work to be performed by the employee. In the latter case, there
is recognition of the exercise of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the probationary period
was set for eighteen (18) months, i.e. from May, 1980 to October, 1981 inclusive,
especially where the employee must learn a particular kind of work such as selling, or
when the job requires certain qualifications, skills, experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and
all doubts on the period of probationary employment. It states as follows:
Probationary Employment has been the subject of misunderstanding in
some quarter. Some people believe six (6) months is the probationary
period in all cases. On the other hand employs who have already served the
probationary period are sometimes required to serve again on probation.
Under the Labor Code, six (6) months is the general probationary period '
but the probationary period is actually the period needed to determine
fitness for the job. This period, for lack of a better measurement is deemed
to be the period needed to learn the job.

Page 159 of 497

The purpose of this policy is to protect the worker at the same time enable
the employer to make a meaningful employee selection. This purpose
should be kept in mind in enforcing this provision of the Code. This issuance
shall take effect immediately.
In the case at bar, it is shown that private respondent Company needs at least eighteen
(18) months to determine the character and selling capabilities of the petitioners as
sales representatives. The Company is engaged in advertisement and publication in the
Yellow Pages of the PLDT Telephone Directories. Publication of solicited ads are only
made a year after the sale has been made and only then win the company be able to
evaluate the efficiency, conduct, and selling ability of its sales representatives, the
evaluation being based on the published ads. Moreover, an eighteen month probationary
period is recognized by the Labor Union in the private respondent company, which is
Article V of the Collective Bargaining Agreement, ... thus:
Probationary Period New employees hired for regular or permanent shall
undergo a probationary or trial period of six (6) months, except in the cases
of telephone or sales representatives where the probationary period shall
be eighteen (I 8) months.
And as indicated earlier, the very contracts of employment signed and acquiesced to by
the petitioners specifically indicate that "the company hereby employs the employee as
telephone sales representative on a probationary status for a period of eighteen (18)
months, i.e. from May 1980 to October 1981, inclusive. This stipulation is not contrary to
law, morals and public policy.
We, therefore, hold and rule that the probationary employment of petitioners set to
eighteen (18) months is legal and valid and that the Regional Director and the Deputy
Minister of Labor and Employment committed no abuse of discretion in ruling
accordingly.
On the second assignment of error that public respondent committed grave abuse of
discretion in ruling that petitioners were dismissed for a just and valid cause, this is not
the first time that this issue has been raised before this Court. Earlier, in the case of
"Arthur Golez vs. The National Labor Relations Commission and General Telephone
Directory Co. "G.R. No. L-64459, July 25, 1983, the petition for certiorari which raised the
same issue against the herein private respondent was dismissed by this Court for lack of
merit.
The practice of a company in laying off workers because they failed to make the work
quota has been recognized in this jurisdiction. (Philippine American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners'
failure to meet the sales quota assigned to each of them constitute a just cause of their
dismissal, regardless of the permanent or probationary status of their employment.
Page 160 of 497

Failure to observe prescribed standards of work, or to fulfill reasonable work assignments

due to inefficiency may constitute just cause for dismissal. Such inefficiency is
understood to mean failure to attain work goals or work quotas, either by failing to
complete the same within the alloted reasonable period, or by producing unsatisfactory
results. This management prerogative of requiring standards availed of so long as they
are exercised in good faith for the advancement of the employer's interest.
Petitioners anchor their claim for commission pay on the Collective Bargaining
Agreement (CBA) of September 1981, in support of their third assignment of error.
Petitioners cannot avail of this agreement since their services had been terminated in
May, 1981, at a time when the CBA of September, 1981 was not yet in existence.
In fine, there is nothing in the records to show any abuse or misuse of power properly
vested in the respondent Deputy Minister of Labor and Employment. For certiorari to lie,
"there must be capricious, arbitrary and whimsical exercise of power, the very antithesis
of the judicial prerogative inaccordance with centuries of both civil and common law
traditions." (Panaligan vs. Adolfo, 67 SCRA 176, 180). The "abuse of discretion must be
grave and patent, and it must be shown that the discretion was exercised arbitrarily or
despotically." (Palma and Ignacio vs. Q. & S., Inc., et al., 17 SCRA 97, 100; Philippine
Virginia Tobacco Administration vs. Lucero, 125 SCRA 337, 343).
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
FIRST DIVISION
SAN MIGUEL CORPORATION,
Petitioner,

G.R. Nos. 168194 & 168603

Present:
Davide, Jr., C.J.

(Chairman),
- versus -

CAROLINE C. DEL ROSARIO,

Respondent.

Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
Promulgated:

December 13, 2005

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

Page 161 of 497

DECISION
YNARES-SANTIAGO, J.:
The instant consolidated petitions for review seek to set aside the (1) January 7,
2005 Decision of the Third Division of the Court of Appeals in CA-G.R. SP No. 83725,
[1]
affirming the December 30, 2003 Resolution [2] of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 036413-03, and holding that respondent
Caroline C. Del Rosario, was a regular employee of petitioner San Miguel Corporation
whose dismissal was valid but ineffectual for non-compliance with the requirement of
one month notice in termination due to redundancy; and the (2) February 23, 2005
Decision of the First Division of the Court of Appeals in CA-G.R. SP No. 84081, [3] which
reinstated the Labor Arbiters June 16, 2003 Judgment [4] finding that respondent is an
illegally dismissed regular employee of petitioner. Likewise questioned are the June 16,
2005[5] and May 13, 2005[6] Resolutions of the Court of Appeals which denied petitioners
motions for reconsideration.
The facts show that on April 17, 2000, respondent was employed by petitioner as
key account specialist. On March 9, 2001, petitioner informed respondent that her
probationary employment will be severed at the close of the business hours of March 12,
2001.[7] On March 13, 2001, respondent was refused entry to petitioners premises.
On June 24, 2002, respondent filed a complaint against petitioner for illegal
dismissal and underpayment/non-payment of monetary benefits. Respondent alleged
that petitioner feigned an excess in manpower because after her dismissal, it hired new
recruits, namely, Jerome Sanchez and Marilou Marfil and re-employed two of her batch
mates, Rosendo To and Ruel Rocha.[8]
On the other hand, petitioner claimed that respondent was a probationary
employee whose services were terminated as a result of the excess manpower that could
no longer be accommodated by the company. Respondent was allegedly employed on
April 17, 2000[9] as a temporary reliever of Patrick Senen, an account specialist, who met
an accident. Anticipating an increase in sales volume, petitioner hired respondent as an
account specialist on a probationary status effective September 4, 2000 and was
assigned at petitioners Greater Manila Area-Key Accounts Group (GMA-KAG) Beer Sales
Group. However, petitioners expected business growth did not materialize, hence, it
reorganized the GMA-KAG, and created the Centralized Key Accounts Group. This
restructuring led to an initial excess of 49 regular employees, who were redeployed to
other positions, including the one occupied by respondent. Her employment was thus
terminated effective March 12, 2001.[10]
On June 16, 2003, the Labor Arbiter rendered a decision declaring respondent a
regular employee because her employment exceeded six months and holding that she
was illegally dismissed as there was no authorized cause to terminate her employment.
The Arbiter further ruled that petitioners failure to rebut respondents claim that it hired
additional employees after she was dismissed belie the companys alleged redundancy.
The dispositive portion thereof, reads:

Page 162 of 497

WHEREFORE, premises considered, judgment is hereby rendered

declaring the dismissal of complainant as illegal and ordering her
reinstatement with full backwages, moral and exemplary damages of
P50,000.00 plus 10% attorneys fees, computed thus:
Backwages:
2003-6-16
2001-3-17 = P9,000.00 x 27 mos. =
2-2-29

P243,000.00

Holiday Pay:
P9,000.00/26 days = P346.15/day
=P346.15 x 20 days =

P6,923.00

Service Incentive Leave

P346.15 x 10 days
=

3,461.50

13th Month Pay

P9,000.00 x 27 mos./12 =
SO ORDERED.[11]

P20,250.00
P273,634.00

On appeal by petitioner to the NLRC, the latter modified the decision of the Labor
Arbiter holding that respondent is a regular employee whose termination from
employment was valid but ineffectual for petitioners failure to comply with the 30-day
notice to the employee and the Department of Labor and Employment (DOLE), thus
WHEREFORE, premises considered, Respondents appeal is partly
GRANTED. The portion of the Labor Arbiters assailed Decision in the
above-entitled case, finding Complainants dismissal illegal and ordering her
reinstatement, is SET ASIDE. It is hereby declared that Complainants
dismissal from employment is valid but ineffectual.
Respondent San Miguel Corporation is hereby ordered to pay
Complainant separation pay equivalent to her one-month pay per year of
service reckoned from her first day of employment therewith on April 17,
2000 up to the date of this Resolution. Complainants award for full
backwages shall be accordingly adjusted to cover the period from the time
she was ineffectually dismissed on March 13, 2001 up to the date of this
Resolution. As of October 17, 2003 Complainants award for separation pay
and full backwages already amount to P36,000.00 and P311,192.31,
respectively.
Complainants award for unpaid service incentive leave pay and
13th month pay shall be reduced to P1,514.42 and P7,875.00, respectively.
Her award for attorneys fees shall likewise be accordingly adjusted to ten
percent (10%) of her total monetary award.

Page 163 of 497

Complainants award for holiday pay and moral and exemplary

damages is (sic) hereby deleted.
SO ORDERED.[12]
In a resolution dated February 20, 2004, [13] the NLRC denied the motions for
reconsideration filed by both parties. Thereafter, petitioner and respondent filed
separate petitions with the Court of Appeals.
In CA-G.R. SP No. 84081, the First Division of the Court of Appeals granted the
respondents petition and reinstated with modification the Labor Arbiters decision
finding her to be an illegally dismissed regular employee, but deleted the award for
holiday pay for lack of basis. The appellate court noted that petitioner gave no
satisfactory explanation for the hiring of employees after respondents termination and
the absence of company criteria in determining who among the employees will be
dismissed. The decretal portion thereof, provides:
WHEREFORE, the petition is GRANTED. Accordingly, the assailed
NLRC resolutions, dated December 30, 2003 and February 20, 2004, are
hereby REVERSED and SET ASIDE. The June 16, 2003 Decision of the Labor
Arbiter is hereby REINSTATED with some MODIFICATION and should read as
follows:
WHEREFORE, judgment is hereby rendered declaring the
dismissal as illegal and ordering her reinstatement with full
backwages, moral and exemplary damages of P50,000.00 plus
10% attorneys fees, computed thus:
Backwages:
2003-6-16
2001-3-17 =
2-2-29

P 9,000.00 x 27 months =

Service Incentive Leave

P 346.15 x 10 days =
13th month Pay
P 9,000.00 x 27 mos./12 =

P 243,000.00

3,461.50

P 20,250.00
P 266,711.00

SO ORDERED.[14]
In CA-G.R. SP No. 83725, the Third Division of the Court of Appeals dismissed the
companys petition and affirmed the decision of the NLRC, as follows:
WHEREFORE, in consideration of the foregoing, the instant petition is
perforce dismissed. Accordingly, the public respondent NLRCs assailed
resolutions dated 30 December 2003 and 20 February 2004 are
hereby affirmed.
Page 164 of 497

SO ORDERED.[15]
Hence, petitioner instituted these two separate petitions for review praying that
the questioned decisions and resolutions of the Court of Appeals in CA-G.R. SP No. 84081
and CA-G.R. SP No. 83725 be set aside and that respondents complaint be dismissed. In
a resolution dated August 8, 2005,[16] the Court consolidated the petitions.
The issues for resolution are: (1) whether or not respondent is a regular employee
of petitioner; and (2) whether or not respondent was illegally dismissed; and (3) if so,
whether or not respondent is entitled to any monetary benefit.
The settled rule is that factual findings of quasi-judicial bodies like the NLRC,
particularly when they coincide with those of the Labor Arbiter are accorded respect and
even finality.[17] This applies with more vigor to the factual issue of respondents
employment status, because the Labor Arbiter, the NLRC and the two Divisions of the
Court of Appeals consistently held that respondent is a regular employee of petitioner
company. Indeed, the records show that their findings are supported by substantial
evidence.
In termination cases, like the present controversy, the burden of proving the
circumstances that would justify the employees dismissal rests with the employer. [18]
The best proof that petitioner should have presented to prove the probationary status of
respondent is her employment contract. None, having been presented, the continuous
employment of respondent as an account specialist for almost 11 months, from April 17,
2000 to March 12, 2001, means that she was a regular employee and not a temporary
reliever or a probationary employee. The 2 Payroll Authorities[19] offered by petitioner
showing that respondent was hired as a replacement, and later, as a probationary
employee do not constitute substantial evidence. As correctly found by the NLRC, none
of these documents bear the conformity of respondent, and are therefore, self-serving.
And while it is true that by way of exception, the period of probationary
employment may exceed six months when the parties so agree, such as when the same
is established by company policy, or when it is required by the nature of the work,
[20]
none of these exceptional circumstance were proven in the present case. Hence,
respondent whose employment exceeded six months is undoubtedly a regular employee
of petitioner.
Moreover, even assuming that the employment of respondent from April 7, 2000
to September 3, 2000, is only temporary, and that the reckoning period of her
probationary employment is September 4, 2000, [21] she should still be declared a regular
employee because by the time she was dismissed on March 12, 2001, her alleged
probationary employment already exceeded six months, i.e., six months and eight days
to be precise. Thus, in Cebu Royal Plant v. Deputy Minister of Labor,[22] a worker was
found to be a regular employee notwithstanding the presentation by the employer of a
Payroll Authority indicating that said employee was hired on probation, since it was
shown that he was terminated four days after the 6 th month of his purported
probationary employment.

Page 165 of 497

Neither will petitioners belated claim before the Court of Appeals that respondent
became a probationary employee starting October 1, 2000, [23] work against respondent.
As earlier stated, the payroll authorities indicating that respondents probationary status
became effective as of such date are of scant evidentiary value since it does not show
the conformity of respondent. At any rate, in the interpretation of employment
contracts, whether oral or written, all doubts must be resolved in favor of labor. [24]
Hence, the contract of employment in the instant case, which appears to be an oral
agreement since no written form was presented by petitioner, should be construed as
one vesting respondent with a regular status and security of tenure.
Having ruled that respondent is a regular employee, her termination from
employment must be for a just or authorized cause, otherwise, her dismissal would be
illegal. Petitioner tried to justify the dismissal of respondent under the authorized cause
of redundancy. It thus argued in the alternative that even assuming that respondent
qualified for regular employment, her services still had to be terminated because there
are no more regular positions in the company. Undoubtedly, petitioner is invoking a
redundancy which allegedly resulted in the termination not only of the trainees,
probationers but also of some of its regular employees.
Redundancy, for purposes of the Labor Code, exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirements of
the enterprise. Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a number of factors, such as
overhiring of workers, decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by the enterprise. [25]
In Asufrin, Jr. v. San Miguel Corporation,[26] it was held that the determination that
the employees services are no longer necessary or sustainable and, therefore, properly
terminable is an exercise of business judgment of the employer. The wisdom or
soundness of this judgment is not subject to discretionary review of the Labor Arbiter
and the NLRC, provided there is no violation of law and no showing that it was prompted
by an arbitrary or malicious act. In other words, it is not enough for a company to
merely declare that it has become overmanned. It must produce adequate proof of such
redundancy to justify the dismissal of the affected employees.
In Panlilio v. NLRC,[27] it was held that the following evidence may be proffered to
substantiate redundancy, to wit:
the new staffing pattern, feasibility studies/proposal, on the
viability of the newly created positions, job description and the approval by
the management of the restructuring.
In the case at bar, petitioner presented an affidavit of its Sales Manager and a
memorandum of the company both to the effect that there is a need to redeploy its
regular employees and terminate the employment of temporary employees, in view of
an excess in manpower. These documents, however, do not satisfy the requirement of
substantial evidence that a reasonable mind might accept as adequate to support a
conclusion.[28] For one, the other signatories to the memorandum were not even
identified. For another, the said memorandum and affidavit are self-serving. These
documents could have gained greater weight had petitioner presented its old and new
Page 166 of 497

staffing pattern, the newly created and abolished positions and the documents showing
the target business, as well as the proof showing the failure to attain the same.
Moreover, the lingering doubt as to the existence of redundancy or of petitioners
so called restructuring, realignment or reorganization which resulted in the dismissal of
not only probationary employees but also of regular employees,[29] is highlighted by
the non-presentation by petitioner of the required notice to the DOLE and to the
separated employees.[30] If there was indeed a valid redundancy effected by petitioner,
these notices and the proof of payment of separation pay to the dismissed regular
employees should have been offered to establish that there was excess manpower in
petitioners GMA-KAG caused by a decline in the sales volume.
In balancing the interest between labor and capital, the prudent recourse in
termination cases is to safeguard the prized security of tenure of employees and to
require employers to present the best evidence obtainable, especially so because in
most cases, the documents or proof needed to resolve the validity of the termination, are
in the possession of employers. A contrary ruling would encourage employers to prevent
the regularization of an employee by simply invoking a feigned or unsubstantiated
redundancy program.
Granting that petitioner was able to substantiate the validity of its reorganization
or restructuring, it nevertheless, failed to effect a fair and reasonable criterion in
dismissing respondent. The criteria in implementing a redundancy are: (a) less preferred
status, e.g. temporary employee; (b) efficiency; and (c) seniority. [31]
In dismissing respondent, petitioner averred that in choosing the employee to be
retained and to be placed in the limited available positions, it had to give priority to the
regular employees, over petitioner who is only a probationary employee. This is clear
from the termination letter to respondent, viz:
There were recent developments and initiatives from Management
which have direct implications to the organization of GMA Sales, to wit:
1.

The expected business growth for the year 2000 did not
materialize despite the augmentation of our Sales manpower,
reconfiguration, and promotional initiatives undertaken during
the year;

2.

There is a need to re-align other SMBD Sales units in order to

further enhance synergy in the sales and distribution of SMC
products;

3.

The realignment of these units will result to excess

manpower specifically in GMA Sales. Considering that these
employees are regular, Management will be constrained to
redeploy them to other areas within GMA Sales;

4.

The existing temporary employees will have to be

separated in order to give way to the aforesaid
redeployment.

Page 167 of 497

In view of this Management direction, we regret to inform you that

your probationary employment with the Company will be severed at the
close of business hours of March 12, 2001.
....[32]
It is evident from the foregoing that the criterion allegedly used by petitioner in
reorganizing its sales unit was the employment status of the employee. However, in the
implementation thereof, petitioner erroneously classified respondent as a probationary
employee, resulting in the dismissal of the latter. The instant case is no different
fromAsufrin, Jr. v. San Miguel Corporation, where the Court refused to give credence to
the redundancy invoked by the employer inasmuch as the company adopted no criterion
in dismissing the employee. Verily, the absence of criteria and the erroneous
implementation of the criterion selected, both render invalid the redundancy because
both have the ultimate effect of illegally dismissing an employee.
What further militated against the alleged redundancy advanced by petitioner is
their failure to refute respondents assertion that after her dismissal, it hired new recruits
and re-employed two of her batch mates. Other than the lame excuse that it is
respondent who has the burden of proving the same, it presented no proof to fortify its
denial. Again, petitioner has in its possession the documents that would disprove the
fact of hiring new employees, but instead of presenting evidence to belie respondents
contentions, it refrained from doing so and conveniently passed the burden to
respondent.
In sum, the Court finds that petitioner was not able to discharge the burden of
proving that the dismissal of respondent was valid.
Article 279 of the Labor Code, provides:
ARTICLE 279. Security of tenure. In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement. (Emphasis, supplied)
Considering that respondent was illegally dismissed, she is entitled not only to
reinstatement but also to payment of full backwages, computed from the time her
compensation was actually withheld from her on March 13, 2001, up to her actual
reinstatement. As a regular employee of petitioner from the date of her employment on
April 17, 2000, she is likewise entitled to other benefits, i.e., service incentive leave pay
and 13th month pay computed from such date also up to her actual reinstatement.
Respondent is not, however, entitled to holiday pay because the records reveal
that she is a monthly paid regular employee. Under Section 2, Rule IV, Book III of the
Omnibus Rules Implementing the Labor Code, employees who are uniformly paid by the
Page 168 of 497

month, irrespective of the number of working days therein, shall be presumed to be paid
for all the days in the month whether worked or not. Hence, the Court of Appeals
correctly deleted said award.[33]
Anent attorneys fees, we held in San Miguel Corporation v. Aballa, et al.,[34] that in
actions for recovery of wages or where an employee was forced to litigate and thus
incurred expenses to protect his rights and interests, a maximum of 10% of the total
monetary award by way of attorneys fees is justifiable under Article 111 of the
Labor Code,[35] Section 8, Rule VIII, Book III of its Implementing Rules, [36] and paragraph 7,
Article 2208 of the Civil Code.[37] The award of attorneys fees is proper and there need
not be any showing that the employer acted maliciously or in bad faith when it withheld
the wages. There need only be a showing that the lawful wages were not paid
accordingly, as in the instant controversy.
Finally, the Court cannot sustain the award of moral and exemplary damages in
favor of respondent. Moral and exemplary damages cannot be justified solely upon the
premise that the employer dismissed his employee without cause or due process. The
termination must be attended with bad faith, or fraud, or was oppressive to labor or done
in a manner contrary to morals, good customs or public policy and, of course, that social
humiliation, wounded feelings, or grave anxiety resulted therefrom. Similarly, exemplary
damages are recoverable only when the dismissal was effected in a wanton, oppressive
or malevolent manner. To merit the award of these damages, additional facts must be
pleaded and proved.[38] In the present case, respondent did not proffer substantial
evidence that would overcome the legal presumption of good faith on the part of
petitioner. The award of moral and exemplary damages should therefore be deleted.
WHEREFORE, the petitions are DENIED. The January 7, 2005 Decision and the
June 16, 2005 Resolution of the Court of Appeals in CA-G.R. No. SP No. 83725 which
affirmed the December 30, 2003 Resolution of the NLRC in NLRC NCR CA No. 036413-03
declaring that the dismissal of respondent Caroline C. Del Rosario, a regular employee of
petitioner, was valid but ineffectual; and the February 23, 2005 Decision and the May 13,
2005 Resolution and of the Court of Appeals in CA-G.R. No. SP No. 84081 which
reinstated with modification the June 16, 2003 Decision of the Labor Arbiter in NLRCNCR-00-04495-2002, holding that respondent is an illegally dismissed regular employee
of petitioner, are AFFIRMED with MODIFICATIONS.
As MODIFIED, the employment status of respondent is declared regular, and her
dismissal from employment, illegal.
Petitioner is ordered to IMMEDIATELY
REINSTATE respondent as a regular employee to her previous position, unless such
position no longer exists, in which case she shall be given a substantially
equivalentposition, without loss of seniority rights. Petitioner is further ORDERED TO
PAY respondent backwages, computed from the time her compensation was actually
withheld on March 13, 2001, up to her actual reinstatement, plus service incentive leave,
13th month pay and attorneys fees equivalent to 10% of the total monetary award. For
this purpose, the case is ordered REMANDED to the Labor Arbiter for the computation of
the amounts due respondent.
SO ORDERED.

Page 169 of 497

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 88636 October 3, 1991
LINA B. OCTAVIANO, petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION and GENERAL DIESEL POWER
CORPORATION, respondents.
D.R. Dando & Associates Law Offices for petitioner.
K.V. Faylona & Associates for private respondent.
SARMIENTO, J.:
The petitioner, Lina Octaviano, assails the decision of the National Labor Relations
Commission (NLRC), Fourth Division, dated March 20, 1989, affirming with modification
the decision of the labor arbiter reducing her award of full backwages to only one (1)
year.
The facts in brief are:
The private respondent, General Diesel Power Corporation, hired Lina as a component
mechanic and issued a temporary employment as such from November 21, 1984 up to
May 21, 1985. 1 She was however made to work, in fact, as a secretary and parts
clerk. 2
On May 22, 1985, the private respondent exyended her another contract of employment
providing a probationary period of six (6) months. 3 On November 21, 1985, she was
terminated as management decided to end her probationary employment. 4 On January
20, 1986, she was rehired as a parts clerk. 5 Pursuant to management's prior
arrangement, she was issued a six-month probationary employment. On June 5, 1986,
she was again dismissed. 6
On July 8, 1986, she lodged a complaint for illegal dismissal and then filed an amended
complaint on January 30, 1987.
On May 22, 1988, Labor Arbiter Felipe T. Garduque II ordered her reinstatement without
loss of seniority rights and privileges, with full backwages from her dismissal on June 5,
1986 up to her actual reinstatement, including her legal holiday pay for ten regular
Page 170 of 497

holidays, and unpaid wages and allowance from June 1-15, 1986 in the amounts of
P500.00 and P215.00, respectively, and 13th month pay in the sum of P416.00 less
P213.70 for advances and canteen bills, with ten (10)% thereof as attorney's fee. 7 All
other claims were dismissed. The respondent corporation appealed to the NLRC
interposing grave abuse of discretion.The NLRC affirmed the labor arbiter's ruling but
reduced the award of full backwages to only one year. Ironically, the NLRC cited in
particular Lina's educational background to justify the reduction. We quote:
It is not disputed that herein complainant is a graduate of chemical
engineering and that the periods of her separate employment contracts
range from six (6) months to one (1) year. Having technical engineering
background, it would not be difficult for complainant find a job during her
period of lay-off. As such, she is therefore not expected to remain Idle and
wait for a windfall for this would be tantamount awarding her for her
Idleness during her lay off. It is therefore more rasonable to limit her
backwages to one (1) year effective from her termination from the service
on June 15, 1986. *
The petitioner now complains that the NLRC erred in limiting the award of backwages to
one year. She invokes Article 279 of the Labor Code which guarantees security of tenure
to a regular employee, prohobiting his termination, except for a just cause, and entitling
an unjustly dismissed worker to reinstatement with full backwages.
We find the petition meritorious and we grant it. We rule that the NLRC gravely abused
its discretion in limiting the award of backwages to one year.
The facts of the case as indicated by the arbiter and the NLRC are uncorroborated- Lina
was unjustly and unlawfully terminated even after she had already completed
successively three six-month probationary periods of employment which should have
converted her status to that of a regular employee. Her termination, therefore, violated
her right to security of tenure in her employment. But even probationary employees are
protected by law. For one, probationary should not exceed six (6) months from the date
the employee started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. 8 True, 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 the reasonable standards made known by the
employer to the employee at the time of his employment. 9 But the law is explicit that
an employee who is allowed to work after a probabtionary period shall be considered a
regular employee. 10
It is clear from the foregoing that Lina should be considered a regular employee on all
counts. First, the nature of her job as a parts clerk required her to perform activities
which were deemed necessary and desirable in the usual business of General Diesel
Power Corporation, in connection with dealing in parts, sales, and services. (She was
Page 171 of 497

neither contracted for a specified project nor required to perform work that was
seasonable in nature.) Under Article 280 of the Labor Code, when one performs such
activities, he is deemed a regular employee, "[tlhe provisions of written agreement to
the contrary notwithstanding . . ." Second, her employment was not covered by any
apprenticeship agreement. Third, she was rehired on May 22, 1985 and on January 20,
1986. This fact of rehiring negates management's claims that she failed to qualify as a
regular employee. On the contrary, management promoted her to parts clerk. Finally, at
the risk of being repetitious, Lina had been re-hired to work not only after her first sixmonth probationary period from November 21, 1984 to May 21, 1985, she had been also
re-hired to work immediately after her second six-month probationary period from May
22, 1985 to November 21, 1985; and then again on January 20, 1986, she was rehired on
a probationary status - her third - and was again terminated on June 5, 1986. Thus, we
can readily see that Lina had been hired and again and again rehired and again and
again and again fired. We perceive these successive hirings and firings as a ploy to avoid
the obligations imposed by law on employers for the protection and benefit of
probationary employees, who, more often than not, are kept in the bondage, so to speak,
of unending probationary employment without any complaint due to the serious
unemployment problem besetting our country today. The Court can not countenance this
overreaching. No member of the country's work force must be allowed to be taken
advantage of by any employer.
An employee who is allowed to work after a probationary period, shall be considered a
regular employee. 11 The fact that Lina worked on a contract-to-contract basis can not
alter the character of her employment, because contracts can not override the mandate
of law.12 Hence, by operation of law, she has likewise, become a regular employee. 13
We find self-defeating the private respondent's arguments that the petitioner, while in
her probationary periods, had failed to measure up to the standards of her work and had
been found unfit for her job, in the light of the circumstance discussed earlier. Second,
the private respondent failed to establish that there had been reasonable standards set
forth by the company by which Lina would measure up to as a regular employee. If
indeed there were, the respondent should have attached copies of those standards, as
annexes to its pleadings; the records reveal nothing of the sort, hence, we dismiss such
trivial justifications.
We agree with the petitioner that she was unceremoniously terminated by the
respondent company to prevent her from becoming a regular employee and exc4ude her
from all the benefits thereto. As we previously stated, this is not only a common but a
convenient practice of unscrupulous employers to circumvent the law on security of
tenure. Security of tenure, which is a right of paramount value guaranteed by the
Constitution, should not be denied to the workers bv such a stratagem. We can not
permit such a subterfuge, if we are to be true to the law and social justice. The law and
social justice mandate that an emplovee whose termination was illelyal is enntitled to
reinstatement with full backwages. 14
Page 172 of 497

Under Article 279 of the Code, "[a]n employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of compensation that should have been earned but were not collected because of
unjust dismissal. 15 Such being the case, the award of backwages computed from the
time of Lina's dismissal up to the time of her reinstatement is not tantamount to
rewarding idleness but to enable her to recover her loss of income during her lack of
employment caused by her dismissal. Clearly then, the NLRC committed a grave abuse
of discretion when it reduced the award of backwages to one year and compounded that
abuse by giving the reason that the petitioner could have easily landed a better-paying
job if she seriously looked for one, she being a chemical engineering graduate.
Worth noting is the manifestation of the Solicitor General when required to comment by
the Court: that "[H]e does not agree with the position of the public respondent, NLRC and
cannot represent said public respondent in this case without, in his honest belief and
understanding, going against the law, the evidence and jurisprudence."
The respondent also argues that the petitioner should not be entitled to backwages
because she was given separation pay upon termination of her employment.
Furthermore, she also signed a quitclaim discharging the company from any liability.
These arguments are devoid of merit. The fact that the petitioner received separation
pay should not be taken against her for it is but natural for her to accept whatever
amounts the company would give her. Her receipt of separation pay does not relieve the
company of its obligations under the law. Backwages and separation pay are reliefs
distinct and separate from each other. Payment of backwages in the forin of rehef that
restores the income that was lost by reason of unlawful dismissal is distinguished from
separation pay which provides the employee money during the period in which he is
locating a new job. 16 We have moreover held that a quitclaim wfll not estop a dismissed
employee from complaining to the authorities. 17
We have consistently adopted the policy of awarding back wages to illegally dismissed
employees equivalent to three years without qualification or deduction, in order to avoid
protracted delay in the execution of the award for backwage due to extended hearings
and unavoidable delays and difficul ties encountered in determining the earnings of laidoff employees ordered to be reinstated with backwages during the pendency of the case
for purposes of deducting the same from the gross backwages awarded. 18 In the case
at bar, we can not find good reason why we should depart from this established policy
The company had unlawfully terminated the petitioner fro her work. We take this
opportunity to reaffirm our concern fo the lowly worker who, like the petitioner, is often
at the mere of her employer, by reinstating her to her previous position or its equivalent,
with backwages.

Page 173 of 497

WHEREFORE, the petition is GRANTED. The private respondent is ORDERED to REINSTATE

the petitioner to her former position without loss of seniority rights and other privileges,
with backwages equivalent to three years without deduction or qualification.
Costs against the private respondent.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-58639 August 12, 1987
CEBU ROYAL PLANT (SAN MIGUEL CORPORATION), petitioner,
vs.
THE HONORABLE DEPUTY MINISTER OF LABOR and RAMON
PILONES, respondents.

CRUZ, J.:
The private respondent was removed by the petitioner and complained to the Ministry of
Labor. His complaint was dismissed by the regional director, who was, however, reversed
by the public respondent. Required to reinstate the separated employee and pay him
back wages, the petitioner has come to us, faulting the Deputy Minister with grave abuse
of discretion. We have issued in the meantime a temporary restraining order. 1
The public respondent held that Ramon Pilones, the private respondent, was already a
permanent employee at the time of his dismissal and so was entitled to security of
tenure. The alleged ground for his removal, to wit, "pulmonary tuberculosis minimal,"
was not certified as incurable within six months as to justify his separation. 2Additionally,
the private respondent insists that the petitioner should have first obtained a clearance,
as required by the regulations then in force, for the termination of his employment.
The petitioner for its part claims that the private respondent was still on probation at the
time of his dismissal and so had no security of tenure. His dismissal was not only in
conformity with company policy but also necessary for the protection of the public
health, as he was handling ingredients in the processing of soft drinks which were being
sold to the public. It is also argued that the findings of the regional director, who had
direct access to the facts, should not have been disturbed on appeal. For these same
Page 174 of 497

reasons, it contends, the employee's reinstatement as ordered by the public respondent

should not be allowed.
The original findings were contained in a one-page order 3 reciting simply that
"complainant was employed on a probationary period of employment for six (6) months.
After said period, he underwent medical examination for qualification as regular
employee but the results showed that he is suffering from PTB minimal. Consequently,
he was informed of the termination of his employment by respondent." The order then
concluded that the termination was "justified." That was all.
As there is no mention of the basis of the above order, we may assume it was the
temporary payroll authority 4submitted by the petitioner showing that the private
respondent was employed on probation on February 16, 1978. Even supposing that it is
not self- serving, we find nevertheless that it is self-defeating. The six-month period of
probation started from the said date of appointment and so ended on August 17, 1978,
but it is not shown that the private respondent's employment also ended then; on the
contrary, he continued working as usual. Under Article 282 of the Labor Code, "an
employee who is allowed to work after a probationary period shall be considered a
regular employee." Hence, Pilones was already on permanent status when he was
dismissed on August 21, 1978, or four days after he ceased to be a probationer.
The petitioner claims it could not have dismissed the private respondent earlier because
the x-ray examination was made only on August 17, 1978, and the results were not
immediately available. That excuse is untenable. We note that when the petitioner had
all of six months during which to conduct such examination, it chose to wait until exactly
the last day of the probation period. In the light of such delay, its protestations now that
reinstatement of Pilones would prejudice public health cannot but sound hollow and
hypocritical. By its own implied admission, the petitioner had exposed its customers to
the employee's disease because of its failure to examine him before entrusting him with
the functions of a "syrup man." Its belated concern for the consuming public is hardly
persuasive, if not clearly insincere and self-righteous.
There is proof in fact that the private respondent was first hired not on February 16,
1978, but earlier in 1977. This is the 1977 withholding tax statement 5 issued for him by
the petitioner itself which it does not and cannot deny. The petitioner stresses that this is
the only evidence of the private respondent's earlier service and notes that he has not
presented any co-worker to substantiate his claim. This is perfectly understandable.
Given the natural reluctance of many workers to antagonize their employers, we need
not wonder why none of them testified against the petitioner.
We are satisfied that whether his employment began on February 16, 1978, or even
earlier as he claims, the private respondent was already a regular employee when he
was dismissed on August 21, 1978. As such, he could validly claim the security of tenure
guaranteed to him by the Constitution and the Labor Code.
Page 175 of 497

The applicable rule on the ground for dismissal invoked against him is Section 8, Rule I,
Book VI, of the Rules and Regulations Implementing the Labor Code reading as follows:
Sec. 8. Disease as a ground for dismissal. Where the employee suffers
from a disease and his continued employment is prohibited by law or
prejudicial to his health or to the health of his co-employees, the employer
shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of six (6) months even
with proper medical treatment. If the disease or ailment can be cured within
the period, the employer shall not terminate the employee but shall ask the
employee to take a leave. The employer shall reinstate such employee to
his former position immediately upon the restoration of his normal health.
The record does not contain the certification required by the above rule. The medical
certificate offered by the petitioner came from its own physician, who was not a
"competent public health authority," and merely stated the employee's disease, without
more. We may surmise that if the required certification was not presented, it was
because the disease was not of such a nature or seriousness that it could not be cured
within a period of six months even with proper medical treatment. If so, dismissal was
unquestionably a severe and unlawful sanction.
It is also worth noting that the petitioner's application for clearance to terminate the
employment of the private respondent was filed with the Ministry of Labor only on
August 28, 1978, or seven days after his dismissal. 6 As the NLRC has repeatedly and
correctly said, the prior clearance rule (which was in force at that time) was not a "trivial
technicality." It required "not just the mere filing of a petition or the mere attempt to
procure a clearance" but that "the said clearance be obtained prior to the operative act
of termination. 7
We agree that there was here an attempt to circumvent the law by separating the
employee after five months' service to prevent him from becoming a regular employee,
and then rehiring him on probation, again without security of tenure. We cannot permit
this subterfuge if we are to be true to the spirit and mandate of social justice. On the
other hand, we have also the health of the public and of the dismissed employee himself
to consider. Hence, although we must rule in favor of his reinstatement, this must be
conditioned on his fitness to resume his work, as certified by competent authority.
We take this opportunity to reaffirm our concern for the lowly worker who, often at the
mercy of his employers, must look up to the law for his protection. Fittingly, that law
regards him with tenderness and even favor and always with faith and hope in his
capacity to help in shaping the nation's future. It is error to take him for granted. He
deserves our abiding respect. How society treats him will determine whether the knife in
his hands shall be a caring tool for beauty and progress or an angry weapon of defiance
Page 176 of 497

and revenge. The choice is obvious, of course. If we cherish him as we should, we must
resolve to lighten "the weight of centuries" of exploitation and disdain that bends his
back but does not bow his head.
WHEREFORE, the petition is DISMISSED and the temporary restraining order of
November 18, 1981, is LIFTED. The Order of the public respondent dated July 14, 1981, is
AFFIRMED, but with the modification that the backwages shall be limited to three years
only and the private respondent shall be reinstated only upon certification by a
competent public health authority that he is fit to return to work. Costs against the
petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 86408 February 15, 1990

BETA ELECTRIC CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER CRESENCIO
INIEGO, BETA ELECTRIC EMPLOYEES ASSOCIATION, and LUZVIMINDA
PETILLA, respondents.
Ermitao, Asuncion, Manzano & Associates for petitioner.
Leonardo C. Fernandez for private respondents.

SARMIENTO, J.:
The petitioner questions the decision of the National Labor Relations Commission
affirming the judgment of the labor arbiter reinstating the private respondent with
backwages.
The petitioner hired the private respondent as clerk typist III
1986 until January 16, 1987. 2

Page 177 of 497

effective December 15,

On January 16, 1987, the petitioner gave her an extension up to February 15, 1987. 3
On February 15, 1987, it gave her another extension up to March 15, 1987.
On March 15, 1987, it gave her a further extension until April 30, 1987.
On May 1, 1987, she was given until May 31, 1987.

On June 1, 1987, she was given up to June 30, 1987.

Her appointments were covered by corresponding written contracts.

On June 22, 1987, her services were terminated without notice or investigation. On the
same day, she went to the labor arbiter on a complaint for illegal dismissal. As the court
has indicated, both the labor arbiter and the respondent National Labor Relations
Commission ruled for her.
The Court likewise rules in her favor.
The petitioner argues mainly that the private respondent's appointment was temporary
and hence she may be terminated at will.
That she had been hired merely on a "temporary basis" "for purposes of meeting the
seasonal or peak demands of the business," 9 and as such, her services may lawfully be
terminated "after the accomplishment of [her] task" 10 is untenable. The private
respondent was to all intents and purposes, and at the very least, a probationary
employee, who became regular upon the expiration of six months. Under Article 281 of
the Labor Code, a probationary employee is "considered a regular employee" if he has
been "allowed to work after [the] probationary period." 11 The fact that her employment
has been a contract-to-contract basis can not alter the character of employment,
because contracts can not override the mandate of law. Hence, by operation of law, she
has become a regular employee.
In the case at bar, the private employee was employed from December 15, 1986 until
June 22, 1987 when she was ordered laid off. Her tenure having exceeded six months,
she attained regular employment.
The petitioner can not rightfully say that since the private respondent's employment
hinged from contract to contract, it was ergo, "temporary", depending on the term of
each agreement. Under the Labor Code, an employment may only be said to be
"temporary" "where [it] has been fixed for a specific undertaking the completion of 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." 12 Quite to the contrary, the private
Page 178 of 497

respondent's work, that of "typist-clerk" is far from being "specific" or "seasonal", but
rather, one, according to the Code, "where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business." 13 And under
the Code, where one performs such activities, he is a regular employee, "[t]he provisions
of written agreement to the contrary notwithstanding . . . 14
It is true that in Biboso v. Victorias Milling Company, Inc., 15 we recognized the validity of
contractual stipulations as to the duration of employment, we can not apply it here
because clearly, the contract-to-contract arrangement given to the private respondent
was but an artifice to prevent her from acquiring security of tenure and to frustrate
constitutional decrees.
The petitioner can not insist that the private respondent had been hired "for a specific
undertaking i.e. to handle the backlogs brought about by the seasonal increase in the
volume of her work." 16 The fact that she had been employed purportedly for the simple
purpose of unclogging the petitioner's files does not make such an undertaking "specific"
from the standpoint of law because in the first place, it is "usually necessary or desirable
in the usual business or trade of the employer," 17 a development which disqualifies it
outrightly as a "specific undertaking", and in the second place, because a "specific
undertaking" is meant, in its ordinary acceptation, a special type of venture or project
whose duration is coterminous with the completion of the project, 18 e.g., project work. It
is not the case in the proceeding at bar.
WHEREFORE, the petition is DISMISSED. The private respondent is ordered REINSTATED
with backwages equivalent to three years with no qualification or deductions.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
ARMANDO ALILING,
Petitioner,

G.R. No. 185829

Present:

- versus JOSE B. FELICIANO,

MANUEL
BERSAMIN, JJ.
F. SAN MATEO III, JOSEPH R.
LARIOSA, and WIDE
Page 179 of 497

VELASCO, JR., J., Chairperson

PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.
Promulgated:

WIDE
Promulgated:
April 25, 2012
WORLD EXPRESS CORPORATION,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to set aside
the July 3, 2008 Decision[1] and December 15, 2008 Resolution[2] of the Court of Appeals
(CA), in CA-G.R. SP No. 101309, entitled Armando Aliling v. National Labor Relations
Commission, Wide Wide World Express Corporation, Jose B. Feliciano, Manuel F. San
Mateo III and Joseph R. Lariosa. The assailed issuances modified the Resolutions dated
May 31, 2007[3] and August 31, 2007[4] rendered by the National Labor Relations
Commission (NLRC) in NLRC NCR Case No. 00-10-11166-2004, affirming the Decision
dated April 25, 2006[5] of the Labor Arbiter.
The Facts
Via a letter dated June 2, 2004,[6] respondent Wide Wide World Express
Corporation (WWWEC) offered to employ petitioner Armando Aliling (Aliling) as Account
Executive (Seafreight Sales), with the following compensation package: a monthly
salary of PhP 13,000, transportation allowance of PhP 3,000, clothing allowance of PhP
800, cost of living allowance of PhP 500, each payable on a per month basis and a
14th month pay depending on the profitability and availability of financial resources of the
company. The offer came with a six (6)-month probation period condition with this
express caveat: Performance during [sic] probationary period shall be made as basis for
confirmation to Regular or Permanent Status.
On June 11, 2004, Aliling and WWWEC inked an Employment Contract[7] under the
following terms, among others:

Conversion to regular status shall be determined on the basis of work

performance; and

Employment services may, at any time, be terminated for just cause or in

accordance with the standards defined at the time of engagement. [8]

Training then started. However, instead of a Seafreight Sale assignment, WWWEC

asked Aliling to handle Ground Express (GX), a new company product launched on June
18, 2004 involving domestic cargo forwarding service for Luzon. Marketing this product
and finding daily contracts for it formed the core of Alilings new assignment.

Page 180 of 497

Barely a month after, Manuel F. San Mateo III (San Mateo), WWWEC Sales and
Marketing Director, emailed Aliling[9] to express dissatisfaction with the latters
performance, thus:
Armand,
My expectations is [sic] that GX Shuttles should be 80% full by the 3 rd week
(August 5) after launch (July 15). Pls. make that happen. It has been more
than a month since you came in. I am expecting sales to be pumping in by
now. Thanks.
Nonong
Thereafter, in a letter of September 25, 2004, [10] Joseph R. Lariosa (Lariosa),
Human Resources Manager of WWWEC, asked Aliling to report to the Human Resources
Department to explain his absence taken without leave from September 20, 2004.
Aliling responded two days later. He denied being absent on the days in question,
attaching to his reply-letter[11] a copy of his timesheet[12] which showed that he worked
from September 20 to 24, 2004. Alilings explanation came with a query regarding the
withholding of his salary corresponding to September 11 to 25, 2004.
In a separate letter dated September 27, 2004, [13] Aliling wrote San Mateo stating:
Pursuant to your instruction on September 20, 2004, I hereby tender my resignation
effective October 15, 2004. While WWWEC took no action on his tender, Aliling
nonetheless demanded reinstatement and a written apology, claiming in a subsequent
letter dated October 1, 2004[14] to management that San Mateo had forced him to resign.
Lariosas response-letter of October 1, 2004, [15] informed Aliling that his case
was still in the process of being evaluated. On October 6, 2004,[16] Lariosa again
wrote, this time to advise Aliling of the termination of his services effective as of that
date owing to his non-satisfactory performance during his probationary period. Records
show that Aliling, for the period indicated, was paid his outstanding salary which
consisted of:
PhP
PhP

4,988.18 (salary for the September 25, 2004 payroll)

1,987.28 (salary for 4 days in October 2004)
------------6,975.46 Total

Earlier, however, or on October 4, 2004, Aliling filed a Complaint [17] for illegal
dismissal due to forced resignation, nonpayment of salaries as well as damages with the
NLRC against WWWEC. Appended to the complaint was Alilings Affidavit dated
November 12, 2004,[18] in which he stated: 5. At the time of my engagement,
respondents did not make known to me the standards under which I will qualify as a
regular employee.
Refuting Alilings basic posture, WWWEC stated in its Position Paper dated
November 22, 2004[19] that, in addition to the letter-offer and employment contract

Page 181 of 497

adverted to, WWWEC and Aliling have signed a letter of appointment [20] on June 11, 2004
containing the following terms of engagement:
Additionally, upon the effectivity of your probation, you and your
immediate superior are required to jointly define your
objectives compared with the job requirements of the position. Based on
the pre-agreed objectives, your performance shall be reviewed on the
3rd month to assess your competence and work attitude. The
5th month Performance Appraisal shall be the basis in elevating or
confirming your employment status from Probationary to Regular.
Failure to meet the job requirements during the probation stage means that
your services may be terminated without prior notice and without recourse
to separation pay.
WWWEC also attached to its Position Paper a memo dated September 20,
2004[21] in which San Mateo asked Aliling to explain why he should not be terminated for
failure to meet the expected job performance, considering that the load factor for the GX
Shuttles for the period July to September was only 0.18% as opposed to the allegedly
agreed upon load of 80% targeted for August 5, 2004. According to WWWEC, Aliling,
instead of explaining himself, simply submitted a resignation letter.
In a Reply-Affidavit dated December 13, 2004,[22] Aliling denied having received a
copy of San Mateos September 20, 2004 letter.
Issues having been joined, the Labor Arbiter issued on April 25, 2006 [23] a Decision
declaring Alilings termination as unjustified. In its pertinent parts, the decision reads:
The grounds upon which complainants dismissal was based did not
conform not only the standard but also the compliance required under
Article 281 of the Labor Code, Necessarily, complainants termination is not
justified for failure to comply with the mandate the law requires.
Respondents should be ordered to pay salaries corresponding to the
unexpired portion of the contract of employment and all other
benefits amounting to a total of THIRTY FIVE THOUSAND EIGHT HUNDRED
ELEVEN PESOS (P35,811.00) covering the period from October 6 to
December 7, 2004, computed as follows:
Unexpired Portion of the Contract:
Basic Salary
Transportation
Clothing Allowance
ECOLA

10/06/04 12/07/04
Page 182 of 497

P13,000.00
3,000.00
800.00
500.00
-------------P17,300.00

P17,300.00 x 2.7 mos.

P35,811.00

Complainants 13th month pay proportionately for 2004 was not

shown to have been paid to complainant, respondent be made liable to him
therefore computed at SIX THOUSAND FIVE HUNDRED THIRTY TWO PESOS
AND 50/100 (P6,532.50).
For engaging the services of counsel to protect his interest,
complainant is likewise entitled to a 10% attorneys fees of the judgment
amount. Such other claims for lack of basis sufficient to support for their
grant are unwarranted.
WHEREFORE, judgment is hereby rendered ordering respondent
company to pay complainant Armando Aliling the sum of THIRTY FIVE
THOUSAND EIGHT HUNDRED ELEVEN PESOS (P35,811.00) representing his
salaries and other benefits as discussed above.
Respondent company is likewise ordered to pay said complainant
the amount of TEN THOUSAND SEVEN HUNDRED SIXTY SIX PESOS AND
85/100 ONLY (10.766.85) representing his proportionate 13 th month pay for
2004 plus 10% of the total judgment as and by way of attorneys fees.
Other claims are hereby denied for lack of merit. (Emphasis
supplied.)
The labor arbiter gave credence to Alilings allegation about not receiving and,
therefore, not bound by, San Mateos purported September 20, 2004 memo. The memo,
to reiterate, supposedly apprised Aliling of the sales quota he was, but failed, to meet.
Pushing the point, the labor arbiter explained that Aliling cannot be validly terminated for
non-compliance with the quota threshold absent a prior advisory of the reasonable
standards upon which his performance would be evaluated.
Both parties appealed the above decision to the NLRC, which affirmed the
Decision in toto in its Resolution dated May 31, 2007. The separate motions for
reconsideration were also denied by the NLRC in its Resolution dated August 31, 2007.
Therefrom, Aliling went on certiorari to the CA, which eventually rendered the
assailed Decision, the dispositive portion of which reads:
WHEREFORE, the petition is PARTLY GRANTED. The assailed
Resolutions of respondent (Third Division) National Labor Relations
Commission
are
AFFIRMED,
with
the
following
MODIFICATION/CLARIFICATION: Respondents Wide Wide World Express Corp.
and its officers, Jose B. Feliciano, Manuel F. San Mateo III and Joseph R.
Lariosa, are jointly and severally liable to pay petitioner Armando Aliling:
(A) the sum of Forty Two Thousand Three Hundred Thirty Three & 50/100
(P42,333.50) as the total money judgment, (B) the sum of Four Thousand
Two Hundred Thirty Three & 35/100 (P4,233.35) as attorneys fees, and (C)
the additional sum equivalent to one-half (1/2) month of petitioners salary
as separation pay.
Page 183 of 497

SO ORDERED.[24] (Emphasis supplied.)

The CA anchored its assailed action on the strength of the following premises: (a)
respondents failed to prove that Alilings dismal performance constituted gross and
habitual neglect necessary to justify his dismissal; (b) not having been informed at the
time of his engagement of the reasonable standards under which he will qualify as a
regular employee, Aliling was deemed to have been hired from day one as a regular
employee; and (c) the strained relationship existing between the parties argues against
the propriety of reinstatement.
Alilings motion for reconsideration was rejected by the CA through the assailed
Resolution dated December 15, 2008.
Hence, the instant petition.
The Issues
Aliling raises the following issues for consideration:
A.
The failure of the Court of Appeals to order reinstatement
(despite its finding that petitioner was illegally dismissed from employment)
is contrary to law and applicable jurisprudence.
B.
The failure of the Court of Appeals to award backwages (even
if it did not order reinstatement) is contrary to law and applicable
jurisprudence.
C.
The failure of the Court of Appeals to award moral and
exemplary damages (despite its finding that petitioner was dismissed to
prevent the acquisition of his regular status) is contrary to law and
applicable jurisprudence.[25]
In their Comment,[26] respondents reiterated their position that WWWEC hired
petitioner on a probationary basis and fired him before he became a regular employee.
The Courts Ruling
The petition is partly meritorious.
Petitioner is a regular employee
On a procedural matter, petitioner Aliling argues that WWWEC, not having
appealed from the judgment of CA which declared Aliling as a regular employee from the
time he signed the employment contract, is now precluded from questioning the
appellate courts determination as to the nature of his employment.
Petitioner errs. The Court has, when a case is on appeal, the authority to review
matters not specifically raised or assigned as error if their consideration is necessary in
reaching a just conclusion of the case. We said as much in Sociedad Europea de
Page 184 of 497

Financiacion, SA v. Court of Appeals,[27] It is axiomatic that an appeal, once accepted by

this Court, throws the entire case open to review, and that this Court has the authority to
review matters not specifically raised or assigned as error by the parties, if their
consideration is necessary in arriving at a just resolution of the case.
The issue of whether or not petitioner was, during the period material, a
probationary or regular employee is of pivotal import. Its resolution is doubtless
necessary at arriving at a fair and just disposition of the controversy.
The Labor Arbiter cryptically held in his decision dated April 25, 2006 that:
Be that as it may, there appears no showing that indeed the said
September 20, 2004 Memorandum addressed to complainant was received
by him. Moreover, complainants tasked where he was assigned was a new
developed service. In this regard, it is noted:
Due process dictates that an employee be apprised
beforehand of the conditions of his employment and of the terms of
advancement therein. Precisely, implicit in Article 281 of the Labor
Code is the requirement that reasonable standards be previously
made known by the employer to the employee at the time of his
engagement (Ibid, citing Sameer Overseas Placement Agency, Inc.
vs. NLRC, G.R. No. 132564, October 20, 1999).[28]
From our review, it appears that the labor arbiter, and later the NLRC, considered
Aliling a probationary employee despite finding that he was not informed of the
reasonable standards by which his probationary employment was to be judged.
The CA, on the other hand, citing Cielo v. National Labor Relations Commission,
ruled that petitioner was a regular employee from the outset inasmuch as he was not
informed of the standards by which his probationary employment would be
measured. The CA wrote:
[29]

Petitioner was regularized from the time of the execution of the

employment contract on June 11, 2004, although respondent company had
arbitrarily shortened his tenure. As pointed out, respondent company did
not make known the reasonable standards under which he will
qualify
as
a
regular
employee
at
the
time
of
his
engagement. Hence, he was deemed to have been hired from day
one as a regular employee.[30] (Emphasis supplied.)
WWWEC, however, excepts on the argument that it put Aliling on notice that he
would be evaluated on the 3 rd and 5th months of his probationary employment. To
WWWEC, its efforts translate to sufficient compliance with the requirement that a
probationary worker be apprised of the reasonable standards for his regularization.
WWWEC invokes the ensuing holding in Alcira v. National Labor Relations
Commission[31] to support its case:

Page 185 of 497

Conversely, an employer is deemed to substantially comply with the

rule on notification of standards if he apprises the employee that he will be
subjected to a performance evaluation on a particular date after his hiring.
We agree with the labor arbiter when he ruled that:
In the instant case, petitioner cannot successfully say that he
was never informed by private respondent of the standards that he
must satisfy in order to be converted into regular status. This rans
(sic) counter to the agreement between the parties that after
five months of service the petitioners performance would be
evaluated. It is only but natural that the evaluation should be made
vis--vis the performance standards for the job. Private respondent
Trifona Mamaradlo speaks of such standard in her affidavit referring
to the fact that petitioner did not perform well in his assigned work
and his attitude was below par compared to the companys standard
required of him. (Emphasis supplied.)
WWWECs contention is untenable.
Alcira is cast under a different factual setting. There, the labor arbiter, the NLRC,
the CA, and even finally this Court were one in their findings that the employee
concerned knew, having been duly informed during his engagement, of the standards for
becoming a regular employee. This is in stark contrast to the instant case where the
element of being informed of the regularizing standards does not obtain. As
such, Alcira cannot be made to apply to the instant case.
To note, the June 2, 2004 letter-offer itself states that the regularization standards
or the performance norms to be used are still to be agreed upon by Aliling and his
supervisor. WWWEC has failed to prove that an agreement as regards thereto has been
reached. Clearly then, there were actually no performance standards to speak of. And
lest it be overlooked, Aliling was assigned to GX trucking sales, an activity entirely
different to the Seafreight Sales he was originally hired and trained for. Thus, at the time
of his engagement, the standards relative to his assignment with GX sales could not
have plausibly been communicated to him as he was under Seafreight Sales. Even for
this reason alone, the conclusion reached in Alcira is of little relevant to the instant case.
Based on the facts established in this case in light of extant jurisprudence, the
CAs holding as to the kind of employment petitioner enjoyed is correct. So was the NLRC
ruling, affirmatory of that of the labor arbiter. In the final analysis, one common thread
runs through the holding of the labor arbiter, the NLRC and the CA, i.e., petitioner Aliling,
albeit hired from managements standpoint as a probationary employee, was deemed a
regular employee by force of the following self-explanatory provisions:
Article 281 of the Labor Code
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
Page 186 of 497

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. (Emphasis supplied.)
Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of
the Labor Code
Sec. 6. Probationary employment. There is probationary
employment where the employee, upon his engagement, is made to
undergo a trial period where the employee 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:
xxxx
(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 supplied.)
To repeat, the labor arbiter, NLRC and the CA are agreed, on the basis of
documentary evidence adduced, that respondent WWWEC did not inform petitioner
Aliling of the reasonable standards by which his probation would be measured against at
the time of his engagement. The Court is loathed to interfere with this factual
determination. As We have held:
Settled is the rule that the findings of the Labor Arbiter, when
affirmed by the NLRC and the Court of Appeals, are binding on the
Supreme Court, unless patently erroneous.It is not the function of the
Supreme Court to analyze or weigh all over again the evidence already
considered in the proceedings below. The jurisdiction of this Court in a
petition for review on certiorari is limited to reviewing only errors of law, not
of fact, unless the factual findings being assailed are not supported by
evidence on record or the impugned judgment is based on a
misapprehension of facts.[32]
The more recent Peafrancia Tours and Travel Transport, Inc., v. Sarmiento[33] has
reaffirmed the above ruling, to wit:
Finally, the CA affirmed the ruling of the NLRC and adopted as its own
the latter's factual findings. Long-established is the doctrine that findings of
fact of quasi-judicial bodies x x x are accorded respect, even finality, if
supported by substantial evidence. When passed upon and upheld by the
CA, they are binding and conclusive upon this Court and will not normally be

Page 187 of 497

disturbed. Though this doctrine is not without exceptions, the Court finds
that none are applicable to the present case.
WWWEC also cannot validly argue that the factual findings being assailed
are not supported by evidence on record or the impugned judgment is based
on a misapprehension of facts. Its very own letter-offer of employment argues
against its above posture. Excerpts of the letter-offer:
Additionally, upon the effectivity of your probation, you and your
immediate superior are required to jointly define your objectives
compared with the job requirements of the position. Based on the
pre-agreed objectives, your performance shall be reviewed on the 3rd
month to assess your competence and work attitude. The 5th month
Performance Appraisal shall be the basis in elevating or confirming your
employment status from Probationary to Regular.
Failure to meet the job requirements during the probation stage
means that your services may be terminated without prior notice and
without recourse to separation pay. (Emphasis supplied.)
Respondents further allege that San Mateos email dated July 16, 2004 shows that
the standards for his regularization were made known to petitioner Aliling at the time of
his engagement. To recall, in that email message, San Mateo reminded Aliling of the
sales quota he ought to meet as a condition for his continued employment, i.e., that the
GX trucks should already be 80% full by August 5, 2004. Contrary to respondents
contention, San Mateos email cannot support their allegation on Aliling being informed
of the standards for his continued employment, such as the sales quota, at the time of
his engagement. As it were, the email message was sent to Aliling more than a month
after he signed his employment contract with WWWEC. The aforequoted Section 6 of the
Implementing Rules of Book VI, Rule VIII-A of the Code specifically requires the employer
to inform the probationary employee of such reasonable standards at the time of his
engagement, not at any time later; else, the latter shall be considered a regular
employee. Thus, pursuant to the explicit provision of Article 281 of the Labor Code,
Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code and
settled jurisprudence, petitioner Aliling is deemed a regular employee as of June 11,
2004, the date of his employment contract.

Petitioner was illegally dismissed

To justify fully the dismissal of an employee, the employer must, as a rule, prove
that the dismissal was for a just cause and that the employee was afforded due process
prior to dismissal. As a complementary principle, the employer has the onus of proving
with clear, accurate, consistent, and convincing evidence the validity of the dismissal. [34]
WWWEC had failed to discharge its twin burden in the instant case.

Page 188 of 497

First off, the attendant circumstances in the instant case aptly show that the issue
of petitioners alleged failure to achieve his quota, as a ground for terminating
employment, strikes the Court as a mere afterthought on the part of WWWEC. Consider:
Lariosas letter of September 25, 2004 already betrayed managements intention to
dismiss the petitioner for alleged unauthorized absences. Aliling was in fact made to
explain and he did so satisfactorily. But, lo and behold, WWWEC nonetheless proceeded
with its plan to dismiss the petitioner for non-satisfactory performance, although the
corresponding termination letter dated October 6, 2004 did not even specifically state
Alilings non-satisfactory performance, or that Alilings termination was by reason of his
failure to achieve his set quota.
What WWWEC considered as the evidence purportedly showing it gave Aliling the
chance to explain his inability to reach his quota was a purported September 20, 2004
memo of San Mateo addressed to the latter. However, Aliling denies having received
such letter and WWWEC has failed to refute his contention of non-receipt. In net effect,
WWWEC was at a loss to explain the exact just reason for dismissing Aliling.
At any event, assuming for argument that the petitioner indeed failed to achieve
his sales quota, his termination from employment on that ground would still be
unjustified.
Article 282 of the Labor Code considers any of the following acts or omission on
the part of the employee as just cause or ground for terminating employment:
(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 representatives; and
(e)
supplied)

Other

causes

analogous

to

the

foregoing. (Emphasis

In Lim v. National Labor Relations Commission,[35] the Court considered inefficiency

as an analogous just cause for termination of employment under Article 282 of the Labor
Code:
We cannot but agree with PEPSI that gross inefficiency falls
within the purview of other causes analogous to the foregoing,
this constitutes, therefore, just cause to terminate an employee
under Article 282 of the Labor Code. One is analogous to another if it is
susceptible of comparison with the latter either in general or in some
specific detail; or has a close relationship with the latter. Gross
inefficiency is closely related to gross neglect, for both involve specific
Page 189 of 497

acts of omission on the part of the employee resulting in damage to the

employer or to his business. In Buiser vs. Leogardo, this Court ruled that
failure to observed prescribed standards to inefficiency may constitute just
cause for dismissal. (Emphasis supplied.)
It did so anew in Leonardo v. National Labor Relations Commission [36] on the
following rationale:
An employer is entitled to impose productivity standards for its workers,
and in fact, non-compliance may be visited with a penalty even more severe
than demotion. Thus,
[t]he practice of a company in laying off workers because
they failed to make the work quota has been recognized in
this jurisdiction. (Philippine American Embroideries vs. Embroidery
and Garment Workers, 26 SCRA 634, 639). In the case at bar, the
petitioners' failure to meet the sales quota assigned to each of them
constitute a just cause of their dismissal, regardless of the permanent
or probationary status of their employment. Failure to observe
prescribed standards of work, or to fulfill reasonable work
assignments due to inefficiency may constitute just cause for
dismissal. Such inefficiency is understood to mean failure to attain
work goals or work quotas, either by failing to complete the same
within the allotted reasonable period, or by producing unsatisfactory
results. This management prerogative of requiring standards
may be availed of so long as they are exercised in good
faith for
the
advancement
of
the
employer's
interest. (Emphasis supplied.)
In fine, an employees failure to meet sales or work quotas falls under the concept
of gross inefficiency, which in turn is analogous to gross neglect of duty that is a just
cause for dismissal under Article 282 of the Code. However, in order for the quota
imposed to be considered a valid productivity standard and thereby validate a dismissal,
managements prerogative of fixing the quota must be exercised in good faith for the
advancement of its interest. The duty to prove good faith, however, rests with WWWEC
as part of its burden to show that the dismissal was for a just cause. WWWEC must show
that such quota was imposed in good faith. This WWWEC failed to do, perceptibly
because it could not. The fact of the matter is that the alleged imposition of the quota
was a desperate attempt to lend a semblance of validity to Alilings illegal dismissal. It
must be stressed that even WWWECs sales manager, Eve Amador (Amador), in an
internal e-mail to San Mateo, hedged on whether petitioner performed below or above
expectation:
Could not quantify level of performance as he as was tasked to handle a
new product (GX). Revenue report is not yet administered by IT on a monthto-month basis. Moreover, this in a way is an experimental activity.
Practically you have a close monitoring with Armand with regards to his
performance. Your assessment of him would be more accurate.
Being an experimental activity and having been launched for the first time, the
sales of GX services could not be reasonably quantified. This would explain why Amador
Page 190 of 497

implied in her email that other bases besides sales figures will be used to determine
Alilings performance. And yet, despite such a neutral observation, Aliling was still
dismissed for his dismal sales of GX services. In any event, WWWEC failed to
demonstrate the reasonableness and the bona fides on the quota imposition.
Employees must be reminded that while probationary employees do not enjoy
permanent status, they enjoy the constitutional protection of security of tenure. They
can only be terminated for cause or when they otherwise fail to meet the reasonable
standards made known to them by the employer at the time of their engagement.
[37]
Respondent WWWEC miserably failed to prove the termination of petitioner was for a
just cause nor was there substantial evidence to demonstrate the standards were made
known to the latter at the time of his engagement. Hence, petitioners right to security of
tenure was breached.
Alilings right to procedural due process was violated
As earlier stated, to effect a legal dismissal, the employer must show not only a
valid ground therefor, but also that procedural due process has properly been observed.
When the Labor Code speaks of procedural due process, the reference is usually to the
two (2)-written notice rule envisaged in Section 2 (III), Rule XXIII, Book V of the Omnibus
Rules Implementing the Labor Code, which provides:
Section 2. Standard of due process: requirements of notice. In all
cases of termination of employment, the following standards of due process
shall be substantially observed.
I. For termination of employment based on just causes as defined in
Article 282 of the Code:
(a) A written notice served on the employee specifying the
ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so desires,
is given opportunity to respond to the charge, present his evidence or
rebut the evidence presented against him; and
(c) A written notice [of] termination served on the employee
indicating that upon due consideration of all the circumstance,
grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the
employees last known address.
MGG Marine Services, Inc. v. NLRC [38] tersely described the mechanics of what may
be considered a two-part due process requirement which includes the two-notice rule, x
x x one, of the intention to dismiss, indicating therein his acts or omissions complained
against, and two, notice of the decision to dismiss; and an opportunity to answer and
rebut the charges against him, in between such notices.
Page 191 of 497

King of Kings Transport, Inc. v. Mamac [39] expounded on this procedural

requirement in this manner:
(1) The first written notice to be served on the employees should
contain the specific causes or grounds for termination against them, and a
directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. Reasonable opportunity
under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for
their defense. This should be construed as a period of at least five calendar
days from receipt of the notice xxxx Moreover, in order to enable the
employees to intelligently prepare their explanation and defenses, the
notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which
among the grounds under Art. 288 [of the Labor Code] is being charged
against the employees
(2) After serving the first notice, the employees should schedule and
conduct a hearing or conference wherein the employees will be given the
opportunity to (1) explain and clarify their defenses to the charge against
them; (2) present evidence in support of their defenses; and (3) rebut the
evidence presented against them by the management. During the hearing
or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice
x x x.
(3) After determining that termination is justified, the employer shall
serve the employees a written notice of termination indicating that: (1)
all the circumstances involving the charge against the employees have
been considered; and (2) grounds have been established to justify the
severance of their employment. (Emphasis in the original.)
Here, the first and second notice requirements have not been properly observed,
thus tainting petitioners dismissal with illegality.
The adverted memo dated September 20, 2004 of WWWEC supposedly informing
Aliling of the likelihood of his termination and directing him to account for his failure to
meet the expected job performance would have had constituted the charge sheet,
sufficient to answer for the first notice requirement, but for the fact that there is no proof
such letter had been sent to and received by him. In fact, in his December 13, 2004
Complainants Reply Affidavit, Aliling goes on to tag such letter/memorandum as
fabrication. WWWEC did not adduce proof to show that a copy of the letter was duly
served upon Aliling. Clearly enough, WWWEC did not comply with the first notice
requirement.

Page 192 of 497

Neither was there compliance with the imperatives of a hearing or conference. The
Court need not dwell at length on this particular breach of the due procedural
requirement. Suffice it to point out that the record is devoid of any showing of a hearing
or conference having been conducted. On the contrary, in its October 1, 2004 letter to
Aliling, or barely five (5) days after it served the notice of termination, WWWEC
acknowledged that it was still evaluating his case. And the written notice of termination
itself did not indicate all the circumstances involving the charge to justify severance of
employment.
Aliling is entitled to backwages
and separation pay in lieu of reinstatement
As may be noted, the CA found Alilings dismissal as having been illegally effected,
but nonetheless concluded that his employment ceased at the end of the probationary
period. Thus, the appellate court merely affirmed the monetary award made by the
NLRC, which consisted of the payment of that amount corresponding to the unserved
portion of the contract of employment.
The case disposition on the award is erroneous.
As earlier explained, Aliling cannot be rightfully considered as a mere probationary
employee. Accordingly, the probationary period set in the contract of employment dated
June 11, 2004 was of no moment. In net effect, as of that date June 11, 2004, Aliling
became part of the WWWEC organization as a regular employee of the company without
a fixed term of employment. Thus, he is entitled to backwages reckoned from the time
he was illegally dismissed on October 6, 2004, with a PhP 17,300.00 monthly salary, until
the finality of this Decision. This disposition hews with the Courts ensuing holding
in Javellana v. Belen:[40]
Article 279 of the Labor Code, as amended by Section 34 of Republic
Act 6715 instructs:
Art. 279. Security of Tenure. - In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual
reinstatement. (Emphasis supplied)
Clearly, the law intends the award of backwages and similar benefits
to accumulate past the date of the Labor Arbiters decision until the
dismissed employee is actually reinstated. But if, as in this case,
reinstatement is no longer possible, this Court has consistently ruled
that backwages shall be computed from the time of illegal
dismissal until the date the decisionbecomes final. (Emphasis
supplied.)

Page 193 of 497

Additionally, Aliling is entitled to separation pay in lieu of reinstatement on the

ground of strained relationship.
In Golden Ace Builders v. Talde,[41] the Court ruled:
The basis for the payment of backwages is different from that for the
award of separation pay. Separation pay is granted where reinstatement is
no longer advisable because of strained relations between the employee
and the employer. Backwages represent compensation that should have
been earned but were not collected because of the unjust dismissal. The
basis for computing backwages is usually the length of the employee's
service while that for separation pay is the actual period when the
employee was unlawfully prevented from working.
As to how both awards should be computed, Macasero v. Southern
Industrial Gases Philippines instructs:
[T]he award of separation pay is inconsistent with a finding
that there was no illegal dismissal, for under Article 279 of the Labor
Code and as held in a catena of cases, an employee who is dismissed
without just cause and without due process is entitled to backwages
and reinstatement or payment of separation pay in lieu thereof:
Thus, an illegally dismissed employee is entitled
to two reliefs: backwages and reinstatement. The two
reliefs provided are separate and distinct. In instances
where reinstatement is no longer feasible because of
strained relations between the employee and the
employer, separation pay is granted. In effect, an
illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
The normal consequences of respondents illegal
dismissal, then, are reinstatement without loss of seniority
rights, and payment of backwages computed from the time
compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an
option, separation pay equivalent to one (1) month salary for
every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of
backwages. x x x
Velasco v. National Labor Relations Commission emphasizes:
The accepted doctrine is that separation pay may avail in lieu
of reinstatement if reinstatement is no longer practical or in the best
interest of the parties. Separation pay in lieu of reinstatement may
likewise be awarded if the employee decides not to be reinstated.
(emphasis in the original; italics supplied)

Page 194 of 497

Under the doctrine of strained relations, the payment of

separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or
viable. On one hand, such payment liberates the employee from what
could be a highly oppressive work environment. On the other hand, it
releases the employer from the grossly unpalatable obligation of
maintaining in its employ a worker it could no longer trust.
Strained relations must be demonstrated as a fact, however,
to be adequately supported by evidence substantial evidence to show
that the relationship between the employer and the employee is indeed
strained as a necessary consequence of the judicial controversy.
In the present case, the Labor Arbiter found that actual
animosity existed between petitioner Azul and respondent as a
result of the filing of the illegal dismissal case. Such finding,
especially when affirmed by the appellate court as in the case at
bar, is binding upon the Court, consistent with the prevailing rules
that this Court will not try facts anew and that findings of facts of
quasi-judicial
bodies
are
accorded
great
respect,
even
finality. (Emphasis supplied.)
As the CA correctly observed, To reinstate petitioner [Aliling] would only create an
atmosphere of antagonism and distrust, more so that he had only a short stint with
respondent company.[42] The Court need not belabor the fact that the patent animosity
that had developed between employer and employee generated what may be
considered as the arbitrary dismissal of the petitioner.
Following the pronouncements of this Court Sagales v. Rustans Commercial
Corporation,[43] the computation of separation pay in lieu of reinstatement includes the
period for which backwages were awarded:
Thus, in lieu of reinstatement, it is but proper to award
petitioner separation pay computed at one-month salary for every
year of service, a fraction of at least six (6) months considered as
one whole year. In the computation of separation pay, the period
where backwages are awarded must be included. (Emphasis
supplied.)
Thus, Aliling is entitled to both backwages and separation pay (in lieu of
reinstatement) in the amount of one (1) months salary for every year of service, that is,
from June 11, 2004 (date of employment contract) until the finality of this decision with a
fraction of a year of at least six (6) months to be considered as one (1) whole year. As
determined by the labor arbiter, the basis for the computation of backwages and
separation pay will be Alilings monthly salary at PhP 17,300.
Finally, Aliling is entitled to an award of PhP 30,000 as nominal damages in
consonance with prevailing jurisprudence [44] for violation of due process.
Petitioner is not entitled to moral and exemplary damages
Page 195 of 497

In Nazareno v. City of Dumaguete,[45] the Court expounded on the requisite

elements for a litigants entitlement to moral damages, thus:
Moral damages are awarded if the following elements exist in the
case: (1) an injury clearly sustained by the claimant; (2) a culpable act or
omission factually established; (3) a wrongful act or omission by the
defendant as the proximate cause of the injury sustained by the claimant;
and (4) the award of damages predicated on any of the cases stated Article
2219 of the Civil Code. In addition, the person claiming moral damages
must prove the existence of bad faith by clear and convincing evidence for
the law always presumes good faith. It is not enough that one merely
suffered sleepless nights, mental anguish, and serious anxiety as the result
of the actuations of the other party. Invariably such action must be shown to
have been willfully done in bad faith or with ill motive. Bad faith, under
the law, does not simply connote bad judgment or negligence. It
imports a dishonest purpose or some moral obliquity and conscious
doing of a wrong, a breach of a known duty through some motive
or interest or ill will that partakes of the nature of fraud. (Emphasis
supplied.)
In alleging that WWWEC acted in bad faith, Aliling has the burden of proof to
present evidence in support of his claim, as ruled in Culili v. Eastern Telecommunications
Philippines, Inc.:[46]
According to jurisprudence, basic is the principle that good faith is
presumed and he who alleges bad faith has the duty to prove the same. By
imputing bad faith to the actuations of ETPI, Culili has the burden of proof to
present substantial evidence to support the allegation of unfair labor
practice. Culili failed to discharge this burden and his bare allegations
deserve no credit.
This was reiterated in United Claimants Association of NEA (UNICAN) v. National
Electrification Administration (NEA),[47] in this wise:
It must be noted that the burden of proving bad faith rests on the one
alleging it. As the Court ruled in Culili v. Eastern Telecommunications,
Inc., According to jurisprudence, basic is the principle that good faith is
presumed and he who alleges bad faith has the duty to prove the same.
Moreover, in Spouses Palada v. Solidbank Corporation, the Court stated,
Allegations of bad faith and fraud must be proved by clear and convincing
evidence.
Similarly, Aliling has failed to overcome such burden to prove bad faith on the part
of WWWEC. Aliling has not presented any clear and convincing evidence to show bad
faith. The fact that he was illegally dismissed is insufficient to prove bad faith. Thus, the
CA correctly ruled that [t]here was no sufficient showing of bad faith or abuse of
management prerogatives in the personal action taken against petitioner. [48] In Lambert
Pawnbrokers and Jewelry Corporation v. Binamira,[49] the Court ruled:

Page 196 of 497

A dismissal may be contrary to law but by itself alone, it does not

establish bad faith to entitle the dismissed employee to moral damages.
The award of moral and exemplary damages cannot be justified solely upon
the premise that the employer dismissed his employee without authorized
cause and due process.
The officers of WWWEC cannot be held
jointly and severally liable with the company
The CA held the president of WWWEC, Jose B. Feliciano, San Mateo and Lariosa
jointly and severally liable for the monetary awards of Aliling on the ground that the
officers are considered employers acting in the interest of the corporation. The CA
cited NYK International Knitwear Corporation Philippines (NYK) v. National Labor
Relations Commission[50] in support of its argument. Notably, NYK in turn cited A.C.
Ransom Labor Union-CCLU v. NLRC.[51]
Such ruling has been reversed by the Court in Alba v. Yupangco,[52] where the
Court ruled:
By Order of September 5, 2007, the Labor Arbiter denied
respondents motion to quash the 3rd alias writ. Brushing aside
respondents contention that his liability is merely joint, the Labor Arbiter
ruled:
Such issue regarding the personal liability of the officers of a
corporation for the payment of wages and money claims to its employees,
as in the instant case, has long been resolved by the Supreme Court in a
long list of cases [A.C. Ransom Labor Union-CLU vs. NLRC (142 SCRA 269)
and reiterated in the cases of Chua vs. NLRC (182 SCRA 353), Gudez vs.
NLRC (183 SCRA 644)]. In the aforementioned cases, the Supreme Court
has expressly held that the irresponsible officer of the corporation (e.g.
President) is liable for the corporations obligations to its workers. Thus,
respondent Yupangco, being the president of the respondent YL Land and
Ultra Motors Corp., is properly jointly and severally liable with the defendant
corporations for the labor claims of Complainants Alba and De Guzman. x x
x
xxxx
As reflected above, the Labor Arbiter held that respondents liability
is solidary.
There is solidary liability when the obligation expressly so states,
when the law so provides, or when the nature of the obligation so
requires. MAM Realty Development Corporation v. NLRC, on solidary liability
of corporate officers in labor disputes, enlightens:
x x x A corporation being a juridical entity, may act only
through its directors, officers and employees. Obligations incurred by
Page 197 of 497

them, acting as such corporate agents are not theirs but the direct
accountabilities of the corporation they represent. True solidary
liabilities may at times be incurred but only when exceptional
circumstances warrant such as, generally, in the following cases:
1. When directors and trustees or, in appropriate cases,
the officers of a corporation:
(a) vote for or assent to patently unlawful acts of the
corporation;
(b) act in bad faith or with gross negligence in directing
the corporate affairs;
xxxx
In labor cases, for instance, the Court has held corporate directors
and officers solidarily liable with the corporation for the termination of
employment of employees done with malice or in bad faith.
A review of the facts of the case does not reveal ample and satisfactory proof that
respondent officers of WWEC acted in bad faith or with malice in effecting the
termination of petitioner Aliling. Even assuming arguendo that the actions of WWWEC
are ill-conceived and erroneous, respondent officers cannot be held jointly and solidarily
with it. Hence, the ruling on the joint and solidary liability of individual respondents must
be recalled.
Aliling is entitled to Attorneys Fees and Legal Interest
Petitioner Aliling is also entitled to attorneys fees in the amount of ten percent
(10%) of his total monetary award, having been forced to litigate in order to seek redress
of his grievances, pursuant to Article 111 of the Labor Code and following our ruling
in Exodus International Construction Corporation v. Biscocho,[53] to wit:
In Rutaquio v. National Labor Relations Commission, this Court held that:
It is settled that in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to protect
his rights and interest, the award of attorneys fees is legally and
morally justifiable.
In Producers Bank of the Philippines v. Court of Appeals this Court
ruled that:
Attorneys fees may be awarded when a party is compelled to litigate
or to incur expenses to protect his interest by reason of an unjustified
act of the other party.
While in Lambert Pawnbrokers and Jewelry Corporation,[54] the Court specifically
ruled:

Page 198 of 497

However, the award of attorneys fee is warranted pursuant to Article

111 of the Labor Code. Ten (10%) percent of the total award is usually the
reasonable amount of attorneys fees awarded. It is settled that where an
employee was forced to litigate and, thus, incur expenses to protect his
rights and interest, the award of attorneys fees is legally and morally
justifiable.
Finally, legal interest shall be imposed on the monetary awards herein granted at
the rate of 6% per annum from October 6, 2004 (date of termination) until fully paid.
WHEREFORE, the petition is PARTIALLY GRANTED. The July 3, 2008 Decision of
the Court of Appeals in CA-G.R. SP No. 101309 is hereby MODIFIED to read:
WHEREFORE, the
petition
is PARTIALLY
GRANTED. The assailed Resolutions of respondent (Third Division) National
Labor
Relations
Commission
are AFFIRMED,
with
the
following MODIFICATION/CLARIFICATION: Respondent Wide Wide World
Express Corp. is liable to pay Armando Aliling the following: (a) backwages
reckoned from October 6, 2004 up to the finality of this Decision based on a
salary of PhP 17,300 a month, with interest at 6% per annum on the
principal amount from October 6, 2004 until fully paid; (b) the additional
sum equivalent to one (1) month salary for every year of service, with a
fraction of at least six (6) months considered as one whole year based on
the period from June 11, 2004 (date of employment contract) until the
finality of this Decision, as separation pay; (c) PhP 30,000 as nominal
damages; and (d) Attorneys Fees equivalent to 10% of the total award.
SO ORDERED.

Republic of the Philippines

Supreme Court
Baguio City

SECOND DIVISION

YOLANDA M. MERCADO,
CHARITO S. DE LEON, DIANA R.
Page 199 of 497

G.R. No. 183572

Present:
LACHICA, MARGARITO M. ALBA,
JR., and FELIX A. TONOG,
CARPIO, J., Chairperson,

Petitioners,

BRION,
DEL CASTILLO,

versus

PEREZ, and

AMA COMPUTER COLLEGEPARAAQUE CITY, INC. ,

MENDOZA, JJ.

Promulgated:

Respondent.

April 13, 2010

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

DECISION

BRION, J.:

The petitioners Yolanda M. Mercado (Mercado), Charito S. De Leon (De Leon),

Diana R. Lachica (Lachica), Margarito M. Alba, Jr. (Alba, Jr.,), and Felix A. Tonog
(Tonog), all former faculty members of AMA Computer College-Paraaque City, Inc.
(AMACC) assail in this petition for review on certiorari[1] the Court of Appeals (CA)
decision of November 29,
Page 200 of 497

2007[2] and its resolution of June 20, 2008 [3] that set aside the National Labor Relations
Commissions (NLRC) resolution dated July 18, 2005.[4]

THE FACTUAL ANTECEDENTS

The background facts are not disputed and are summarized below.

AMACC is an educational institution engaged in computer-based education in the

country. One of AMACCs biggest schools in the country is its branch at ParaaqueCity.
The petitioners were faculty members who started teaching at AMACC on May 25,
1998. The petitioner Mercado was engaged as a Professor 3, while petitioner Tonog was
engaged as an Assistant Professor 2. On the other hand, petitioners De Leon, Lachica
and Alba, Jr., were all engaged as Instructor 1. [5] The petitioners executed individual
Teachers Contracts for each of the trimesters that they were engaged to teach, with the
following common stipulation:[6]

1.

POSITION. The TEACHER has agreed to accept a non-tenured

appointment to work in the College of xxx effective xxx to xxx or for
the duration of the last term that the TEACHER is given a
teaching load based on the assignment duly approved by the
DEAN/SAVP-COO. [Emphasis supplied]

For the school year 2000-2001, AMACC implemented new faculty screening
guidelines, set forth in its Guidelines on the Implementation of AMACC Faculty Plantilla.
[7]
Under the new screening guidelines, teachers were to be hired or maintained based on
extensive teaching experience, capability, potential, high academic qualifications and
research background. The performance standards under the new screening guidelines
were also used to determine the present faculty members entitlement to salary
increases.The petitioners failed to obtain a passing rating based on the
performance standards; hence AMACC did not give them any salary increase. [8]

Because of AMACCs action on the salary increases, the petitioners filed a

complaint with the Arbitration Branch of the NLRC on July 25, 2000, for underpayment of
wages, non-payment of overtime and overload compensation, 13 th month pay, and for
discriminatory practices.[9]
Page 201 of 497

On September 7, 2000, the petitioners individually received a memorandum from

AMACC, through Human Resources Supervisor Mary Grace Beronia, informing them that
with the expiration of their contract to teach, their contract would no longer be renewed.
[10]
The memorandum[11] entitled Notice of Non-Renewal of Contract states in full:

In view of the expiration of your contract to teach with AMACCParanaque, We wish to inform you that your contract shall no longer be
renewed effective Thirty (30) days upon receipt of this notice. We therefore
would like to thank you for your service and wish you good luck as you
pursue your career.

You are hereby instructed to report to the HRD for further

instruction. Please bear in mind that as per company policy, you are
required to accomplish your clearance and turn-over all documents and
accountabilities to your immediate superior.

For your information and guidance

The petitioners amended their labor arbitration complaint to include the charge of
illegal dismissal against AMACC. In their Position Paper, the petitioners claimed that their
dismissal was illegal because it was made in retaliation for their complaint for monetary
benefits and discriminatory practices against AMACC. The petitioners also contended
that AMACC failed to give them adequate notice; hence, their dismissal was ineffectual.
[12]

AMACC contended in response that the petitioners worked under a contracted

term under a non-tenured appointment and were still within the three-year probationary
period for teachers. Their contracts were not renewed for the following term because
they failed to pass the Performance Appraisal System for Teachers (PAST) while others
failed to comply with the other requirements for regularization, promotion, or increase in
salary. This move, according to AMACC, was justified since the school has to maintain its
high academic standards.[13]

The Labor Arbiter Ruling

On March 15, 2002, Labor Arbiter (LA) Florentino R. Darlucio declared in his
decision[14] that the petitioners had been illegally dismissed, and ordered AMACC to
Page 202 of 497

reinstate them to their former positions without loss of seniority rights and to pay them
full backwages, attorneys fees and 13th month pay. The LA ruled that Article 281 of the
Labor Code on probationary employment applied to the case; that AMACC allowed the
petitioners to teach for the first semester of school year 2000-200; that AMACC did not
specify who among the petitioners failed to pass the PAST and who among them did not
comply with the other requirements of regularization, promotions or increase in salary;
and that the petitioners dismissal could not be sustained on the basis of AMACCs
vague and general allegations without substantial factual basis. [15] Significantly, the LA
found no discrimination in the adjustments for the salary rate of the faculty members
based on the performance and other qualification which is an exercise of management
prerogative.[16] On this basis, the LA paid no heed to the claims for salary increases.

The NLRC Ruling

On appeal, the NLRC in a Resolution dated July 18, 2005 [17] denied AMACCs appeal
for lack of merit and affirmed in toto the LAs ruling. The NLRC, however, observed that
the applicable law is Section 92 of the Manual of Regulations for Private Schools (which
mandates a probationary period of nine consecutive trimesters of satisfactory service for
academic personnel in the tertiary level where collegiate courses are offered on a
trimester basis), not Article 281 of the Labor Code (which prescribes a probationary
period of six months) as the LA ruled. Despite this observation, the NLRC affirmed the
LAs finding of illegal dismissal since the petitioners were terminated on the basis of
standards that were only introduced near the end of their probationary period.

The NLRC ruled that the new screening guidelines for the school year 2000-20001
cannot be imposed on the petitioners and their employment contracts since the new
guidelines were not imposed when the petitioners were first employed in
1998. According to the NLRC, the imposition of the new guidelines violates Section 6(d)
of Rule I, Book VI of the Implementing Rules of the Labor Code, which provides that 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. Citing our ruling in Orient Express Placement Philippines v. NLRC,[18] the
NLRC stressed that the rudiments of due process demand that employees should be
informed beforehand of the conditions of their employment as well as the basis for their
advancement.

AMACC elevated the case to the CA via a petition for certiorari under Rule 65 of
the Rules of Court. It charged that the NLRC committed grave abuse of discretion in: (1)
ruling that the petitioners were illegally dismissed; (2) refusing to recognize and give
effect to the petitioners valid term of employment; (3) ruling that AMACC cannot apply
the performance standards generally applicable to all faculty members; and (4) ordering
the petitioners reinstatement and awarding them backwages and attorneys fees.

Page 203 of 497

The CA Ruling

In a decision issued on November 29, 2007, [19] the CA granted AMACCs petition
for certiorari and dismissed the petitioners complaint for illegal dismissal.

The CA ruled that under the Manual for Regulations for Private Schools, a teaching
personnel in a private educational institution (1) must be a full time teacher; (2) must
have rendered three consecutive years of service; and (3) such service must be
satisfactory before he or she can acquire permanent status.

The CA noted that the petitioners had not completed three (3) consecutive years
of service (i.e. six regular semesters or nine consecutive trimesters of satisfactory
service) and were still within their probationary period; their teaching stints only covered
a period of two (2) years and three (3) months when AMACC decided not to renew their
contracts on September 7, 2000.

The CA effectively found reasonable basis for AMACC not to renew the petitioners
contracts. To the CA, the petitioners were not actually dismissed; their respective
contracts merely expired and were no longer renewed by AMACC because they failed to
satisfy the schools standards for the school year 2000-2001 that measured their fitness
and aptitude to teach as regular faculty members. The CA emphasized that in the
absence of any evidence of bad faith on AMACCs part, the court would not disturb or
nullify its discretion to set standards and to select for regularization only the teachers
who qualify, based on reasonable and non-discriminatory guidelines.

The CA disagreed with the NLRCs ruling that the new guidelines for the school
year 2000-20001 could not be imposed on the petitioners and their employment
contracts. The appellate court opined that AMACC has the inherent right to upgrade the
quality of computer education it offers to the public; part of this pursuit is the
implementation of continuing evaluation and screening of its faculty members for
academic excellence. The CA noted that the nature of education AMACC offers demands
that the school constantly adopt progressive performance standards for its faculty to
ensure that they keep pace with the rapid developments in the field of information
technology.

Finally, the CA found that the petitioners were hired on a non-tenured basis and for
a fixed and predetermined term based on the Teaching Contract exemplified by the
contract between the petitioner Lachica and AMACC. The CA ruled that the non-renewal
of the petitioners teaching contracts is sanctioned by the doctrine laid down in Brent
School, Inc. v. Zamora[20] where the Court recognized the validity of contracts providing
for fixed-period employment.
Page 204 of 497

THE PETITION

The petitioners cite the following errors in the CA decision: [21]

1)

The CA gravely erred in reversing the LA and NLRC illegal dismissal rulings;
and

2)

The CA gravely erred in not ordering their reinstatement with full,

backwages.

The petitioners submit that the CA should not have disturbed the findings of the
LA and the NLRC that they were illegally dismissed; instead, the CA should have
accorded great respect, if not finality, to the findings of these specialized bodies as these
findings were supported by evidence on record. Citing our ruling in Soriano v. National
Labor Relations Commission,[22] the petitioners contend that in certiorari proceedings
under Rule 65 of the Rules of Court, the CA does not assess and weigh the sufficiency of
evidence upon which the Labor Arbiter and the NLRC based their conclusions. They
submit that the CA erred when it substituted its judgment for that of the Labor Arbiter
and the NLRC who were the triers of facts who had the opportunity to review the
evidence extensively.

On the merits, the petitioners argue that the applicable law on probationary
employment, as explained by the LA, is Article 281 of the Labor Code which mandates a
period of six (6) months as the maximum duration of the probationary period unless
there is a stipulation to the contrary; that the CA should not have disturbed the LAs
conclusion that the AMACC failed to support its allegation that they did not qualify under
the new guidelines adopted for the school year 2000-2001; and that they were illegally
dismissed; their employment was terminated based on standards that were not made
known to them at the time of their engagement. On the whole, the petitioners argue that
the LA and the NLRC committed no grave abuse of discretion that the CA can validly cite.

Page 205 of 497

THE CASE FOR THE RESPONDENT

In their Comment,[23] AMACC notes that the petitioners raised no substantial

argument in support of their petition and that the CA correctly found that the petitioners
were hired on a non-tenured basis and for a fixed or predetermined term. AMACC
stresses that the CA was correct in concluding that no actual dismissal transpired; it
simply did not renew the petitioners respective employment contracts because of their
poor performance and failure to satisfy the schools standards.

AMACC also asserts that the petitioners knew very well that the applicable
standards would be revised and updated from time to time given the nature of the
teaching profession. The petitioners also knew at the time of their engagement that
they must comply with the schools regularization policies as stated in the Faculty
Manual. Specifically, they must obtain a passing rating on the Performance
Appraisal for Teachers (PAST) the primary instrument to measure the
performance of faculty members.

Since the petitioners were not actually dismissed, AMACC submits that the CA
correctly ruled that they are not entitled to reinstatement, full backwages and attorneys
fees.

THE COURTS RULING

We find the petition meritorious.

Page 206 of 497

The CAs Review of Factual Findings

under Rule 65

We agree with the petitioners that, as a rule in certiorari proceedings under Rule
65 of the Rules of Court, the CA does not assess and weigh each piece of evidence
introduced in the case. The CA only examines the factual findings of the NLRC to
determine whether or not the conclusions are supported by substantial evidence whose
absence points to grave abuse of discretion amounting to lack or excess of jurisdiction.
[24]
In the recent case of Protacio v. Laya Mananghaya & Co.,[25] we emphasized that:

As a general rule, in certiorari proceedings under Rule 65 of the Rules

of Court, the appellate court does not assess and weigh the sufficiency of
evidence upon which the Labor Arbiter and the NLRC based their
conclusion. The query in this proceeding is limited to the determination of
whether or not the NLRC acted without or in excess of its jurisdiction or with
grave abuse of discretion in rendering its decision. However, as an
exception, the appellate court may examine and measure the
factual findings of the NLRC if the same are not supported by
substantial evidence. The Court has not hesitated to affirm the
appellate courts reversals of the decisions of labor tribunals if
they are not supported by substantial evidence.[Emphasis supplied]

As discussed below, our review of the records and of the CA decision shows that
the CA erred in recognizing that grave abuse of discretion attended the NLRCs
conclusion that the petitioners were illegally dismissed. Consistent with this conclusion,
the evidence on record show that AMACC failed to discharge its burden of proving by
substantial evidence the just cause for the non-renewal of the petitioners contracts.

In Montoya v. Transmed Manila Corporation,[26] we laid down our basic approach in

the review of Rule 65 decisions of the CA in labor cases, as follows:

In a Rule 45 review, we consider the correctness of the assailed

CA decision, in contrast with the review for jurisdictional error that we
undertake under Rule 65. Furthermore, Rule 45 limits us to the review
of questions of law raised against the assailed CA decision. In ruling for
legal correctness, we have to view the CA decision in the same context that
the petition forcertiorari it ruled upon was presented to it; we have to
Page 207 of 497

examine the CA decision from the prism of whether it correctly

determined the presence or absence of grave abuse of discretion in
the NLRC decision before it, not on the basis of whether the NLRC
decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. This is the
approach that should be basic in a Rule 45 review of a CA ruling in a labor
case. In question form, the question to ask is: Did the CA correctly
determine whether the NLRC committed grave abuse of discretion
in ruling on the case?

Following this approach, our task is to determine whether the CA correctly found
that the NLRC committed grave abuse of discretion in ruling that the petitioners were
illegally dismissed.

Legal Environment in the Employment of Teachers

a. Rule on Employment on Probationary Status

A reality we have to face in the consideration of employment on probationary

status of teaching personnel is that they are not governed purely by the Labor
Code. The Labor Code is supplemented with respect to the period of probation by
special rules found in the Manual of Regulations for Private Schools. [27] On the matter
of probationary period, Section 92 of these regulations provides:

Section 92. Probationary Period. Subject in all instances to

compliance with the Department and school requirements, the
probationary period for academic personnel shall not be more than three (3)
consecutive years of satisfactory service for those in the elementary and
secondary levels, six (6) consecutive regular semesters of satisfactory
service for those in the tertiary level, and nine (9) consecutive
trimesters of satisfactory service for those in the tertiary level
where collegiate courses are offered on a trimester basis. [Emphasis
supplied]

Page 208 of 497

The CA pointed this out in its decision (as the NLRC also did), and we confirm the
correctness of this conclusion. Other than on the period, the following quoted portion of
Article 281 of the Labor Code still fully applies:

x x x The services of an employee who has been engaged on a

probationary basis may be terminated for a just cause when he fails to
qualify as a regular employee in accordance withreasonable 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. [Emphasis supplied]

b. Fixed-period Employment

The use of employment for fixed periods during the teachers probationary period
is likewise an accepted practice in the teaching profession. We mentioned this in
passing in Magis Young Achievers Learning Center v. Adelaida P. Manalo, [28] albeit a case
that involved elementary, not tertiary, education, and hence spoke of a school year
rather than a semester or a trimester. We noted in this case:

The common practice is for the employer and the teacher to

enter into a contract, effective for one school year. At the end of the
school year, the employer has the option not to renew the contract,
particularly considering the teachers performance. If the contract is not
renewed, the employment relationship terminates. If the contract is
renewed, usually for another school year, the probationary employment
continues. Again, at the end of that period, the parties may opt to renew or
not to renew the contract. If renewed, this second renewal of the contract
for another school year would then be the last year since it would be the
third school year of probationary employment. At the end of this third
year, the employer may now decide whether to extend a permanent
appointment to the employee, primarily on the basis of the
employee having met the reasonable standards of competence and
efficiency set by the employer. For the entire duration of this
three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on
probation, he cannot automatically claim security of tenure and
Page 209 of 497

compel the employer to renew his employment contract. It is when

the yearly contract is renewed for the third time that Section 93 of the
Manual becomes operative, and the teacher then is entitled to regular or
permanent employment status.

It is important that the contract of probationary employment specify

the period or term of its effectivity. The failure to stipulate its precise
duration could lead to the inference that the contract is binding for the full
three-year probationary period.

We have long settled the validity of a fixed-term contract in the case Brent School, Inc. v.
Zamora[29] that AMACC cited. Significantly, Brent happened in a school setting. Care
should be taken, however, in reading Brent in the context of this case as Brent did not
involve any probationary employment issue; it dealt purely and simply with the validity
of a fixed-term employment under the terms of the Labor Code, then newly issued and
which does not expressly contain a provision on fixed-term employment.

c.

Academic and Management Prerogative

Last but not the least factor in the academic world, is that a school enjoys
academic freedom a guarantee that enjoys protection from the Constitution no
less. Section 5(2) Article XIV of the Constitution guarantees all institutions of higher
learning academic freedom.[30]

The institutional academic freedom includes the right of the school or college to
decide and adopt its aims and objectives, and to determine how these objections can
best be attained, free from outside coercion or interference, save possibly when the
overriding public welfare calls for some restraint. The essential freedoms subsumed in
the term academic freedom encompass the freedom of the school or college to
determine for itself: (1) who may teach; (2) who may be taught; (3) how lessons shall be
taught; and (4) who may be admitted to study. [31]

AMACCs right to academic freedom is particularly important in the present case,

because of the new screening guidelines for AMACC faculty put in place for the school
year 2000-2001. We agree with the CA that AMACC has the inherent right to establish
high standards of competency and efficiency for its faculty members in order to achieve
and maintain academic excellence. The schools prerogative to provide standards for its
Page 210 of 497

teachers and to determine whether or not these standards have been met is in
accordance with academic freedom that gives the educational institution the right to
choose who should teach.[32] In Pea v. National Labor Relations Commission,[33] we
emphasized:

It is the prerogative of the school to set high standards of efficiency for its
teachers since quality education is a mandate of the Constitution. As long as
the standards fixed are reasonable and not arbitrary, courts are not at
liberty to set them aside. Schools cannot be required to adopt standards
which barely satisfy criteria set for government recognition.

The same academic freedom grants the school the autonomy to decide for itself
the terms and conditions for hiring its teacher, subject of course to the overarching
limitations under the Labor Code. Academic freedom, too, is not the only legal basis for
AMACCs issuance of screening guidelines. The authority to hire is likewise covered and
protected by its management prerogative the right of an employer to regulate all
aspects of employment, such as hiring, the freedom to prescribe work assignments,
working methods, process to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of workers.
[34]
Thus, AMACC has every right to determine for itself that it shall use fixed-term
employment contracts as its medium for hiring its teachers. It also acted within the
terms of the Manual of Regulations for Private Schools when it recognized the petitioners
to be merely on probationary status up to a maximum of nine trimesters.

The Conflict: Probationary Status

and Fixed-term Employment

The existence of the term-to-term contracts covering the petitioners employment

is not disputed, nor is it disputed that they were on probationary status not permanent
or regular status from the time they were employed on May 25, 1998 and until the
expiration of their Teaching Contracts on September 7, 2000. As the CA correctly found,
their teaching stints only covered a period of at least seven (7) consecutive trimesters or
two (2) years and three (3) months of service. This case, however, brings to the
fore the essential question of which, between the two factors affecting
employment, should prevail given AMACCs position that the teachers
contracts expired and it had the right not to renew them. In other words, should
the teachers probationary status be disregarded simply because the contracts were
fixed-term?

Page 211 of 497

The provision on employment on probationary status under the Labor Code [35] is a
primary example of the fine balancing of interests between labor and management that
the Code has institutionalized pursuant to the underlying intent of the Constitution. [36]

On the one hand, employment on probationary status affords management the

chance to fully scrutinize the true worth of hired personnel before the full force of the
security of tenure guarantee of the Constitution comes into play. [37] Based on the
standards set at the start of the probationary period, management is given the widest
opportunity during the probationary period to reject hirees who fail to meet its own
adopted but reasonable standards.[38] These standards, together with the just[39] and
authorized causes[40] for termination of employment the Labor Code expressly provides,
are the grounds available to terminate the employment of a teacher on probationary
status. For example, the school may impose reasonably stricter attendance or report
compliance records on teachers on probation, and reject a probationary teacher for
failing in this regard, although the same attendance or compliance record may not be
required for a teacher already on permanent status. At the same time, the same just
and authorizes causes for dismissal under the Labor Code apply to probationary
teachers, so that they may be the first to be laid-off if the school does not have enough
students for a given semester or trimester. Termination of employment on this basis is
an authorized cause under the Labor Code. [41]

Labor, for its part, is given the protection during the probationary period of
knowing the company standards the new hires have to meet during the probationary
period, and to be judged on the basis of these standards, aside from the usual standards
applicable to employees after they achieve permanent status. Under the terms of the
Labor Code, these standards should be made known to the teachers on probationary
status at the start of their probationary period, or at the very least under the
circumstances of the present case, at the start of the semester or the trimester during
which the probationary standards are to be applied. Of critical importance in invoking a
failure to meet the probationary standards, is that the school should show as a matter
of due process how these standards have been applied. This is effectively the second
notice in a dismissal situation that the law requires as a due process guarantee
supporting the security of tenure provision, [42] and is in furtherance, too, of the basic rule
in employee dismissal that the employer carries the burden of justifying a dismissal.
[43]
These rules ensure compliance with the limited security of tenure guarantee the law
extends to probationary employees.[44]

Page 212 of 497

When fixed-term employment is brought into play under the above probationary
period rules, the situation as in the present case may at first blush look muddled as
fixed-term employment is in itself a valid employment mode under Philippine law and
jurisprudence.[45] The conflict, however, is more apparent than real when the respective
nature of fixed-term employment and of employment on probationary status are closely
examined.

The fixed-term character of employment essentially refers to the period agreed

upon between the employer and the employee; employment exists only for the duration
of the term and ends on its own when the term expires. In a sense, employment on
probationary status also refers to a period because of the technical meaning probation
carries in Philippine labor law a maximum period of six months, or in the academe, a
period of three years for those engaged in teaching jobs. Their similarity ends there,
however, because of the overriding meaning that being on probation connotes, i.e., a
process of testing and observing the character or abilities of a person who is new to a
role or job.[46]

Understood in the above sense, the essentially protective character of

probationary status for management can readily be appreciated. But this same
protective character gives rise to the countervailing but equally protective rule that the
probationary period can only last for a specific maximum period and under reasonable,
well-laid and properly communicated standards. Otherwise stated, within the period of
the probation, any employer move based on the probationary standards and affecting
the continuity of the employment must strictly conform to the probationary rules.

Under the given facts where the school year is divided into trimesters, the school
apparently utilizes its fixed-term contracts as a convenient arrangement dictated by the
trimestral system and not because the workplace parties really intended to limit the
period of their relationship to any fixed term and to finish this relationship at the end of
that term. If we pierce the veil, so to speak, of the parties so-called fixed-term
employment contracts, what undeniably comes out at the core is a fixed-term contract
conveniently used by the school to define and regulate its relations with its
teachers during their probationary period.

Page 213 of 497

To be sure, nothing is illegitimate in defining the school-teacher relationship in this

manner. The school, however, cannot forget that its system of fixed-term contract is a
system that operates during the probationary period and for this reason is subject to the
terms of Article 281 of the Labor Code. Unless this reconciliation is made, the
requirements of this Article on probationary status would be fully negated as
the school may freely choose not to renew contracts simply because their
terms have expired. The inevitable effect of course is to wreck the scheme
that the Constitution and the Labor Code established to balance relationships
between labor and management.

Given the clear constitutional and statutory intents, we cannot but conclude that
in a situation where the probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers, Article 281 should assume primacy and the
fixed-period character of the contract must give way. This conclusion is immeasurably
strengthened by the petitioners and the AMACCs hardly concealed expectation that the
employment on probation could lead to permanent status, and that the contracts are
renewable unless the petitioners fail to pass the schools standards.

To highlight what we mean by a fixed-term contract specifically used for the fixed
term it offers, a replacement teacher, for example, may be contracted for a period of one
year to temporarily take the place of a permanent teacher on a one-year study
leave. The expiration of the replacement teachers contracted term, under the
circumstances, leads to no probationary status implications as she was never employed
on probationary basis; her employment is for a specific purpose with particular focus on
the term and with every intent to end her teaching relationship with the school upon
expiration of this term.

If the school were to apply the probationary standards (as in fact it says it did in
the present case), these standards must not only be reasonable but must have also been
communicated to the teachers at the start of the probationary period, or at the very
least, at the start of the period when they were to be applied. These terms, in addition
to those expressly provided by the Labor Code, would serve as the just cause for the
termination of the probationary contract. As explained above, the details of this finding
of just cause must be communicated to the affected teachers as a matter of due
process.

Page 214 of 497

AMACC, by its submissions, admits that it did not renew the petitioners contracts
because they failed to pass the Performance Appraisal System for Teachers (PAST) and
other requirements for regularization that the school undertakes to maintain its high
academic standards.[47] The evidence is unclear on the exact terms of the standards,
although the school also admits that these were standards under the Guidelines on the
Implementation of AMACC Faculty Plantilla put in place at the start of school year 20002001.

While we can grant that the standards were duly communicated to the petitioners
and could be applied beginning the 1st trimester of the school year 2000-2001, glaring
and very basic gaps in the schools evidence still exist. The exact terms of the standards
were never introduced as evidence; neither does the evidence show how these
standards were applied to the petitioners. [48] Without these pieces of evidence
(effectively, the finding of just cause for the non-renewal of the petitioners contracts),
we have nothing to consider and pass upon as valid or invalid for each of the
petitioners. Inevitably, the non-renewal (or effectively, the termination of employment of
employees on probationary status) lacks the supporting finding of just cause that the law
requires and, hence, is illegal.

In this light, the CA decision should be reversed. Thus, the LAs decision, affirmed
as to the results by the NLRC, should stand as the decision to be enforced, appropriately
re-computed to consider the period of appeal and review of the case up to our level.

Given the period that has lapsed and the inevitable change of circumstances that
must have taken place in the interim in the academic world and at AMACC, which
changes inevitably affect current school operations, we hold that - in lieu of
reinstatement - the petitioners should be paid separation pay computed on a trimestral
basis from the time of separation from service up to the end of the complete trimester
preceding the finality of this Decision. [49] The separation pay shall be in addition to the
other awards, properly recomputed, that the LA originally decreed.

WHEREFORE, premises considered, we hereby GRANT the petition, and,

consequently, REVERSE and SET ASIDE the Decision of the Court of Appeals dated
November 29, 2007 and its Resolution dated June 20, 2008 in CA-G.R. SP No. 96599. The
Page 215 of 497

Labor Arbiters decision of March 15, 2002, subsequently affirmed as to the results by the
National Labor Relations Commission, stands and should be enforced with appropriate recomputation to take into account the date of the finality of this Decision.
In lieu of reinstatement, AMA Computer College-Paraaque City, Inc. is
hereby DIRECTED to pay separation pay computed on a trimestral basis from the time of
separation from service up to the end of the complete trimester preceding the finality of
this Decision. For greater certainty, the petitioners are entitled to:
(a)

backwages and 13th month pay computed from September 7,

2000 (the date AMA Computer College-Paraaque City, Inc. illegally
dismissed the petitioners) up to the finality of this Decision;

(b)

monthly honoraria (if applicable) computed from September 7,

2000 (the time of separation from service) up to the finality of this
Decision; and

(c)

separation pay on a trimestral basis from September 7, 2000 (the time

of separation from service) up to the end of the complete trimester
preceding the finality of this Decision.

The labor arbiter is hereby ORDERED to make another re-computation according

to the above directives. No costs.

SO ORDERED.
THIRD DIVISION
PETROLEUM SHIPPING LIMITED
(formerly ESSO INTERNATIONAL
SHIPPING (BAHAMAS) CO., LTD.)
and TRANS-GLOBAL MARITIME
AGENCY, INC.,
Petitioners,

- versus NATIONAL LABOR RELATIONS

COMMISSION and FLORELLO
W. TANCHICO,
Respondents.

G.R. No. 148130

Present:
QUISUMBING, J.,
Chairman,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
Promulgated:
June 16, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Page 216 of 497

DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review [1] assailing the 25 January
2001 Decision[2] and 7 May 2001 Resolution[3] 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. Tanchicoaccepted 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 13 th month pay. In view of the enactment of Republic
Act No. 8042 (RA 8042)[4] 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 Decision[5] 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[6] of 3 September 1998, the NLRC affirmed the Decision of Labor
Arbiter
De
Vera. Tanchico filed
a
motion
for
reconsideration. In
a
Resolution[7]promulgated on 29 March 1999, the NLRC reconsidered its 3 September
1998 Resolution, as follows:
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.
Page 217 of 497

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]
Esso and Trans-Global moved for the reconsideration of the 29 March
1999 Resolution.[9] In its 27 July 1999 Resolution,[10] 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 coverage
of Presidential Decree No. 851, as amended (PD 851)[11] 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]

Page 218 of 497

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 complaint.[13]
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.,[14] the Court traced its ruling in a
number of cases that seafarers are contractual, not regular, employees. Thus, in Brent
School, Inc. v. Zamora,[15] 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 Code. In Coyoca v. NLRC,[16] 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[17] 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:
Page 219 of 497

[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.
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

Page 220 of 497

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 are contractual
employees. They can not be considered regular employees. x x x[18]
The Court reiterated the Millares ruling in Gu-Miro v. Adorable[19] 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 13 th month pay on its ruling
that Tanchico was a regular employee. The Court of Appeals also ruled that petitioners
are not 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 WHEREASclauses
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.
[20]

Tanchicos employment is governed by his Contract of Enlistment (Contract).

The Contract has been approved by the POEA in accordance with Title I,

Page 221 of 497

Book One of the Labor Code and the POEA Rules Governing Employment. [21] 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 pay. The Contract of Employment, [22] which is the standard employment
contract of the POEA, likewise does not provide for the payment of 13 th 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 termination pay. x xx[23]
Hence, in the absence of any provision in his Contract governing the payment of
13 month pay, Tanchico is not entitled to the benefit.
th

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.
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.

Page 222 of 497

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 SEAFARER early from vacation. [24]
Since Tanchico received compensation during his vacation, the Contract did not
terminate on the day he returned to Manila. The Contract remained in force
duringTanchicos 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
thatTanchicos 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 pro-rata 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.

Page 223 of 497

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 calculation of benefits due SEAFARER under this Article VIII.
[25]
(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
acquired the illness during his last deployment since the Medical Report [26] he submitted
Page 224 of 497

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 he refused to sign the receipt.[27] Tanchico alleged that he was only paid under the
Career Employment Incentive Plan. [28] 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 CA-G.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 forbackwages,
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.

SPECIAL FIRST DIVISION

[G.R. No. 110524. July 29, 2002]
DOUGLAS MILLARES and ROGELIO LAGDA, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, TRANS-GLOBAL MARITIME AGENCY, INC. and
ESSO INTERNATIONAL SHIPPING CO., LTD. respondents.
RESOLUTION
KAPUNAN, J.:
On March 14, 2000, the Court promulgated its decision in the above-entitled case,
ruling in favor of the petitioners. The dispositive portion reads, as follows:
WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of the
National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new
judgment is hereby rendered ordering the private respondents to:
(1)
Reinstate petitioners Millares and Lagda to their former positions without loss of
seniority rights, and to pay full backwages computed from the time of illegal dismissal to
the time of actual reinstatement;

Page 225 of 497

(2)
Alternatively, if reinstatement is not possible, pay petitioners Millares and Lagda
separation pay equivalent to one months salary for every year of service; and,
(3)
Jointly and severally pay petitioners One Hundred Percent (100%) of their total
credited contributions as provided under the Consecutive Enlistment Incentive Plan.
SO ORDERED.[1]
A motion for reconsideration was consequently filed [2] by the private respondents to
which petitioners filed an Opposition thereto. [3]
In a Minute Resolution dated June 28, 2000, the Court resolved to deny the motion
for reconsideration with finality.[4]
Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME) filed a
Motion for Leave to Intervene and to Admit a Motion for Reconsideration in Intervention.
Private respondents, meanwhile, also filed a Motion for Leave to File a Second Motion
for Reconsideration of our decision.
In both motions, the private respondents and FAME respectively pray in the main that
the Court reconsider its ruling that Filipino seafarers are considered regular employees
within the context of Article 280 of the Labor Code. They claim that the decision may
establish a precedent that will adversely affect the maritime industry.
The Court resolved to set the case for oral arguments to enable the parties to
present their sides.
To recall, the facts of the case are, as follows:
Petitioner Douglas Millares was employed by private respondent ESSO International
Shipping Company LTD. (Esso International, for brevity) through its local manning
agency, private respondent Trans-Global Maritime Agency, Inc. (Trans-Global, for brevity)
on November 16, 1968 as a machinist. In 1975, he was promoted as Chief Engineer
which position he occupied until he opted to retire in 1989. He was then receiving a
monthly salary of US $1,939.00.
On June 13, 1989, petitioner Millares applied for a leave of absence for the period July 9
to August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel, President of
private respondent Trans-Global, approved the request for leave of absence. On June 21,
1989, petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon International
Co., (now Esso International) through Michael J. Estaniel, informing him of his intention to
avail of the optional retirement plan under the Consecutive Enlistment Incentive Plan
(CEIP) considering that he had already rendered more than twenty (20) years of
Page 226 of 497

continuous service. On July 13, 1989 respondent Esso International, through W.J. Vrints,
Employee Relations Manager, denied petitioner Millares request for optional retirement
on the following grounds, to wit: (1) he was employed on a contractual basis; (2) his
contract of enlistment (COE) did not provide for retirement before the age of sixty (60)
years; and (3) he did not comply with the requirement for claiming benefits under the
CEIP, i.e., to submit a written advice to the company of his intention to terminate his
employment within thirty (30) days from his last disembarkation date.
On August 9, 1989, petitioner Millares requested for an extension of his leave of absence
from August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing Manager, Ship
Group A, Trans-global, wrote petitioner Millares advising him that respondent Esso
International has corrected the deficiency in its manpower requirement specifically in
the Chief Engineer rank by promoting a First Assistant Engineer to this position as a
result of (his) previous leave of absence which expired last August 8, 1989. The
adjustment in said rank was required in order to meet manpower schedules as a result of
(his) inability.
On September 26, 1989, respondent Esso International, through H. Regenboog,
Personnel Administrator, advised petitioner Millares that in view of his absence without
leave, which is equivalent to abandonment of his position, he had been dropped from the
roster of crew members effective September 1, 1989.
On the other hand, petitioner Lagda was employed by private respondent Esso
International as wiper/oiler in June 1969. He was promoted as Chief Engineer in 1980, a
position he continued to occupy until his last COE expired on April 10, 1989. He was
then receiving a monthly salary of US$1,939.00.
On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19, 1989 up
to the whole month of August 1989. On June 14, 1989, respondent Trans-Globals
President, Michael J. Estaniel, approved petitioner Lagdas leave of absence from June 22,
1989 to July 20, 1989 and advised him to report for re-assignment on July 21, 1989.
On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations Manager of
respondent Esso International, through respondent Trans-Globals President Michael J.
Estaniel, informing him of his intention to avail of the optional early retirement plan in
view of his twenty (20) years continuous service in the complaint.
On July 13, 1989, respondent Trans-global denied petitioner Lagdas request for
availment of the optional early retirement scheme on the same grounds upon which
petitioner Millares request was denied.
On August 3, 1989, he requested for an extension of his leave of absence up to August
26, 1989 and the same was approved. However, on September 27, 1989, respondent
Esso International, through H. Regenboog, Personnel Administrator, advised petitioner
Page 227 of 497

Lagda that in view of his unavailability for contractual sea service, he had been
dropped from the roster of crew members effective September 1, 1989.
On October 5, 1989, petitioners Millares and Lagda filed a complaint-affidavit, docketed
as POEA (M) 89-10-9671, for illegal dismissal and non-payment of employee benefits
against private respondents Esso International and Trans-Global, before the POEA. [5]
On July 17, 1991, the POEA rendered a decision dismissing the complaint for lack of
merit.
On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993 with
the following disquisition:
The first issue must be decided in the negative. Complainants-appellants, as seamen
and overseas contract workers are not covered by the term regular employment as
defined under Article 280 of the Labor Code. The POEA, which is tasked with protecting
the rights of the Filipino workers for overseas employment to fair and equitable
recruitment and employment practices and to ensure their welfare, prescribes a
standard employment contract for seamen on board ocean-going vessels for a fixed
period but in no case to exceed twelve (12) months (Part 1, Sec. C). This POEA policy
appears to be in consonance with the international maritime practice. Moreover, the
Supreme Court in Brent School, Inc. vs. Zamora, 181 SCRA 702, had held that a fixed
term is essential and natural appurtenance of overseas employment contracts to which
the concept of regular employment with all that it implies is not applicable, Article 280 of
the Labor Code notwithstanding. There is, therefore, no reason to disturb the POEA
Administrators finding that complainants-appellants were hired on a contractual basis
and for a definite period. Their employment is thus governed by the contracts they sign
each time they are re-hired and is terminated at the expiration of the contract period. [6]
Undaunted, the petitioners elevated their case to this Court [7] and successfully
obtained the favorable action, which is now vehemently being assailed.
At the hearing on November 15, 2000, the Court defined the issues for resolution in
this case, namely:
I.
ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE EMPLOYMENTS
ARE TERMINATED EVERYTIME THEIR CONTRACTS OF EMPLOYMENT EXPIRE?
II.
ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE THEY DISMISSED
WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO REINSTATEMENT AND BACKWAGES,
INCLUDING PAYMENT OF 100% OF THEIR TOTAL CREDITED CONTRIBUTIONS TO THE
CONSECUTIVE ENLISTMENT INCENTIVE PLAN (CEIP)?

Page 228 of 497

III.
DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR SEAFARERS ON
BOARD FOREIGN VESSELS (SEC. C., DURATION OF CONTRACT) PRECLUDE THE
ATTAINMENT BY SEAMEN OF THE STATUS OF REGULAR EMPLOYEES?
IV.
DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE
INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE LAND UNDER
SECTION 2, ARTICLE II OF THE CONSTITUTION?
V.
DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE FROM ITS
RULING IN COYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)?[8]
In answer to the private respondents Second Motion for Reconsideration and to
FAMEs Motion for Reconsideration in Intervention, petitioners maintain that they are
regular employees as found by the Court in the March 14, 2000 Decision. Considering
that petitioners performed activities which are usually necessary or desirable in the
usual business or trade of private respondents, they should be considered as regular
employees pursuant to Article 280, Par. 1 of the Labor Code. [9] Other justifications for this
ruling include the fact that petitioners have rendered over twenty (20) years of service,
as admitted by the private respondents; [10] that they were recipients of Merit Pay which is
an express acknowledgment by the private respondents that petitioners are regular and
not just contractual employees;[11] that petitioners were registered under the Social
Security System (SSS).
The petitioners further state that the case of Coyoca v. NLRC[12] which the private
respondents invoke is not applicable to the case at bar as the factual milieu in that case
is not the same. Furthermore, private respondents fear that our judicial pronouncement
will spell the death of the manning industry is far from real. Instead, with the valuable
contribution of the manning industry to our economy, these seafarers are supposed to be
considered as Heroes of the Republic whose rights must be protected. [13] Finally, the
first motion for reconsideration has already been denied with finality by this Court and it
is about time that the Court should write finis to this case.
The private respondents, on the other hand, contend that: (a) the ruling holding
petitioners as regular employees was not in accord with the decision in Coyoca v.
NLRC, 243 SCRA 190; (b) Art. 280 is not applicable as what applies is the POEA Rules and
Regulations Governing Overseas Employment; (c) seafarers are not regular employees
based on international maritime practice; (d) grave consequences would result on the
future of seafarers and manning agencies if the ruling is not reconsidered; (e) there was
no dismissal committed; (f) a dismissed seafarer is not entitled to back wages and
reinstatement, that being not allowed under the POEA rules and the Migrant Workers Act;
and, (g) petitioners are not entitled to claim the total amount credited to their account
under the CEIP.[14]

Page 229 of 497

Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME) avers that

our decision, if not reconsidered, will have negative consequences in the employment of
Filipino Seafarers overseas which, in turn, might lead to the demise of the manning
industry in the Philippines. As intervenor FAME puts it:
xxx
7.1 Foreign principals will start looking for alternative sources for seafarers to man their
ships. AS reported by the BIMCO/ISF study, there is an expectancy that there will be an
increasing demand for (and supply of) Chinese seafarers, with some commentators
suggesting that this may be a long-term alternative to the Philippines. Moreover, the
political changes within the former Eastern Bloc have made new sources of supply
available to the international market. Intervenors recent survey among its members
shows that 50 Philippine manning companies had already lost some 6,300 slots to other
Asian, East Europe and Chinese competition for the last two years;
7.2 The Philippine stands to lose an annual foreign income estimated at U.S. DOLLARS
TWO HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY NINE THOUSAND (US$
274,549,000.00) from the manning industry and another US DOLLARS FOUR BILLION SIX
HUNDRED FIFTY MILLION SEVEN HUNDRED SIX THOUSAND (US$ 4,650,760,000.00) from
the land-based sector if seafarers and equally situated land-based contract workers will
be declared regular employees;
7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be rendered
jobless should we lose the market;
7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no longer be
doing business with them will close their shops;
7.5 The contribution to the Overseas Workers Welfare Administration by the sector,
which is USD 25.00 per contract and translates to US DOLLARS FOUR MILLION (US$
4,000,000.00)annually, will be drastically reduced. This is not to mention the processing
fees paid to POEA, Philippine Regulatory Commission (PRC), Department of Foreign
Affairs (DFA) and Maritime Industry Authority (MARINA) for the documentation of these
seafarers;
7.6 Worst, some 195,917 (as of 1998) families will suffer socially and economically, as
their breadwinners will be rendered jobless; and
7.7 It will considerably slow down the governments program of employment generation,
considering that, as expected foreign employers will now avoid hiring Filipino overseas
contract workers as they will become regular employees with all its concomitant effects.
[15]

Page 230 of 497

Significantly, the Office of the Solicitor General, in a departure from its original
position in this case, has now taken the opposite view. It has expressed its apprehension
in sustaining our decision and has called for a re-examination of our ruling. [16]
Considering all the arguments presented by the private respondents, the Intervenor
FAME and the OSG, we agree that there is a need to reconsider our position with respect
to the status of seafarers which we considered as regular employees under Article 280 of
the Labor Code. We, therefore, partially grant the second motion for reconsideration.
In Brent School Inc. v. Zamora,[17] the Supreme Court stated that Article 280 of the
Labor Code does not apply to overseas employment.
In the light of the foregoing description of the development of the provisions of the Labor
Code bearing on term or fixed-period employment that the question posed in the
opening paragraph of this opinion should now be addressed. Is it then the legislative
intention to outlaw stipulations in employment contracts laying down a definite period
therefor? Are such stipulations in essence contrary to public policy and should not on
this account be accorded legitimacy?
On the other hand, there is the gradual and progressive elimination of references to term
or fixed-period employment in the Labor Code, and the specific statement of the rule
that:
Regular and Casual Employment The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be employee 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.
There is, on the other hand, the Civil Code, which has always recognized, and continues
to recognize, the validity and propriety of contracts and obligations with a fixed or
definite period, and imposes no restraints on the freedom of the parties to fix the
duration of a contract, whatever its object, be it specific, goods or services, except the
general admonition against stipulations contrary to law, morals, good customs, public
order or public policy. Under the Civil code, therefore, and as a general proposition,
Page 231 of 497

fixed-term employment contracts are not limited, as they are under the present Labor
Code, to those by natural seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free choice have assigned a
specific date of termination.
Some familiar examples may be cited of employment contract which may be
neither for seasonal work nor for specific projects, but to which a fixed term is
an essential and natural appurtenance: overseas employment contracts, for
one, to which, whatever the nature of the engagement, the concept of regular
employment with all that it implies does not appear ever to have been
applied. Article 280 of the Labor Code notwithstanding also appointments to the
positions of dean, assistant dean, college secretary, principal, and other administrative
offices in educational institutions, which are by practice or tradition rotated among the
faculty members, and where fixed terms are a necessity without which no reasonable
rotation would be possible. Similarly, despite the provisions of Article 280, Policy
Instructions. No. 8 of the Minister of Labor implicitly recognize that certain company
officials may be elected for what would amount to fix periods, at the expiration of which
they would have to stand down, in providing that these officials, xxx may lose their jobs
as president, executive vice-president or vice-president, etc. because the stockholders
or the board of directors for one reason or another did not reelect them.
There can of course be no quarrel with the proposition 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 disregard as contrary
to public policy, morals, etc. But where no such intent to circumvent the law is shown, or
stated otherwise, where the reason for the law does not exists, e.g., where it is indeed
the employee himself who insists upon a period or where the nature of the engagement
is such that, without being seasonal or for a specific project, a definite date of
termination is a sine qua non, would an agreement fixing a period be essentially evil or
illicit, therefore anathema? Would such an agreement come within the scope of Article
280 which admittedly was enacted to prevent the circumvention of the right of the
employee to be secured in xxx his employment
As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut
of employment contracts to which the lack of a fixed period would be an anomaly, but
would also appear to restrict, without reasonable distinctions, the right of an employee
to freely stipulate within his employer the duration of his engagement, it logically follows
that such a literal interpretation should be eschewed or avoided. The law must be given
a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole
concept of term employment and subverting to boot the principle of freedom of contract
to remedy the evil of employers using it as a means to prevent their employees from
obtaining security of tenure is like cutting off the nose to spite the face or, more
relevantly, curing a headache by lopping of the head.
Page 232 of 497

It is a salutary principle in statutory construction that there exists a valid presumption

that undesirable consequences were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is favored, which will avoid all
objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences.
Nothing is better settled than that courts are not to give words a meaning which would
lead to absurd or unreasonable consequences. That is a principle that goes back to In re
Allen decided on October 27, 1902, where it was held that a literal interpretation is to be
rejected if it would be unjust or lead to absurd results. That is a strong argument against
its adoption. The words of Justice Laurel are particularly apt. Thus: the appellants
would lead to an absurdity is another argument for rejecting it.
Xxx We have, here, then a case where the true intent of the law is clear that calls for the
application of the cardinal rule of statutory construction that such intent of spirit must
prevail over the letter thereof, for whatever is within the spirit of a statute is within the
statute, since adherence to the letter would result in absurdity, injustice and
contradictions and would defeat the plain and vital purpose of the statute.
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
employees 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. It
should have no application to instances where a fixed period of employment
was agreed upon knowingly and voluntarily by the parties, without any force,
duress or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with each other on more or less
equal terms with no moral dominance whatever being exercised by the former
over the latter. Unless thus limited in its purview, the law would be made to apply to
purposes other than those explicitly stated by its framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences.
Again, in Pablo Coyoca v. NLRC,[18] the Court also held that a seafarer is not a regular
employee and is not entitled to separation pay. His employment is governed by the
POEA Standard Employment Contract for Filipino Seamen.
XXX. In this connection, it is important to note that neither does the POEA standard
employment contract for Filipino seamen provide for such benefits.

Page 233 of 497

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 termination pay. What is embodied in petitioners contract is the
payment of compensation arising from permanent partial disability during the period of
employment. We find that private respondent complied with the terms of contract when
it paid petitioner P42,315.00 which, in our opinion, is a reasonable amount, as
compensation for his illness.
Lastly, petitioner claims that he eventually became a regular employee of private
respondent and thus falls within the purview of Articles 284 and 95 of the Labor Code. In
support of this contention, petitioner cites the case of Worth Shipping Service, Inc., et
al. v. NLRC, et al., wherein we held that the crew members of the shipping company had
attained regular status and thus, were entitled to separation pay. However, the facts of
said case differ from the present. In Worth, we held that the principal and agent had
operational control and management over the MV Orient Carrier and thus, were the
actual employers of their crew members.
From the foregoing cases, it 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. [19]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.
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.[20] 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:
Page 234 of 497

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. [21] 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.[22]
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 are
contractual employees. They can not be considered regular employees. We quote with
favor the explanation of the NLRC in this wise:
Xxx The reference to permanent and probationary masters and employees in these
papers is a misnomer and does not alter the fact that the contracts for enlistment
between complainants-appellants and respondent-appellee Esso International were for a
definite periods of time, ranging from 8 to 12 months. Although the use of the terms
permanent and probationary is unfortunate, what is really meant is eligible for-rehire. This is the only logical conclusion possible because the parties cannot and should
not violate POEAs requirement that a contract of enlistment shall be for a limited period
only; not exceeding twelve (12)months.[23]
From all the foregoing, we hereby state that petitioners are not considered regular or
permanent employees under Article 280 of the Labor Code. Petitioners employment
have automatically ceased upon the expiration of their contracts of enlistment
(COE). Since there was no dismissal to speak of, it follows that petitioners are not
entitled to reinstatement or payment of separation pay or backwages, as provided by
law.

Page 235 of 497

With respect to the benefits under the Consecutive Enlistment Incentive Plan (CEIP),
we hold that the petitioners are still entitled to receive 100% of the total amount
credited to him under the CEIP. Considering that we have declared that petitioners are
contractual employees, their compensation and benefits are covered by the contracts
they signed and the CEIP is part and parcel of the contract.
The CEIP was formulated to entice seamen to stay long in the company. As the name
implies, the program serves as an incentive for the employees to renew their contracts
with the same company for as long as their services were needed. For those who
remained loyal to them, they were duly rewarded with this additional remuneration
under the CEIP, if eligible. While this is an act of benevolence on the part of the
employer, it can not, however, be denied that this is part of the benefits accorded to the
employees for services rendered. Such right to the benefits is vested upon them upon
their eligibility to the program.
The CEIP provides that an employee becomes covered under the Plan when he
completes thirty-six (36) months or an equivalent of three (3) years of credited
service with respect to employment after June 30, 1973. [24] Upon eligibility, an amount
shall be credited to his account as it provides, among others:
III.
A.

Distribution of Benefits
Retirement, Death and Disability
When the employment of an employee terminates because of his retirement,
death or permanent and total disability, a percentage of the total amount
credited to his account will be distributed to him (or his eligible survivor(s) in
accordance with the following:

Reason for Termination

Percentage

a) Attainment of mandatory retire-

100%

ment age of 60.

b) Permanent and total disability,

100%

while under contract, that is

not due to accident or misconduct.
c) Permanent and total disability,

100%

while under contract, that is

Page 236 of 497

due to accident, and not due to

misconduct.
xxx
B.

Voluntary Termination

When an employee voluntary terminates his employment with at least 36 months of

credited service without any misconduct on his part, 18 percent of the total amount
credited to his account, plus an additional of one percent for each month (up to a
maximum of 164 months of credited service in excess of 36, will be distributed to him
provided (1) the employee has completed his last Contract of Enlistment and (2)
employee advises the company in writing, within 30 days, from his last disembarkation
date, of his intention to terminate his employment. (To advise the Company in writing
means that the original letter must be sent to the Companys agent in the Philippines, a
copy sent to the Company in New York).
xxx
C.

Other Terminations
When the employment of an employee is terminated by the Company for a
reason other than one in A and B above, without any misconduct on his
part, a percentage of the total amount credited to his account will be
distributed to him in accordance with the following.

Credited Service

Percentage

36 months

50%
48

60

75%
100%

When the employment of an employee is terminated due to his poorperformance, misconduct, unavailability, etc., or if employee is not offered reengagement for similar reasons, no distribution of any portion of employees
account will ever be made to him (or his eligible survivor[s]).
It must be recalled that on June 21, 1989, Millares wrote a letter to his employer
informing his intention to avail of the optional retirement plan under the CEIP considering
that he has rendered more than twenty (20) years of continuous service. Lagda,
likewise, manifested the same intention in a letter dated June 26, 1989. Private
Page 237 of 497

respondent, however, denied their requests for benefits under the CEIP since: (1) the
contract of enlistment (COE) did not provide for retirement before 60 years of age; and
that (2) petitioners failed to submit a written notice of their intention to terminate their
employment within thirty (30) days from the last disembarkation date pursuant to the
provision on Voluntary Termination of the CEIP. Petitioners were eventually dropped from
the roster of crew members and on grounds of abandonment and unavailability for
contractual sea service, respectively, they were disqualified from receiving any benefits
under the CEIP.[25]
In our March 14, 2000 Decision, we, however, found that petitioners Millares and
Lagda were not guilty of abandonment or unavailability for contractual sea service,
as we have stated:
The absence of petitioners was justified by the fact that they secured the approval of
private respondents to take a leave of absence after the termination of their last
contracts of enlistment. Subsequently, petitioners sought for extensions of their
respective leaves of absence. Granting arguendo that their subsequent requests for
extensions were not approved, it cannot be said that petitioners were unavailable or had
abandoned their work when they failed to report back for assignment as they were still
questioning the denial of private respondents of their desire to avail of the optional early
retirement policy, which they believed in good faith to exist. [26]
Neither can we consider petitioners guilty of poor performance or misconduct since
they were recipients of Merit Pay Awards for their exemplary performances in the
company.
Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for Lagda)
which private respondent considered as belated written notices of termination, we find
such assertion specious. Notwithstanding, we could conveniently consider the
petitioners eligible under Section III-B of the CEIP (Voluntary Termination), but this would,
however, award them only a measly amount of benefits which to our mind, the
petitioners do not rightfully deserve under the facts and circumstances of the case. As
the CEIP provides:
III. Distribution of Benefits
xxx
E. Distribution of Accounts
When an employee terminates under conditions that would qualify for a distribution of
more than one specified in A, B or C above, the largest single amount, only, will be
distributed.

Page 238 of 497

Since petitioners termination of employment under the CEIP do not fall under
Section III-A (Retirement, Death and Disability) or Section III-B (Voluntary Termination),
nor could they be considered under the second paragraph of Section III-C, as earlier
discussed; it follows that their termination falls under the first paragraph of Section III-C
for which they are entitled to 100% of the total amount credited to their accounts. The
private respondents can not now renege on their commitment under the CEIP to reward
deserving and loyal employees as the petitioners in this case.
In taking cognizance of private respondents Second Motion for Reconsideration, the
Court hereby suspends the rules to make them conformable to law and justice and to
subserve an overriding public interest.
IN VIEW OF THE FOREGOING, THE COURT Resolved to Partially GRANT Private
Respondents Second Motion for Reconsideration and Intervenor FAMES Motion for
Reconsideration in Intervention. The Decision of the National Labor Relations
Commission dated June 1, 1993 is hereby REINSTATED with MODIFICATION. The Private
Respondents, Trans-Global Maritime Agency, Inc. and Esso International Shipping Co.,Ltd.
are hereby jointly and severally ORDERED to pay petitioners One Hundred Percent
(100%) of their total credited contributions as provided under the Consecutive
Enlistment Incentive Plan(CEIP).
SO ORDERED.
FIRST DIVISION
[G.R. No. 160952. August 20, 2004]
MARCIAL GU-MIRO, petitioner, vs. ROLANDO C. ADORABLE and BERGESEN D.Y.
MANILA, respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is a petition for review on certiorari of the decision of the Court of Appeals
in CA-G.R. SP No. 66131 dated May 29, 2003, [1] which modified the decision of the
National Labor Relations Commission (NLRC) by increasing the incentive bonus awarded
to petitioner from US$594.56 to US$1189.12.
Petitioner Marcial Gu-Miro was formerly employed as a Radio Officer of respondent
Bergesen D.Y. Philippines, which acted for and in behalf of its principal Bergesen D.Y.
ASA, on board its different vessels. A Certification dated April 14, 1998 was issued by
Bergesen D.Y. Philippines, Inc.s President and General Manager Rolando C. Adorable
showing that petitioner served in the company on board its vessels starting 1988. [2] The
Page 239 of 497

case before us involves an employment contract signed by petitioner to commence

service on board the M/V HEROS, which stipulated a monthly salary of US$929.00 for a
period of eight (8) months. It also provided for overtime pay of US$495.00 per month
and vacation leave with pay in the amount of US$201.00 per month equivalent to six and
a half days.[3] The contract of employment was signed on March 18, 1996 and petitioner
commenced work on April 15, 1996.
Record shows that respondent company traditionally gives an incentive bonus
termed as Re-employment Bonus to employees who decide to rejoin the company after
the expiration of their employment contracts. After the expiration of petitioners
contract in December 1996, the same was renewed by respondent company until
September 9, 1997, as stated in the Certification issued by Bergesen D.Y. Philippines,
Inc. In September 1997, petitioners services were terminated due to the installation of
labor saving devices which made his services redundant. Upon his forced separation
from the company, petitioner requested that he be given the incentive bonus plus the
additional allowances he was entitled to. Respondent company, however, refused to
accede to his request.
Thus, in June 1999 petitioner filed a complaint with the NLRC, Regional Arbitration
Branch of Cebu, for payment of the incentive bonus from April 15, 1996 to September
15, 1997, 10% of the basic wage, unclaimed payment for incentive bonus from
September 1993 to June 1994, non-remittance of provident fund from July 1992 to June
1994, moral and exemplary damages as well as attorneys fees. On December 29, 1999,
the complaint was provisionally dismissed by the NLRC due to the failure of petitioner to
file the required position paper. Petitioner re-filed the complaint on March 2, 2000
accordingly.
In a Decision dated June 6, 2000, the Labor Arbiter dismissed the case for lack of
merit,[4] based on the following findings:
x x x. Incentive bonus or reemployment bonus are benefits not found in the POEA
approved contract. These are benefits which are specifically granted pursuant to an
internal memorandum entitled Employment Conditions for Filipino Seafarers serving on
board vessels of Bergesen D.Y. ASA. As stated in the said internal memorandum,
entitlement to the benefits therein (is) not automatic but (is) subject to some conditions.
As clearly stated in the said memorandum, the reemployment bonus is an incentive
bonus system for reemployment upon signing for a subsequent period. x x x. In order
that a seafarer, like the complainant, be entitled to reemployment/incentive bonus, he
must satisfy all of the following requirements, to wit:
1)
He must be employed in a vessel under a principal who is a member of the
reemployment bonus scheme;

Page 240 of 497

2)
He must have been an officer of the principal members vessel subject to the
additional conditions stated in page 2 of the aforementioned internal memorandum; and
3)
After serving in a principal-members vessel, he must be reemployed in another
or the same principal-members vessel.
To avail of the benefits under this scheme, seafarers like the complainant has to prove
that he met all the foregoing conditions. It is, thus, his burden to prove that he is
entitled to the said benefit. Complainant, however, miserably failed to adduce evidence
that he met all the foregoing conditions for entitlement to the benefit. He relied on his
unsubstantiated allegation that a certain Captain D. Ramirez received an incentive bonus
even if he did not sign up with the Company. x x x.
xxx

xxx

xxx

For obvious reasons, complainants claims for moral and exemplary damages as well as
attorneys fees are denied. x x x.[5]
Petitioner appealed to the NLRC, which set aside the Labor Arbiters decision and
ordered respondents to pay petitioner the amount of US$594.56 in a Decision dated
March 5, 2001. The pertinent portion of the NLRCs decision states:
The Contract of Employment entered into between the complainant and the respondents
specifically set a term of eight (8) months which was supposed to be from April 15, 1996
up to December 14, 1996. The complainants length of service from December 15, 1996
to September 9, 1997, or a period of nine (9) months, more or less, was an extended
term of employment. A closer look at the facts shows that the extended term was even
longer than the original term of the contract.
xxx

xxx

xxx

[W]e construe that the extended term of the contract of employment from December 15,
1996 up to September 9, 1997 was considered as re-employment of the complainant.
And when there was re-employment, it is presumed that all the conditions set forth by
the respondents in their established company written policy entitled Employment
Conditions for Filipino Seafarers Serving Onboard Vessels of Bergesen D.Y. ASA are
deemed complied with. The pertinent portion of the said company policy states:
2.

Re-employment bonus

The company has established an incentive bonus system for re-employment upon
signing for a subsequent period.
The conditions are as follows:
Page 241 of 497

xxx

xxx

xxx

Radio Officers/Electricians Serving onboard bulk carriers- 8% of basic wage per month
of actual service.
To do otherwise, we would allow the respondent to circumvent its own established policy
to merely extending the original contract of employment. [6]
Petitioner and respondents filed separate Motions for Reconsideration which were
both denied by the NLRC in its Resolution dated April 24, 2001.
Not satisfied with the monetary award, petitioner filed a petition for review with the
Court of Appeals claiming that there was an error in computing the amount of the
incentive bonus he is entitled to. Petitioner argued that he should be considered as a
regular employee of respondent company and thus, entitled to backwages or, at the very
least, separation pay.
The Court of Appeals, on May 29, 2003, rendered the assailed Decision where it
ruled:
WHEREFORE, the petition is GRANTED. The assailed Decision dated March 5, 2001 is
hereby MODIFIED increasing the award of incentive bonus from US$594.56 to
US$1189.12.
SO ORDERED.[7]
In arriving at its decision, the appellate court made the following findings:
It is uncontroverted that the company grants incentive bonus for re-employment upon
signing for a subsequent period. For radio officers onboard bulk carriers, it shall be 8% of
the basic wage per month of actual service. In this case, we find nothing in the record to
show that the classification of the vessel to which the petitioner was deployed is a
Gas/LPG Tanker, which would make him entitled to 10% instead of 8% of the basic wage
as incentive bonus. Thus, the public respondent correctly applied the rate of 8% of the
basic wage per month of actual service, the basic wage in this case being the amount
stipulated in the contract of employment, i.e., US$929.00, and does not include the
stipulated rate for overtime pay.
The question now is the application of the provision of the memorandum with respect to
the length of actual service. Record shows that after the expiration of the original eightmonth employment contract on December 15, 1996, the petitioner was in fact reemployed when his service was extended for another nine (9) months or up to
September 1997. This unquestionably entitled him to the incentive bonus for the 8month period covered by the contract and which was correctly awarded to him by the
Page 242 of 497

public respondent NLRC. However, as to the succeeding period, although it was not
covered by a written contract, it is unrebutted that the petitioner was actually made to
suffer work during that period. Hence, there was a monthly re-employment of the
petitioner for the succeeding 9 months. Conformably, since the incentive bonus is given
for re-employment upon signing for a subsequent period, for purposes of computing the
same, the petitioner is deemed to have been re-employed not only for the 8 months
covered by the contract but also for the succeeding 8 months preceding the last month
when he was terminated. x x x.
xxx

xxx

xxx

As for the claim for backwages or separation pay, we note that these claims were neither
raised in the petitioners position paper nor in the motion for reconsideration filed before
the NLRC; hence, they can no longer be raised for the first time in this petition. x x x.[8]
Hence, the instant petition for certiorari based on the following grounds:
I.

THE HONORABLE COURT OF APPEALS ERRED WHEN IT PLACED THE BURDEN

UPON PETITIONER TO PROVE THAT M/V HEROS IS AN LPG/GAS TANKER.

II.

CONSIDERING THAT PETITIONER HAD WORKED FOR BERGESEN D.Y.

PHILIPPINES FOR AND IN BEHALF OF ITS PRINCIPAL BERGESEN D.Y. ASA FOR
TEN (10) LONG YEARS ABOARD ITS DIFFERENT VESSELS, PETITIONER SHOULD
HAVE BEEN CONSIDERED AS A REGULAR EMPLOYEE BY THE COURT OF
APPEALS.

III. THE HONORABLE COURT OF APPEALS LIKEWISE ERRED WHEN IT SAID IN ITS
DECISION THAT PETITIONER FAILED TO RAISE THE ISSUE OF BACKWAGES AND
SEPARATION PAY IN THE MOTION FOR RECONSIDERATION FILED WITH THE
NLRC.[9]
In this petition, we are called upon to resolve two basic issues: The first concerns
what percentage to use in computing the incentive bonus which petitioner is entitled to.
In the memorandum entitled Employment Conditions for Filipino Seafarers Serving
Onboard Vessels of Bergesen D.Y. ASA (Employment Conditions Memorandum), Radio
Officers are entitled to re-employment bonus equivalent to a certain percentage of their
basic wage per month of actual service. If the employee served onboard a bulk carrier,
he is entitled to 8% of his basic wage per month of actual service. Alternatively, if
service was done onboard a gas carrier tanker, the employee is entitled to 10% of his
basic wage per month of actual service.
The NLRC and the Court of Appeals both agree that petitioner failed to adduce
concrete proof to show that M/V HEROS is a Gas/LPG Tanker and not a bulk carrier.
Hence, the Court of Appeals upheld the use of 8% by the NLRC as multiplier to compute
Page 243 of 497

the incentive bonus. Respondent company argues that petitioner failed to allege the
nature of M/V HEROS at the earliest opportunity, belatedly alleging this information in
the Motion for Reconsideration with the NLRC. Petitioner insists that M/V HEROS is a
Gas/LPG Tanker which entitles him to 10% of his basic wage as incentive bonus; and that
the Court of Appeals erred in ruling that it was petitioners burden to prove the
classification of M/V HEROS.
We rule in petitioners favor. The registration papers, which contain the vessel
classification of M/V HEROS, are the conclusive evidence that petitioner needs to prove
his allegation. However, these are in the custody of respondent company or its mother
company, Bergesen D.Y. ASA. Interestingly, respondent company never presented the
registration papers in evidence.
We find that respondent companys failure to controvert the allegation, when it had
the opportunity and resources to do so, works in favor of petitioner. Time and again we
have held that should doubts exist between the evidence presented by the employer and
the employee, the scales of justice must be tilted in favor of the latter. [10] Moreover, the
law creates the presumption that evidence willfully suppressed would be adverse if
produced.[11]
Consequently, the amount of incentive bonus termed as re-employment bonus which
petitioner is entitled to should be computed as follows:
Salary per month = US$929.00
No. of months of actual service = 16 months
Rate = 10% of basic wage
US$929.00/month x 16 months x 10% = US$1,486.40
The second and third grounds raised in this petition are related, based on petitioners
allegation that he should be considered a regular employee of respondent company,
having been employed onboard the latters different vessels for the span of 10 years.
Hence, petitioner claims that he is entitled to backwages or at the very least separation
pay, invoking our decision in Millares, et al. v. NLRC[12] where it was held that the
repeated re-hiring of a Chief Engineer of a shipping company for 20 years is sufficient
evidence of the necessity and indispensability of the employees service to the
employers business or trade. Hence, applying the express provision of Article 280 of the
Labor Code,[13] such an employee should be considered as a regular employee.
Petitioners argument is not well-taken. The decision of Millares, et al. v. NLRC was
reconsidered and set aside in a Resolution [14] where it was held:

Page 244 of 497

[I]t is clear that seafarers are considered contractual employees. They can not be
considered as regular employees under Article 280 of Labor Code. Their employment is
governed by the contracts they sign every time 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 the engagement of the employee or where the
nature of the work or services to be performed is seasonal in nature and employment is
for the duration of the season.
xxx

xxx

xxx

Moreover, it is an accepted maritime industry practice that employment of seafarers (is)

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 employment status must be contractual only or for a certain period of
time. Seafarers spend most of their time at sea and understandably, they cannot 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 [Contract of Enlistment] is a reality that
necessitates the limitation of its period.[15]
Clearly, petitioner cannot be considered as a regular employee notwithstanding that
the work he performs is necessary and desirable in the business of respondent company.
As expounded in the above-mentioned Millares Resolution, an exception is made in the
situation of seafarers. The exigencies of their work necessitates that they be employed
on a contractual basis.
Thus, even with the continued re-hiring by respondent company of petitioner to
serve as Radio Officer onboard Bergesens different vessels, this should be interpreted
not as a basis for regularization but rather a series of contract renewals sanctioned
under the doctrine set down by the second Millares case. If at all, petitioner was
preferred because of practical considerationsnamely, his experience and
qualifications. However, this does not alter the status of his employment from being
contractual.
With respect to the claim for backwages and separation pay, it is now well-settled
that the award of backwages and separation pay in lieu of reinstatement are reliefs that
are awarded to an employee who is unjustly dismissed. [16] In the instant case, petitioner
was separated from his employment due to the termination of an impliedly renewed
contract with respondent company. Hence, there is no illegal or unjust dismissal.
WHEREFORE, premises considered, the petition is GRANTED IN PART. The Decision
of the Court of Appeals in CA-G.R. SP No. 66131 dated May 29, 2003 is MODIFIED in that
Page 245 of 497

the award of incentive bonus is increased from US$1189.12 to US$1,486.40. Petitioners

claim that he be declared a regular employee and awarded backwages and separation
pay is DENIED for lack of merit.
SO ORDERED.

CASES ON PROCEDURE FOR TERMINATION

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 80587 February 8, 1989
WENPHIL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND ROBERTO
MALLARE, respondents.
Renato B. Valdecantos & Associates for petitioner.
The Solicitor General for public respondent.
Diego O. Untalan for private respondent.

GANCAYCO, J.:
Once again the dismissal of an employee without affording him due process is brought to
the attention of this Court by this petition.
Private respondent was hired by petitioner on January 18, 1984 as a crew member at its
Cubao Branch. He thereafter became the assistant head of the Backroom department of
Page 246 of 497

the same branch. At about 2:30 P.M. on May 20, 1985 private respondent had an
altercation with a co-employee, Job Barrameda, as a result of which he and Barrameda
were suspended on the following morning and in the afternoon of the same day a
memorandum was issued by the Operations Manager advising private respondent of his
dismissal from the service in accordance with their Personnel Manual. The notice of
dismissal was served on private respondent on May 25, 1985.
Thus private respondent filed a complaint against petitioner for unfair labor practice,
illegal suspension and illegal dismissal. After submitting their respective position papers
to the Labor Arbiter and as the hearing could not be conducted due to repeated absence
of counsel for respondent, the case was submitted for resolution. Thereafter a decision
was rendered by the Labor Arbiter on December 3, 1986 dismissing the complaint for
lack of merit.
Private respondent appealed to the National Labor Relations Commission (NLRC) wherein
in due course a decision was rendered on October 16, 1987 setting aside the appealed
decision and ordering the reinstatement of private respondent to his former position
without loss of seniority and other related benefits and one (1) year backwages without
qualification and deduction.
Hence the herein petition for certiorari with preliminary injunction and/or restraining
order wherein petitioner alleges that the public respondent NLRC committed a grave
abuse of discretion in rendering its decision contrary to the evidence on record.
On December 2, 1987, the court issued a restraining order as prayed for in the petition
enjoining the enforcement of the decision dated October 16, 1987 of public respondent
NLRC upon petitioner posting a bond of P20,000.00.
The theory of the petitioner is that on the aforesaid date, May 20, 1985, when private
respondent and Barrameda had a misunderstanding about tending the Salad Bar, private
respondent slapped Barrameda's cap, stepped on his foot and picked up the ice scooper
and brandished it against the latter. Marijo B. Kolimlim who was a management trainee
tried to pacify private respondent but he defied her so Kolimlim reported the incident to
the assistant manager, Delilah C. Hermosura, who immediately asked private respondent
to see her. Private respondent refused to see Hermosura and it took the security guard to
bring him to her. Private respondent then shouted and uttered profane words instead of
making an explanation before her. He stated the matter should be settled only by him
and Barrameda. The following day Kolimlim and Hermosura submitted a report on the
incident and recommended the imposition of the appropriate penalties on both. It was
the store manager who issued a report meting out the penalty of suspension on the two
until further notice in the following morning. Later that day the Operations Manager
issued a memorandum advising Barrameda of one (1) week suspension and the
dismissal of private respondent from the service.

Page 247 of 497

The main thrust of the petition is that under the Personnel Manual of petitioner which
had been read and understood by private respondent, private respondent waived his
right to the investigation. It is provided therein that INVESTIGATION
If the offense is punishable with a penalty higher than suspension for fifteen
(15) days, upon the request of the erring employee, there shall be
convened an investigation board composed of the following
1. The Parlor Manager or Supervisor on duty when the incident occurred.
2. The General Manager or the Assistant Manager.
The investigation board shall discuss the merits of the case and shall issue
a ruling, which shall be final and conclusive. (p. 3, Personnel Manual:
Emphasis supplied).
From the foregoing it appears that an investigation shall only be conducted if the offense
committed by the employee is punishable with the penalty higher than suspension of
fifteen (15) days and the erring employee requests for an investigation of the incident.
Petitioner alleges that private respondent not having asked for an investigation he is
thus deemed to have waived his right to the same. Petitioner avers that immediately
after the incident when private respondent was asked to see Hermosura, he was defiant
and showed that he was not interested to avail of an investigation.
The contention of petitioner is untenable. The incident happened on May 20, 1985 and
right then and there as afore repeated on the following day private respondent was
suspended in the morning and was dismissed from the service in the afternoon. He
received an official notice of his termination four (4) days later.
The defiant attitude of private respondent immediately after the incident amounted to
insubordination. Nevertheless his refusal to explain his side under the circumstances
cannot be considered as a waiver of his right to an investigation.
Although in the Personnel Manual of the petitioner, it states that an erring employee
must request for an investigation it does not thereby mean that petitioner is thereby
relieved of the duty to conduct an investigation before dismissing private respondent.
Indeed said provision of the Personnel Manual of petitioner which may effectively deprive
its employees of the right to due process is clearly against the law and hence null and
void. The security of tenure of a laborer or employee is enshrined in the Constitution, the
Labor Code and other related laws. 1

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Under Section 1, Rule XIV of the Implementing Regulations of the Labor Code, it is
provided that "No worker shall be dismissed except for just or authorized cause provided
by law and after due process." Sections 2, 5, 6, and 7 of the same rules require that
before an employer may dismiss an employee the latter must be given a written notice
stating the particular act or omission constituting the grounds thereof; that the employee
may answer the allegations within a reasonable period; that the employer shall afford
him ample opportunity to be heard and to defend himself with the assistance of his
representative, if he so desires; and that it is only then that the employer may dismiss
the employee by notifying him of the decision in writing stating clearly the reasons
therefor. Such dismissal is without prejudice to the right of the employee to contest its
validity in the Regional Branch of the NLRC.
Petitioner insists that private respondent was afforded due process but he refused to
avail of his right to the same; that when the matter was brought to the labor arbiter he
was able to submit his position papers although the hearing cannot proceed due to the
non-appearance of his counsel; and that the private respondent is guilty of serious
misconduct in threatening or coercing a co-employee which is a ground for dismissal
under Article 283 of the Labor Code.
The failure of petitioner to give private respondent the benefit of a hearing before he was
dismissed constitutes an infringement of his constitutional right to due process of law
and equal protection of the laws. 2 The standards of due process in judicial as well as
administrative proceedings have long been established. In its bare minimum due process
of law simply means giving notice and opportunity to be heard before judgment is
rendered. 3
The claim of petitioner that a formal investigation was not necessary because the
incident which gave rise to the termination of private respondent was witnessed by his
co- employees and supervisors is without merit. The basic requirement of due process is
that which hears before it condemns, which proceeds upon inquiry and renders judgment
only after trial. 4
However, it is a matter of fact that when the private respondent filed a complaint against
petitioner he was afforded the right to an investigation by the labor arbiter. He presented
his position paper as did the petitioner. If no hearing was had, it was the fault of private
respondent as his counsel failed to appear at the scheduled hearings. The labor arbiter
concluded that the dismissal of private respondent was for just cause. He was found
guilty of grave misconduct and insubordination. This is borne by the sworn statements of
witnesses. The Court is bound by this finding of the labor arbiter.
By the same token, the conclusion of the public respondent NLRC on appeal that private
respondent was not afforded due process before he was dismissed is binding on this
Court. Indeed, it is well taken and supported by the records. However, it can not justify a
ruling that private respondent should be reinstated with back wages as the public
Page 249 of 497

respondent NLRC so decreed. Although belatedly, private respondent was afforded due
process before the labor arbiter wherein the just cause of his dismissal bad been
established. With such finding, it would be arbitrary and unfair to order his reinstatement
with back wages.
The Court holds that the policy of ordering the reinstatement to the service of an
employee without loss of seniority and the payment of his wages during the period of his
separation until his actual reinstatement but not exceeding three (3) years without
qualification or deduction, when it appears he was not afforded due process, although his
dismissal was found to be for just and authorized cause in an appropriate proceeding in
the Ministry of Labor and Employment, should be re-examined. 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.
Thus in the present case, where the private respondent, who appears to be of violent
temper, caused trouble during office hours and even defied his superiors as they tried to
pacify him, should not be rewarded with re-employment and back wages. It may
encourage him to do even worse and will render a mockery of the rules of discipline that
employees are required to observe. Under the circumstances the dismissal of the private
respondent for just cause should be maintained. He has no right to return to his former
employer.
However, the petitioner must nevertheless be held to account for failure to extend to
private respondent his right to an investigation before causing his dismissal. The rule is
explicit as above discussed. The dismissal of an employee must be for just or authorized
cause and after due process. 5 Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice
and conduct an investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The measure of this award depends on the
facts of each case and the gravity of the omission committed by the employer.
WHEREFORE, the petition is GRANTED. The questioned decision of the public respondent
NLRC dated October 16, 1987 for the reinstatement with back wages of private
respondent is REVERSED AND SET ASIDE, and the decision of the labor arbiter dated
December 3, 1986 dismissing the complaint is revived and affirmed, but with the
modification that petitioner is ordered to indemnify private respondent in the amount of
P1,000.00. The restraining order issued by this Court on December 2, 1987 is hereby
made permanent and the bond posted by petitioner is cancelled. This decision is
immediately executory.
SO ORDERED.
Page 250 of 497

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 117040 May 4, 2000
RUBEN SERRANO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT STORE,
respondents.

RESOLUTION

MENDOZA, J.:
Respondent Isetann Department Store moves for reconsideration of the decision in this
case insofar as it is ordered to pay petitioner full backwages from the time the latter's
employment was terminated on October 11, 1991 up to the time it is determined that
the termination of employment is for an authorized cause. The motion is opposed by
petitioner. The decision is based on private respondent's failure to give petitioner a
written notice of termination at least thirty (30) days before the termination of his
employment as required by Art. 283 the Labor Code.
In support of its motion, private respondent puts forth three principal arguments, to wit:
(1) that its failure to give a written notice to petitioner at least thirty (30) days in
advance in accordance with Art. 283 of the Labor Code is not in issue in this case
because, as a matter of fact, it gave its employees in the affected security section thirty
(30) days pay which effectively gave them thirty (30) days notice, and petitioner
accepted this form of notice although he did not receive payment; (2) that payment of
thirty (30) days pay in lieu of the thirty (30) days prior formal notice is more
advantageous to an employee because instead of being required to work for thirty (30)
days, the employee can look for another job while being paid by the company; and (3)
that in any event the new ruling announced in this case should only be applied
prospectively.
Private respondent's contentions have no merit.
First. Private respondent states that in September 1991, its employees in the security
section were called to a meeting during which they were informed that a security agency
would take over their work and that the employees would be paid "their last salaries, one
month pay for every year of service and proportionate 13th month pay"; that all affected
personnel, numbering around fifty (50), accepted the company's offer and stopped
Page 251 of 497

working by October 1, 1991, although they were paid their salaries up to October 31,
1991; that petitioner Ruben Serrano said he was reserving the right to take advantage of
the offer but after several months brought this case before the Labor Arbiter's office.
Private respondent claims that "petitioner accepted the mode of notice in this case [and]
never questioned it" and that "not having been raised as an issue in the petition. . . the
said notice requirement "lies outside the issues raised by the pleadings of the parties"
and should not be passed upon by this Honorable Court."
It is not true that the validity of private respondent's offer to pay thirty (30) days salary
in lieu of the thirty (30) days written notice required under Art. 283 of the Labor Code
was not raised in issue in this case. Private respondent itself raised the issue in its
position paper before the Labor Arbiter's office, thus:
. . . Respondent was, from the time of [petitioner's] separation, offering to
pay his last salary and proportionate 13th month pay less payment of his
loan but he unreasonably refused to accept it. . . .
. . . On October 11, 1991, [petitioner] together with all other employees
holding the position of Security Checker were formally terminated by the
Respondent Company on the ground of the adoption of cost saving devices.
Accordingly, all the security checkers were duly paid one month for every
year of service plus their last salaries and proportionate 13th month pay
less payments for loans obtained from the Respondent Company and other
dues deductible from their last salary. . . . [A]ll the security checkers with
the sole exception of [petitioner] herein, gladly accepted the offer and
readily got what was due to them and in turn, executed an "Affidavit of
Quitclaim" manifesting their utter satisfaction to the offer of Respondent
and expressed their waiver and quitclaim for any claims from the company.
Respondent reserves the right to present such affidavits of quitclaim at the
right opportune time. After a few months, [petitioner] did not manifest his
reaction to the company's offer after he failed to appear on the day the
Respondent scheduled the giving of the separation pay and other amounts
due to them. The next time, Respondent received a word from [petitioner]
was when it received this summons. 1
Joining issue with private respondent with respect to the validity of the latter's scheme
for terminating the services of its security employees, petitioner contended before the
Labor Arbiter:
2. [Petitioner's] dismissal is patently illegal. The constitutional duty of the
state to protect the right of the laborers to security of tenure demands
that an employer may be permitted to terminate the services of an
employee only under conditions allowed by and with due process of
law (Cebu Stevedoring Co., Inc., v. Regional Director/Minister of Labor, 168
SCRA 315).
3. This doctrinal pronouncement of the Highest Tribunal was wantonly
disregarded by respondent in the instant case [a]s purely narrated by
[petitioner] in his affidavit Annex "A." He performed his work faithfully and
efficiently and he never transgressed the rules and regulations of company
Page 252 of 497

during the entire period of his employment. The commendation of the

Company with regard to [petitioner's] exemplary performance are attached
and marked as Annex "G" to "G-27" respectively. However, he was verbally
told and notified by respondent[s] Human Resource Division Manager
Teresita A. Villanueva that his employment was terminated on October 11,
1991. . . .
Indeed, it is mandatory for an employer to accord to the supposed errant or
unwanted worker the legal requirements of written notice of the specific
reason for the retrenchment and eventual termination of complainant and
he should have been given a chance to present his side, otherwise, the
worker's security of tenure would be at the pleasure of the employer. 2
Ruling on this issue as thus defined by the parties' pleadings, the Labor Arbiter held that
petitioner "was not afforded due process. Respondent merely issued to him a dismissal
letter stating retrenchment as the sole ground for his dismissal." 3 But, as the Labor
Arbiter found, private respondent failed to prove that it was laying off employees in order
to prevent or minimize losses. Accordingly, he ruled that petitioner had been illegally
dismissed and ordered him to be reinstated and paid full backwages and other monetary
benefits to which he was entitled.
Private respondent appealed to the NLRC. Maintaining that it had complied with the
notice requirement of the law, it said in its Memorandum on Appeal:
POINT SIX. When the [Labor Arbiter's] decision finds that [petitioner] was
not afforded due process, the Hon. Labor Arbiter failed to make distinction
between termination by reason of "just causes" (Arts. 282, Labor Code) and
termination for "authorized causes" (Art. 283 and 284, Labor Code). Due
Process which is to afford an employee to explain why he should not be
terminated is only required if termination is for just cause under Art. 282
but not [in] termination for authorized causes under Arts. 283 and 284 of
the Labor Code. Termination for authorized causes requires notice of 30
days before the intended termination date or in lieu of notice, payment of
wages for 30 days which respondent, in the case at bar, was willing to pay
the complainant. 4
The NLRC reversed the Labor Arbiter's decision not because it found that private
respondent had complied with the notice requirement but only that petitioner's
employment had been terminated for a cause authorized by law,i.e., redundancy.
Accordingly, the NLRC ordered petitioner to be given separation pay in addition to the
other monetary benefits to which he is entitled.
Indeed, the NLRC failed to address the question of whether the notice requirement in Art.
283 had been complied with. Because of this gap in the NLRC decision, this Court, in
affirming the decision, ordered the payment of full backwages to petitioner from October
11, 1991 when his employment was terminated without the requisite thirty (30) days
written notice until the decision finding the termination to be for an authorized cause
had become final.

Page 253 of 497

There is thus no basis for private respondent's allegation that its failure to give a written
notice of termination to petitioner was never in issue and that, in awarding full
backwages to petitioner for its failure to comply with the notice requirement of Art. 283
of the Labor Code, this court dealt "almost entirely" with a "non-issue."
In any event, this Court has authority to inquire into any question necessary in arriving at
a just decision of a case before it. 5
Second. It is contended that payment of petitioner's salary for thirty (30) days, "even
when [he is] no longer working, is effective notice and is much better than 30 days
formal notice but working until the end of the 30 day period." 6 Private respondent's
letter of October 11, 1991, so it is claimed, was a mere reiteration of the oral notice
previously given to petitioner in September that effective October 1, 1991, he and his
fellow security checkers would no longer be required to work because they would be
replaced by a security agency, although they would be given their salary for the month
of October 1991.
Private respondent's position has no basis in the law. The requirement to give a written
notice of termination at least thirty (30) days in advance is a requirement of the Labor
Code. Art. 283 provides:
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the Department of Labor
and Employment at least one (1) month before the intended date thereof. In
case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation
pay equivalent to at least one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (1)
whole year. (Emphasis added).
As pointed out in Sebuguero v. National Labor Relations Conmission:

. . . [W]hat the law requires is a written notice to the employees concerned

and that requirement is mandatory. The notice must also be given at least
one month in advance of the intended date of retrenchment to enable the
employees to look for other means of employment and therefore to ease
the impact of the loss of their jobs and the corresponding income.
Nothing in the law gives private respondent the option to substitute the required prior
written notice with payment of thirty (30) days salary. It is not for private respondent to
Page 254 of 497

make substitutions for a right that a worker is legally entitled to. For instance, as held
in Farmanlis Farms, Inc. v. Minister of
Labor, 8 under the law, benefits in the form of food or free electricity, assuming they
were given, were not a proper substitute for the 13th month pay required by law.
Indeed, a job is more than the salary that it carries. Payment of thirty (30) days salary
cannot compensate for the psychological effect or the stigma of immediately finding
one's self laid off from work. It cannot be a fully effective substitute for the thirty (30)
days written notice required by law especially when, as in this case, the fact is that no
notice was given to the Department of Labor and Employment (DOLE).
Besides, as we held in our decision in this case, 9 the purpose of such previous notice is
to give the employee some time to prepare for the eventual loss of his job as well as the
DOLE the opportunity to ascertain the verity of the alleged authorized cause of
termination. Such purpose would not be served by the simple expedient of paying thirty
(30) days salary in lieu of notice of an employee's impending dismissal, as by then the
loss of employment would have been a fait accompli.
Private respondent nevertheless claims that payment of thirty (30) days salary in lieu of
written notice given thirty (30) days before the termination of employment is in
accordance with our ruling in Associated Labor Unions-VIMCONTU v. NLRC. 10
This claim will not bear analysis. In that case, the employees and the then Ministry of
Labor and Employment (MOLE) were notified in writing on August 5, 1983 that the
employees' services would cease on August 31, 1983 but that they would be paid their
salaries and other benefits until September 5, 1983. It was held that such written notice
was "more than substantial compliance" with the notice requirement of the Labor Code.
Indeed, there was "more than substantial compliance" with the law in that case because,
in addition to the advance written notice required under Art. 284 (now Art. 283) of the
Labor Code, the employees were paid for five days, from September 1 to 5, 1993, even if
they rendered no service for the period. But, in the case at bar, there was no written
notice given to petitioner at least thirty (30) days before the termination of his
employment. Had private respondent given a written notice to petitioner on October 1,
1991, at the latest, that effective October 31, 1991 his employment would cease
although from October 1 he would no longer be required to work, there would be basis
for private respondent's boast that "[payment] of this salary even [if he is] no longer
working is effective notice and is much better than 30 days formal notice but working
until the end of the 30 days period." This is not the case here, however. What happened
here was that on October 11, 1991, petitioner was given a memorandum terminating his
employment effective on the same day on the ground of retrenchment (actually
redundancy).
Third. It is contended that private respondent's non-observance of the notice
requirement should not be visited with a severe consequence in accordance with Art. III,
19(1) of the Constitution. The contention is without merit. In the first place, Art. III,
19(1) of the Constitution, prohibiting the imposition of excessive fines, applies only to
criminal prosecutions. In the second place, the decision in this case, providing for the
payment of full backwages for failure of an employer to give notice, seeks to vindicate
the employee's right to notice before he is dismissed or laid off, while recognizing the
Page 255 of 497

right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to
terminate employment for any of the authorized causes mentioned in Arts. 283284. 11 The order to pay full backwages is a consequence of the employer's action in
dismissing an employee without notice which makes said dismissal ineffectual. 12 The
employee is considered not to have been terminated from his employment until it is
finally determined that his dismissal/termination of employment was for cause and,
therefore, he should be paid his salaries in the interim. This eliminates guesswork in
determining the degree of prejudice suffered by an employee dismissed with cause but
without notice since the penalty is measured by the salary he failed to earn on account
of his dismissal/termination of employment.
Fourth. Private respondent finally contends that, in any event, the new doctrine
announced in this case should only be applied prospectively. Private respondent invokes
the ruling in Columbia Pictures, Inc. v. Court of Appeals1 that
[While] a judicial interpretation becomes a part of the law as of the date
that law was originally passed, [this is] subject to the qualification that
when a doctrine of this Court is overruled and a different view is adopted,
and more so when there is a reversal thereof, the new doctrine should be
applied prospectively and should not apply to parties who relied on the old
doctrine and acted in good faith. To hold otherwise would be to deprive the
law of its quality of fairness and justice then, if there is no recognition of
what had transpired prior to such adjudication.
It is apparent that private respondent misconceived the import of the ruling. The decision
in Columbia Pictures does not mean that if a new rule is laid down in a case, it should not
be applied in that case but that said rule should apply prospectively to cases arising
afterwards. Private respondent's view of the principle of prospective application of new
judicial doctrines would turn the judicial function into a mere academic exercise with the
result that the doctrine laid down would be no more than a dictum and would deprive the
holding in the case of any force.
Indeed, when the Court formulated the Wenphil doctrine, 14 which we reverse in this
case, the Court did not defer application of the rule laid down imposing a fine on the
employer for failure to give notice in a case of dismissal for cause. To the contrary, the
new rule was applied right then and there. For that matter, in 20th Century Fox Film
Corp. v. Court of Appeals 15 the Court laid down the rule that in determining the existence
of probable cause for the issuance of a search warrant in copyright infringement cases,
the court must require the production of the master tapes of copyrighted films in order to
compare them with the "pirated" copies. The new rule was applied in opinion of the
Court written by Justice Hugo E. Gutierrez, Jr. in the very same case of 20th Century Fox
in which the new requirement was laid down. Where the new rule was held to be
prospective in application was in Columbia Pictures and that was because at the time the
search warrant in that case was issued, the new standard had not yet been announced
so it would be unreasonable to expect the judge issuing the search warrant to apply a
rule that had not been announced at the time.
A good illustration of the scope of overruling decisions is People v. Mapa, 16 where the
accused was charged with illegal possession of firearms. The accused invoked the ruling
in an earlier case 17 that appointment as a secret agent of a provincial governor to assist
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in the maintenance of peace and order sufficiently put the appointee in the category of a
"peace officer" equal to a member of the municipal police authorized under 879 of the
Administrative Code of 1917 to carry firearms. The Court rejected the accused's
contention and overruled the prior decision in People v. Macarandang on the ground that
879 of the Administrative Code of 1917 was explicit and only those expressly mentioned
therein were entitled to possess firearms. Since secret agents were not among those
mentioned, they were not authorized to possess firearms.
Although in People v. Jabinal 18 the Court refused to give retro active effect to its decision
in Mapa, because the new doctrine "should not apply to parties who had relied on the old
doctrine and acted in good faith thereon" and, for this reason, it acquitted the accused of
illegal possession of firearms, nonetheless it applied the new ruling (that secret agents of
provincial governors were not authorized to possess firearms) in the very case in which
the new rule was announced and convicted the accused.
In the case at bar, since private respondent does not even claim that it has relied in good
faith on the former doctrine of Wenphil and its progeny Sebuguero v. NLRC, there is no
reason not to apply the new standard to this case.
WHEREFORE, private respondent's motion for reconsideration is DENIED with finality for
lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 158693

November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME
IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.:

Page 257 of 497

This petition for review seeks to reverse the decision 1 of the Court of Appeals dated
January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor
Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of
selling and installing ornamental and construction materials. It employed petitioners
Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January 2,
19922 until February 23, 1999 when they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims 3 and
on December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals
illegal and ordered private respondent to pay the monetary claims. The dispositive
portion of the decision states:
WHEREFORE, premises considered, We find the termination of the complainants
illegal. Accordingly, respondent is hereby ordered to pay them their backwages up
to November 29, 1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for
every year of service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and
service incentive leave pay for the years 1996, 1997 and 1998 as well as their
premium pay for holidays and rest days and Virgilio Agabon's 13th month pay
differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos,
or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX
HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and
ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT &
93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of
Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had
abandoned their work, and were not entitled to backwages and separation pay. The other
money claims awarded by the Labor Arbiter were also denied for lack of evidence. 5
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari
with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal
because they had abandoned their employment but ordered the payment of money
claims. The dispositive portion of the decision reads:

Page 258 of 497

WHEREFORE, the decision of the National Labor Relations Commission is

REVERSED only insofar as it dismissed petitioner's money claims. Private
respondents are ordered to pay petitioners holiday pay for four (4) regular
holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for
said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay
for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were illegally
dismissed.7
Petitioners assert that they were dismissed because the private respondent refused to
give them assignments unless they agreed to work on a "pakyaw" basis when they
reported for duty on February 23, 1999. They did not agree on this arrangement because
it would mean losing benefits as Social Security System (SSS) members. Petitioners also
claim that private respondent did not comply with the twin requirements of notice and
hearing.8
Private respondent, on the other hand, maintained that petitioners were not dismissed
but had abandoned their work. 9 In fact, private respondent sent two letters to the last
known addresses of the petitioners advising them to report for work. Private
respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime
in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving
40,000 square meters of cornice installation work. However, petitioners did not report for
work because they had subcontracted to perform installation work for another company.
Petitioners also demanded for an increase in their wage to P280.00 per day. When this
was not granted, petitioners stopped reporting for work and filed the illegal dismissal
case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded
not only respect but even finality if the findings are supported by substantial evidence.
This is especially so when such findings were affirmed by the Court of
Appeals.11 However, if the factual findings of the NLRC and the Labor Arbiter are
conflicting, as in this case, the reviewing court may delve into the records and examine
for itself the questioned findings. 12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that
petitioners' dismissal was for a just cause. They had abandoned their employment and
were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause
but also enjoins the employer to give the employee the opportunity to be heard and to
defend himself.13 Article 282 of the Labor Code enumerates the just causes for
termination by the employer: (a) serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or the latter's representative in connection
with the employee's 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
his duly authorized representative; (d) commission of a crime or offense by the employee
Page 259 of 497

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.
Abandonment is the deliberate and unjustified refusal of an employee to resume his
employment.14 It is a form of neglect of duty, hence, a just cause for termination of
employment by the employer.15 For a valid finding of abandonment, these two factors
should be present: (1) the failure to report for work or absence without valid or justifiable
reason; and (2) a clear intention to sever employer-employee relationship, with the
second as the more determinative factor which is manifested by overt acts from which it
may be deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was deliberate and
unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for an
installation work for another company. Subcontracting for another company clearly
showed the intention to sever the employer-employee relationship with private
respondent. This was not the first time they did this. In January 1996, they did not report
for work because they were working for another company. Private respondent at that
time warned petitioners that they would be dismissed if this happened again. Petitioners
disregarded the warning and exhibited a clear intention to sever their employeremployee relationship. The record of an employee is a relevant consideration in
determining the penalty that should be meted out to him. 17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented
from work without leave or permission from his employer, for the purpose of looking for a
job elsewhere, is considered to have abandoned his job. We should apply that rule with
more reason here where petitioners were absent because they were already working in
another company.
The law imposes many obligations on the employer such as providing just compensation
to workers, observance of the procedural requirements of notice and hearing in the
termination of employment. On the other hand, the law also recognizes the right of the
employer to expect from its workers not only good performance, adequate work and
diligence, but also good conduct 19 and loyalty. The employer may not be compelled to
continue to employ such persons whose continuance in the service will patently be
inimical to his interests.20
After establishing that the terminations were for a just and valid cause, we now
determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of
the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all cases of termination of
employment, the following standards of due process shall be substantially
observed:
I. For termination of employment based on just causes as defined in Article 282 of
the Code:
Page 260 of 497

(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to
explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond
to the charge, present his evidence or rebut the evidence presented against him;
and
(c) A written notice of termination served on the employee indicating that upon
due consideration of all the circumstances, grounds have been established to
justify his termination.
In case of termination, the foregoing notices shall be served on the employee's
last known address.
Dismissals based on just causes contemplate acts or omissions attributable to the
employee while dismissals based on authorized causes involve grounds under the Labor
Code which allow the employer to terminate employees. A termination for an authorized
cause requires payment of separation pay. When the termination of employment is
declared illegal, reinstatement and full backwages are mandated under Article 279. If
reinstatement is no longer possible where the dismissal was unjust, separation pay may
be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer
must give the employee two written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the employment: a notice specifying the
grounds for which dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the
dismissal is based on authorized causes under Articles 283 and 284, the employer must
give the employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for
a just cause under Article 282 of the Labor Code, for an authorized cause under Article
283, or for health reasons under Article 284, and due process was observed; (2) the
dismissal is without just or authorized cause but due process was observed; (3) the
dismissal is without just or authorized cause and there was no due process; and (4) the
dismissal is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer
any liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates
that the employee is entitled to reinstatement without loss of seniority rights and other
privileges and full backwages, inclusive of allowances, and other benefits or their
monetary equivalent computed from the time the compensation was not paid up to the
time of actual reinstatement.

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In the fourth situation, the dismissal should be upheld. While the procedural infirmity
cannot be cured, it should not invalidate the dismissal. However, the employer should be
held liable for non-compliance with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be
upheld because it was established that the petitioners abandoned their jobs to work for
another company. Private respondent, however, did not follow the notice requirements
and instead argued that sending notices to the last known addresses would have been
useless because they did not reside there anymore. Unfortunately for the private
respondent, this is not a valid excuse because the law mandates the twin notice
requirements to the employee's last known address. 21 Thus, it should be held liable for
non-compliance with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and timely to
clarify the various rulings on employment termination in the light of Serrano v. National
Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was
not given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations
Commission,23 we reversed this long-standing rule and held that the dismissed
employee, although not given any notice and hearing, was not entitled to reinstatement
and backwages because the dismissal was for grave misconduct and insubordination, a
just ground for termination under Article 282. The employee had a violent temper and
caused trouble during office hours, defying superiors who tried to pacify him. We
concluded that reinstating the employee and awarding backwages "may encourage him
to do even worse and will render a mockery of the rules of discipline that employees are
required to observe."24 We further held that:
Under the circumstances, the dismissal of the private respondent for just cause
should be maintained. He has no right to return to his former employment.
However, the petitioner must nevertheless be held to account for failure to extend
to private respondent his right to an investigation before causing his dismissal.
The rule is explicit as above discussed. The dismissal of an employee must be for
just or authorized cause and after due process. Petitioner committed an infraction
of the second requirement. Thus, it must be imposed a sanction for its failure to
give a formal notice and conduct an investigation as required by law before
dismissing petitioner from employment. Considering the circumstances of this
case petitioner must indemnify the private respondent the amount of P1,000.00.
The measure of this award depends on the facts of each case and the gravity of
the omission committed by the employer. 25
The rule thus evolved: where the employer had a valid reason to dismiss an employee
but did not follow the due process requirement, the dismissal may be upheld but the
employer will be penalized to pay an indemnity to the employee. This became known as
the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We
held that the violation by the employer of the notice requirement in termination for just
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or authorized causes was not a denial of due process that will nullify the termination.
However, the dismissal is ineffectual and the employer must pay full backwages from the
time of termination until it is judicially declared that the dismissal was for a just or
authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the
significant number of cases involving dismissals without requisite notices. We concluded
that the imposition of penalty by way of damages for violation of the notice requirement
was not serving as a deterrent. Hence, we now required payment of full backwages from
the time of dismissal until the time the Court finds the dismissal was for a just or
authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay later" by
imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of
Article 279 of the Labor Code which states:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.
This means that the termination is illegal only if it is not for any of the justified or
authorized causes provided by law. Payment of backwages and other benefits, including
reinstatement, is justified only if the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited strong
dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a
system of rights based on moral principles so deeply imbedded in the traditions and
feelings of our people as to be deemed fundamental to a civilized society as conceived
by our entire history. Due process is that which comports with the deepest notions of
what is fair and right and just.26 It is a constitutional restraint on the legislative as well as
on the executive and judicial powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under the
Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process
requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended,
otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as
amended by Department Order Nos. 9 and 10. 27 Breaches of these due
process requirements violate the Labor Code. Therefore statutory due process should be
differentiated from failure to comply with constitutional due process.

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Constitutional due process protects the individual from the government and assures him
of his rights in criminal, civil or administrative proceedings; while statutory due
process found in the Labor Code and Implementing Rules protects employees from being
unjustly terminated without just cause after notice and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and
valid cause but the employee was not accorded due process. The dismissal was upheld
by the Court but the employer was sanctioned. The sanction should be in the nature of
indemnification or penalty, and depends on the facts of each case and the gravity of the
omission committed by the employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee
was not given due process, the failure did not operate to eradicate the just causes for
dismissal. The dismissal being for just cause,albeit without due process, did not entitle
the employee to reinstatement, backwages, damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National
Labor Relations Commission,30 which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly
observed by an employer, it would not be right to order either the reinstatement
of the dismissed employee or the payment of backwages to him. In failing,
however, to comply with the procedure prescribed by law in terminating the
services of the employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It might be
pointed out that the notice to be given and the hearing to be conducted generally
constitute the two-part due process requirement of law to be accorded to the
employee by the employer. Nevertheless, peculiar circumstances might obtain in
certain situations where to undertake the above steps would be no more than a
useless formality and where, accordingly, it would not be imprudent to apply
the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to
the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the law on
employment termination, we believe that in cases involving dismissals for cause but
without observance of the twin requirements of notice and hearing, the better rule is to
abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for
just cause but imposing sanctions on the employer. Such sanctions, however, must be
stiffer than that imposed in Wenphil. By doing so, this Court would be able to achieve a
fair result by dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes
but not complying with statutory due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most notorious violators of
company policy are rewarded by invoking due process. This also creates absurd
situations where there is a just or authorized cause for dismissal but a procedural
infirmity invalidates the termination. Let us take for example a case where the employee
is caught stealing or threatens the lives of his co-employees or has become a criminal,
Page 264 of 497

who has fled and cannot be found, or where serious business losses demand that
operations be ceased in less than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can generate employment in
the local economy.
The constitutional policy to provide full protection to labor is not meant to be a sword to
oppress employers. The commitment of this Court to the cause of labor does not prevent
us from sustaining the employer when it is in the right, as in this case. 32 Certainly, an
employer should not be compelled to pay employees for work not actually performed
and in fact abandoned.
The employer should not be compelled to continue employing a person who is
admittedly guilty of misfeasance or malfeasance and whose continued employment is
patently inimical to the employer. The law protecting the rights of the laborer authorizes
neither oppression nor self-destruction of the employer. 33
It must be stressed that in the present case, the petitioners committed a grave offense,
i.e., abandonment, which, if the requirements of due process were complied with, would
undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should not be
protected by the Social Justice Clause of the Constitution. Social justice, as the term
suggests, should be used only to correct an injustice. As the eminent Justice Jose P.
Laurel observed, social justice must be founded on the recognition of the necessity of
interdependence among diverse units of a society and of the protection that should be
equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about "the
greatest good to the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in
stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labormanagement relations and dispense justice with an even hand in every case:
We have repeatedly stressed that social justice or any justice for that matter is
for the deserving, whether he be a millionaire in his mansion or a pauper in his
hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in
favor of the poor to whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor simply because
they are poor, or reject the rich simply because they are rich, for justice must
always be served for the poor and the rich alike, according to the mandate of the
law.35
Justice in every case should only be for the deserving party. It should not be presumed
that every case of illegal dismissal would automatically be decided in favor of labor, as
management has rights that should be fully respected and enforced by this Court. As
Page 265 of 497

interdependent and indispensable partners in nation-building, labor and management

need each other to foster productivity and economic growth; hence, the need to weigh
and balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory due
process should not nullify the dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of his statutory rights, as ruled
in Reta v. National Labor Relations Commission.36 The indemnity to be imposed should be
stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought
to deter in the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special consideration
the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by
him.37
As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an
employer is liable to pay indemnity in the form of nominal damages to an employee who
has been dismissed if, in effecting such dismissal, the employer fails to comply with the
requirements of due process. The Court, after considering the circumstances therein,
fixed the indemnity at P2,590.50, which was equivalent to the employee's one month
salary. This indemnity is intended not to penalize the employer but to vindicate or
recognize the employee's right to statutory due process which was violated by the
employer.39
The violation of the petitioners' right to statutory due process by the private respondent
warrants the payment of indemnity in the form of nominal damages. The amount of such
damages is addressed to the sound discretion of the court, taking into account the
relevant circumstances.40 Considering the prevailing circumstances in the case at bar, we
deem it proper to fix it at P30,000.00. We believe this form of damages would serve to
deter employers from future violations of the statutory due process rights of employees.
At the very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay
petitioners' holiday pay, service incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims. Private
respondent is liable for petitioners' holiday pay, service incentive leave pay and 13th
month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where the
employee must allege non-payment, the general rule is that the burden rests on the
employer to prove payment, rather than on the employee to prove non-payment. The
reason for the rule is that the pertinent personnel files, payrolls, records, remittances
Page 266 of 497

and other similar documents which will show that overtime, differentials, service
incentive leave and other claims of workers have been paid are not in the possession of
the worker but in the custody and absolute control of the employer. 41
In the case at bar, if private respondent indeed paid petitioners' holiday pay and service
incentive leave pay, it could have easily presented documentary proofs of such monetary
benefits to disprove the claims of the petitioners. But it did not, except with respect to
the 13th month pay wherein it presented cash vouchers showing payments of the benefit
in the years disputed.42 Allegations by private respondent that it does not operate during
holidays and that it allows its employees 10 days leave with pay, other than being selfserving, do not constitute proof of payment. Consequently, it failed to discharge
the onus probandi thereby making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay, we find the same to be unauthorized. The evident intention of
Presidential Decree No. 851 is to grant an additional income in the form of the 13th
month pay to employees not already receiving the same 43 so as "to further protect the
level of real wages from the ravages of world-wide inflation."44 Clearly, as additional
income, the 13th month pay is included in the definition of wage under Article 97(f) of
the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money whether fixed
or ascertained on a time, task, piece , or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee"
from which an employer is prohibited under Article 113 45 of the same Code from making
any deductions without the employee's knowledge and consent. In the instant case,
private respondent failed to show that the deduction of the SSS loan and the value of the
shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The
lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon
included the same as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the Labor
Arbiter ordering the private respondent to pay each of the petitioners holiday pay for
four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive
leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio
Agabon's thirteenth month pay for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court
of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners'
Jenny and Virgilio Agabon abandoned their work, and ordering private respondent to pay
each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the
amount of P6,520.00, service incentive leave pay for the same period in the amount of
P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the
amount of P2,150.00 isAFFIRMED with the MODIFICATION that private respondent
Page 267 of 497

Riviera Home Improvements, Inc. is furtherORDERED to pay each of the petitioners the
amount of P30,000.00 as nominal damages for non-compliance with statutory due
process.
No costs.
SO ORDERED.
EN BANC
[G.R. No. 151378. March 28, 2005]
JAKA FOOD PROCESSING CORPORATION, petitioner, vs. DARWIN PACOT, ROBERT
PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL LESCANO and
JONATHAN CAGABCAB, respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a petition for review on
certiorari under rule 45 of the Rules of Court are the following issuances of the Court of
Appeals in CA-G.R. SP. No. 59847, to wit:
1.

Decision dated 16 November 2001, [1] reversing and setting aside an

earlier decision of the National Labor Relations Commission (NLRC); and

2.

Resolution dated 8 January 2002, [2] denying petitioners motion for

reconsideration.

The material facts may be briefly stated, as follows:

Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel
Lescano and Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing
Corporation (JAKA, for short) until the latter terminated their employment on August 29,
1997 because the corporation was in dire financial straits. It is not disputed, however,
that the termination was effected without JAKA complying with the requirement under
Article 283 of the Labor Code regarding the service of a written notice upon the
employees and the Department of Labor and Employment at least one (1) month before
the intended date of termination.
In time, respondents separately filed with the regional Arbitration Branch of the
National Labor Relations Commission (NLRC) complaints for illegal dismissal,
underpayment of wages and nonpayment of service incentive leave and 13 th month pay
against JAKA and its HRD Manager, Rosana Castelo.
Page 268 of 497

After due proceedings, the Labor Arbiter rendered a decision [3] declaring the
termination illegal and ordering JAKA and its HRD Manager to reinstate respondents with
full backwages, and separation pay if reinstatement is not possible. More specifically the
decision dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as illegal the termination of
complainants and ordering respondents to reinstate them to their positions with full
backwages which as of July 30, 1998 have already amounted to P339,768.00.
Respondents are also ordered to pay complainants the amount of P2,775.00 representing
the unpaid service incentive leave pay of Parohinog, Lescano and Cagabcab an the
amount of P19,239.96 as payment for 1997 13th month pay as alluded in the above
computation.
If complainants could not be reinstated, respondents are ordered to pay them separation
pay equivalent to one month salary for very (sic) year of service.
SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30,
1999,[4] affirmed in toto that of the Labor Arbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with
another decision dated January 28, 2000,[5] this time modifying its earlier decision, thus:
WHEREFORE, premises considered, the instant motion for reconsideration is hereby
GRANTED and the challenged decision of this Commission [dated] 30 August 1999 and
the decision of the Labor Arbiter xxx are hereby modified by reversing an setting aside
the awards of backwages, service incentive leave pay. Each of the complainantsappellees shall be entitled to a separation pay equivalent to one month. In addition,
respondents-appellants is (sic) ordered to pay each of the complainants-appellees the
sum of P2,000.00 as indemnification for its failure to observe due process in effecting the
retrenchment.
SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its resolution of
April 28, 2000,[6] respondents went to the Court of Appeals via a petition for certiorari,
thereat docketed as CA-G.R. SP No. 59847.
As stated at the outset hereof, the Court of Appeals, in a decision dated November
16, 2000, applying the doctrine laid down by this Court in Serrano vs. NLRC,[7] reversed
and set aside the NLRCs decision of January 28, 2000, thus:

Page 269 of 497

WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations
Commission is REVERSED and SET ASIDE and another one entered ordering
respondent JAKA Foods Processing Corporation to pay petitioners separation pay
equivalent to one (1) month salary, the proportionate 13 th month pay and, in addition,
full backwages from the time their employment was terminated on August 29, 1997 up
to the time the Decision herein becomes final.
SO ORDERED.
This time, JAKA moved for a reconsideration but its motion was denied by the
appellate court in its resolution of January 8, 2002.
Hence, JAKAs present recourse, submitting, for our consideration, the following
issues:
I.

WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED FULL

BACKWAGES TO RESPONDENTS.

II.

WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED

SEPARATION PAY TO RESPONDENTS.

As we see it, there is only one question that requires resolution, i.e. what are the
legal implications of a situation where an employee is dismissed for cause but such
dismissal was effected without the employers compliance with the notice requirement
under the Labor Code.
This, certainly, is not a case of first impression. In the very recent case of Agabon
vs. NLRC,[8] we had the opportunity to resolve a similar question. Therein, we found that
the employees committed a grave offense, i.e., abandonment, which is a form of a
neglect of duty which, in turn, is one of the just causes enumerated under Article 282 of
the Labor Code. In said case, we upheld the validity of the dismissal despite noncompliance with the notice requirement of the Labor Code. However, we required the
employer to pay the dismissed employees the amount of P30,000.00, representing
nominal damages for non-compliance with statutory due process, thus:
Where the dismissal is for a just cause, as in the instant case, the lack of statutory due
process should not nullify the dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of his statutory rights, as ruled
in Reta vs. National Labor Relations Commission. The indemnity to be imposed should
be stiffer to discourage the abhorrent practice of dismiss now, pay later, which we
sought to deter in the Serrano ruling. The sanction should be in the nature of
indemnification or penalty and should depend on the facts of each case, taking into
special consideration the gravity of the due process violation of the employer.

Page 270 of 497

xxx

xxx

xxx

The violation of petitioners right to statutory due process by the private respondent
warrants the payment of indemnity in the form of nominal damages. The amount of
such damages is addressed to the sound discretion of the court, taking into account the
relevant circumstances. Considering the prevailing circumstances in the case at
bar, we deem it proper to fix it at P30,000.00. We believe this form of damages
would serve to deter employers from future violations of the statutory due process rights
of employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its Implementing
Rules, (Emphasis supplied).
The difference between Agabon and the instant case is that in the former, the
dismissal was based on a just cause under Article 282 of the Labor Code while in the
present case, respondents were dismissed due to retrenchment, which is one of the
authorized causes under Article 283 of the same Code.
At this point, we note that there are divergent implications of a dismissal for just
cause under Article 282, on one hand, and a dismissal for authorized cause under Article
283, on the other.
A dismissal for just cause under Article 282 implies that the employee concerned
has committed, or is guilty of, some violation against the employer, i.e. the employee
has committed some serious misconduct, is guilty of some fraud against the employer,
or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee
himself initiated the dismissal process.
On another breath, a dismissal for an authorized cause under Article 283 does not
necessarily imply delinquency or culpability on the part of the employee. Instead, the
dismissal process is initiated by the employers exercise of his management
prerogative, i.e. when the employer opts to install labor saving devices, when he decides
to cease business operations or when, as in this case, he undertakes to implement a
retrenchment program.
The clear-cut distinction between a dismissal for just cause under Article 282 and a
dismissal for authorized cause under Article 283 is further reinforced by the fact that in
the first, payment of separation pay, as a rule, is not required, while in the second, the
law requires payment of separation pay.[9]
For these reasons, there ought to be a difference in treatment when the ground for
dismissal is one of the just causes under Article 282, and when based on one of the
authorized causes under Article 283.

Page 271 of 497

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under
Article 282 but the employer failed to comply with the notice requirement, the sanction
to be imposed upon him should be tempered because the dismissal process was, in
effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on
an authorized cause under Article 283 but the employer failed to comply with the notice
requirement, the sanction should be stiffer because the dismissal process was initiated
by the employers exercise of his management prerogative.
The records before us reveal that, indeed, JAKA was suffering from serious business
losses at the time it terminated respondents employment. As aptly found by the NLRC:
A careful study of the evidence presented by the respondent-appellant corporation
shows that the audited Financial Statement of the corporation for the periods 1996, 1997
and 1998 were submitted by the respondent-appellant corporation, The Statement of
Income and Deficit found in the Audited Financial Statement of the respondent-appellant
corporation clearly shows the following in 1996, the deficit of the respondent-appellant
corporation was P188,218,419.00 or 94.11% of the stockholders [sic] equity which
amounts to P200,000,000.00. In 1997 when the retrenchment program of respondentappellant corporation was undertaken, the deficit ballooned to P247,222,569.00 or
123.61% of the stockholders equity, thus a capital deficiency or impairment of equity
ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the stockholders
equity. From 1996 to 1997, the deficit grew by more that (sic) 31% while in 1998 the
deficit grew by more than 47%.
The Statement of Income and Deficit of the respondent-appellant corporation to prove its
alleged losses was prepared by an independent auditor, SGV & Co. It convincingly
showed that the respondent-appellant corporation was in dire financial straits, which the
complainants-appellees failed to dispute. The losses incurred by the respondentappellant corporation are clearly substantial and sufficiently proven with clear and
satisfactory evidence. Losses incurred were adequately shown with respondentappellants audited financial statement. Having established the loss incurred by the
respondent-appellant corporation, it necessarily necessarily (sic) follows that the ground
in support of retrenchment existed at the time the complainants-appellees were
terminated. We cannot therefore sustain the findings of the Labor Arbiter that the
alleged losses of the respondent-appellant was [sic] not well substantiated by substantial
proofs. It is therefore logical for the corporation to implement a retrenchment program
to prevent further losses.[10]
Noteworthy it is, moreover, to state that herein respondents did not assail the
foregoing finding of the NLRC which, incidentally, was also affirmed by the Court of
Appeals.
It is, therefore, established that there was ground for respondents
dismissal, i.e., retrenchment, which is one of the authorized causes enumerated under
Page 272 of 497

Article 283 of the Labor Code. Likewise, it is established that JAKA failed to comply with
the notice requirement under the same Article. Considering the factual circumstances in
the instant case and the above ratiocination, we, therefore, deem it proper to fix the
indemnity at P50,000.00.
We likewise find the Court of Appeals to have been in error when it ordered JAKA to
pay respondents separation pay equivalent to one (1) month salary for every year of
service. This is because in Reahs Corporation vs. NLRC,[11] we made the following
declaration:
The rule, therefore, is that in all cases of business closure or cessation of operation or
undertaking of the employer, the affected employee is entitled to separation pay. This is
consistent with the state policy of treating labor as a primary social economic force,
affording full protection to its rights as well as its welfare. The exception is when the
closure of business or cessation of operations is due to serious business losses
or financial reverses; duly proved, in which case, the right of affected
employees to separation pay is lost for obvious reasons. xxx. (Emphasis
supplied)
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision
and resolution of the Court of Appeals respectively dated November 16, 2001 and
January 8, 2002 are hereby SET ASIDE and a new one entered upholding the legality of
the dismissal but ordering petitioner to pay each of the respondents the amount of
P50,000.00, representing nominal damages for non-compliance with statutory due
process.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 192571

July 23, 2013

ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST,

MARIA OLIVIA T. YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G.
ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Page 273 of 497

Assailed in this petition for review on certiorari 1 are the Decision2 dated December
10,2009 and Resolution3dated June 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP
No. 101045 which pronounced that the National Labor Relations Commission (NLRC) did
not gravely abuse its discretion when it ruled that respondent Pearlie Ann F. Alcaraz
(Alcaraz) was illegally dismissed from her employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused the
publication in a major broadsheet newspaper of its need for a Medical and Regulatory
Affairs Manager (Regulatory Affairs Manager) who would: (a) be responsible for drug
safety surveillance operations, staffing, and budget; (b) lead the development and
implementation of standard operating procedures/policies for drug safety surveillance
and vigilance; and (c) act as the primary interface with internal and external customers
regarding safety operations and queries. 4 Alcaraz - who was then a Regulatory Affairs
and Information Manager at Aventis Pasteur Philippines, Incorporated (another
pharmaceutical company like Abbott) showed interest and submitted her application on
October 4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the abovementioned position
which was an item under the companys Hospira Affiliate Local Surveillance Unit (ALSU)
department.6 In Abbotts offer sheet.7 it was stated that Alcaraz was to be employed on a
probationary basis.8 Later that day, she accepted the said offer and received an
electronic mail (e-mail) from Abbotts Recruitment Officer, petitioner Teresita C. Bernardo
(Bernardo), confirming the same. Attached to Bernardos e-mail were Abbotts
organizational chart and a job description of Alcarazs work. 9
On February 12, 2005, Alcaraz signed an employment contract which stated, inter alia,
that she was to be placed on probation for a period of six (6) months beginning February
15, 2005 to August 14, 2005. The said contract was also signed by Abbotts General
Manager, petitioner Edwin Feist (Feist): 10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment requirements, you are hereby
appointed as follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005

Page 274 of 497

Basic Salary : P110,000.00/ month

It is understood that you agree to abide by all existing policies, rules and regulations of
the company, as well as those, which may be hereinafter promulgated.
Unless renewed, probationary appointment expires on the date indicated subject to
earlier termination by the Company for any justifiable reason.
If you agree to the terms and conditions of your employment, please signify your
conformity below and return a copy to HRD.
Welcome to Abbott!
Very truly yours,
Sgd.
EDWIN D. FEIST
General Manager
CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcarazs pre-employment orientation, petitioner Allan G. Almazar (Almazar),
Hospiras Country Transition Manager, briefed her on her duties and responsibilities as
Regulatory Affairs Manager, stating that: (a) she will handle the staff of Hospira ALSU and
will directly report to Almazar on matters regarding Hopiras local operations, operational
budget, and performance evaluation of the Hospira ALSU Staff who are on probationary
status; (b) she must implement Abbotts Code of Good Corporate Conduct (Code of
Conduct), office policies on human resources and finance, and ensure that Abbott will
hire people who are fit in the organizational discipline; (c) petitioner Kelly Walsh (Walsh),
Manager of the Literature Drug Surveillance Drug Safety of Hospira, will be her
immediate supervisor; (d) she should always coordinate with Abbotts human resource
officers in the management and discipline of the staff; (e) Hospira ALSU will spin off from
Abbott in early 2006 and will be officially incorporated and known as Hospira, Philippines.
In the interim, Hospira ALSU operations will still be under Abbotts management,
excluding the technical aspects of the operations which is under the control and
supervision of Walsh; and (f) the processing of information and/or raw material data
subject of Hospira ALSU operations will be strictly confined and controlled under the
computer system and network being maintained and operated from the United States.
For this purpose, all those involved in Hospira ALSU are required to use two identification
cards: one, to identify them as Abbotts employees and another, to identify them as
Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbotts Human
Resources (HR) Director, sent Alcaraz an e-mail which contained an explanation of the
procedure for evaluating the performance of probationary employees and further
indicated that Abbott had only one evaluation system for all of its employees. Alcaraz
Page 275 of 497

was also given copies of Abbotts Code of Conduct and Probationary Performance
Standards and Evaluation (PPSE) and Performance Excellence Orientation Modules
(Performance Modules) which she had to apply in line with her task of evaluating the
Hospira ALSU staff.12
Abbotts PPSE procedure mandates that the job performance of a probationary employee
should be formally reviewed and discussed with the employee at least twice: first on the
third month and second on the fifth month from the date of employment. The necessary
Performance Improvement Plan should also be made during the third-month review in
case of a gap between the employees performance and the standards set. These
performance standards should be discussed in detail with the employee within the first
two (2) weeks on the job. It was equally required that a signed copy of the PPSE form
must be submitted to Abbotts Human Resources Department (HRD) and shall serve as
documentation of the employees performance during his/her probationary period. This
shall form the basis for recommending the confirmation or termination of the
probationary employment.13
During the course of her employment, Alcaraz noticed that some of the staff had
disciplinary problems. Thus, she would reprimand them for their unprofessional behavior
such as non-observance of the dress code, moonlighting, and disrespect of Abbott
officers. However, Alcarazs method of management was considered by Walsh to be "too
strict."14 Alcaraz approached Misa to discuss these concerns and was told to "lie low" and
let Walsh handle the matter. Misa even assured her that Abbotts HRD would support her
in all her management decisions. 15
On April 12, 2005, Alcaraz received an e-mail from Misa requesting immediate action on
the staffs performance evaluation as their probationary periods were about to end. This
Alcaraz eventually submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible (Terrible),
Abbotts former HR Director, to discuss certain issues regarding staff performance
standards. In the course thereof, Alcaraz accidentally saw a printed copy of an e-mail
sent by Walsh to some staff members which essentially contained queries regarding the
formers job performance. Alcaraz asked if Walshs action was the normal process of
evaluation. Terrible said that it was not. 17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where she was
informed that she failed to meet the regularization standards for the position of
Regulatory Affairs Manager.18 Thereafter, Walsh and Terrible requested Alcaraz to tender
her resignation, else they be forced to terminate her services. She was also told that,
regardless of her choice, she should no longer report for work and was asked to
surrender her office identification cards. She requested to be given one week to decide
on the same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales (Gonzales),
that she would be on leave for that day. However, Gonzales told her that Walsh and
Terrible already announced to the whole Hospira ALSU staff that Alcaraz already resigned
due to health reasons.20

Page 276 of 497

On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter
stating that her services had been terminated effective May 19, 2005. 21 The letter
detailed the reasons for Alcarazs termination particularly, that Alcaraz: (a) did not
manage her time effectively; (b) failed to gain the trust of her staff and to build an
effective rapport with them; (c) failed to train her staff effectively; and (d) was not able
to obtain the knowledge and ability to make sound judgments on case processing and
article review which were necessary for the proper performance of her duties. 22 On May
27, 2005, Alcaraz received another copy of the said termination letter via registered
mail.23
Alcaraz felt that she was unjustly terminated from her employment and thus, filed a
complaint for illegal dismissal and damages against Abbott and its officers, namely, Misa,
Bernardo, Almazar, Walsh, Terrible, and Feist. 24 She claimed that she should have already
been considered as a regular and not a probationary employee given Abbotts failure to
inform her of the reasonable standards for her regularization upon her engagement as
required under Article 29525 of the Labor Code. In this relation, she contended that while
her employment contract stated that she was to be engaged on a probationary status,
the same did not indicate the standards on which her regularization would be
based.26 She further averred that the individual petitioners maliciously connived to
illegally dismiss her when: (a) they threatened her with termination; (b) she was ordered
not to enter company premises even if she was still an employee thereof; and (c) they
publicly announced that she already resigned in order to humiliate her. 27
On the contrary, petitioners maintained that Alcaraz was validly terminated from her
probationary employment given her failure to satisfy the prescribed standards for her
regularization which were made known to her at the time of her engagement. 28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcarazs complaint for lack of
merit.
The LA rejected Alcarazs argument that she was not informed of the reasonable
standards to qualify as a regular employee considering her admissions that she was
briefed by Almazar on her work during her pre-employment orientation meeting 30 and
that she received copies of Abbotts Code of Conduct and Performance Modules which
were used for evaluating all types of Abbott employees. 31 As Alcaraz was unable to meet
the standards set by Abbott as per her performance evaluation, the LA ruled that the
termination of her probationary employment was justified. 32 Lastly, the LA found that
there was no evidence to conclude that Abbotts officers and employees acted in bad
faith in terminating Alcarazs employment. 33
Displeased with the LAs ruling, Alcaraz filed an appeal with the National Labor Relations
Commission (NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a Decision, 34 annulling and setting aside the
LAs ruling, the dispositive portion of which reads:
Page 277 of 497

WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is hereby
reversed, annulled and set aside and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to have committed
illegal dismissal;
2. Respondents are ordered to immediately reinstate complainant to her former
position without loss of seniority rights immediately upon receipt hereof;
3. To jointly and severally pay complainant backwages computed from 16 May
2005 until finality of this decision. As of the date hereof the backwages is
computed at
a. Backwages for 15 months -

PhP 1,650,000.0

b. 13th month pay TOTAL

110,000.0

PhP 1,760,000.0

4. Respondents are ordered to pay complainant moral damages of P50,000.00 and

exemplary damages ofP50,000.00.
5. Respondents are also ordered to pay attorneys fees of 10% of the total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was no evidence showing
that Alcaraz had been apprised of her probationary status and the requirements which
she should have complied with in order to be a regular employee. 36 It held that Alcarazs
receipt of her job description and Abbotts Code of Conduct and Performance Modules
was not equivalent to her being actually informed of the performance standards upon
which she should have been evaluated on. 37 It further observed that Abbott did not
comply with its own standard operating procedure in evaluating probationary
employees.38 The NLRC was also not convinced that Alcaraz was terminated for a valid
cause given that petitioners allegation of Alcarazs "poor performance" remained
unsubstantiated.39
Petitioners filed a motion for reconsideration which was denied by the NLRC in a
Resolution dated July 31, 2007.40
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for Issuance
of a Temporary Restraining Order and/or Writ of Preliminary Injunction, docketed as CA
G.R. SP No. 101045 (First CA Petition), alleging grave abuse of discretion on the part of
NLRC when it ruled that Alcaraz was illegally dismissed. 41
Pending resolution of the First CA Petition, Alcaraz moved for the execution of the NLRCs
Decision before the LA, which petitioners strongly opposed. The LA denied the said
Page 278 of 497

motion in an Order dated July 8, 2008 which was, however, eventually reversed on
appeal by the NLRC.42 Due to the foregoing, petitioners filed another Petition for
Certiorari with the CA, docketed as CA G.R. SP No. 111318 (Second CA Petition), assailing
the propriety of the execution of the NLRC decision. 43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision 44 dated December 10, 2009,
affirmed the ruling of the NLRC and held that the latter did not commit any grave abuse
of discretion in finding that Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the
reasonable standards under which she could qualify as a regular employee. 45 This was
based on its examination of the employment contract which showed that the same did
not contain any standard of performance or any stipulation that Alcaraz shall undergo a
performance evaluation before she could qualify as a regular employee. 46 It also found
that Abbott was unable to prove that there was any reasonable ground to terminate
Alcarazs employment.47 Abbott moved for the reconsideration of the aforementioned
ruling which was, however, denied by the CA in a Resolution 48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a Resolution dated May 18, 2010 (May
18, 2010 Resolution) and ruled that the NLRC was correct in upholding the execution of
the NLRC Decision.49 Thus, petitioners filed a motion for reconsideration.
While the petitioners motion for reconsideration of the CAs May 18, 2010 Resolution
was pending, Alcaraz again moved for the issuance of a writ of execution before the LA.
On June 7, 2010, petitioners received the LAs order granting Alcarazs motion for
execution which they in turn appealed to the NLRC through a Memorandum of Appeal
dated June 16, 2010 (June 16, 2010 Memorandum of Appeal ) on the ground that the
implementation of the LAs order would render its motion for reconsideration moot and
academic.50
Meanwhile, petitioners motion for reconsideration of the CAs May 18, 2010 Resolution
in the Second CA Petition was denied via a Resolution dated October 4, 2010. 51 This
attained finality on January 10, 2011 for petitioners failure to timely appeal the
same.52 Hence, as it stands, only the issues in the First CA petition are left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges that
petitioners were guilty of forum shopping when they filed the Second CA Petition pending
the resolution of their motion for reconsideration of the CAs December 10, 2009
Decision i.e., the decision in the First CA Petition. 53 She also contends that petitioners
have not complied with the certification requirement under Section 5, Rule 7 of the Rules
of Court when they failed to disclose in the instant petition the filing of the June 16, 2010
Memorandum of Appeal filed before the NLRC. 54
The Issues Before the Court
The following issues have been raised for the Courts resolution: (a) whether or not
petitioners are guilty of forum shopping and have violated the certification requirement
Page 279 of 497

under Section 5, Rule 7 of the Rules of Court; (b) whether or not Alcaraz was sufficiently
informed of the reasonable standards to qualify her as a regular employee; (c) whether
or not Alcaraz was validly terminated from her employment; and (d) whether or not the
individual petitioners herein are liable.
The Courts Ruling
A. Forum Shopping and
Violation of Section 5, Rule 7
of the Rules of Court.
At the outset, it is noteworthy to mention that the prohibition against forum shopping is
different from a violation of the certification requirement under Section 5, Rule 7 of the
Rules of Court. In Sps. Ong v. CA,55 the Court explained that:
x x x The distinction between the prohibition against forum shopping and the
certification requirement should by now be too elementary to be misunderstood. To
reiterate, compliance with the certification against forum shopping is separate from and
independent of the avoidance of the act of forum shopping itself. There is a difference in
the treatment between failure to comply with the certification requirement and violation
of the prohibition against forum shopping not only in terms of imposable sanctions but
also in the manner of enforcing them. The former constitutes sufficient cause for the
dismissal without prejudice to the filing of the complaint or initiatory pleading upon
motion and after hearing, while the latter is a ground for summary dismissal thereof and
for direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant files multiple suits involving
the same parties, either simultaneously or successively, to secure a favorable judgment.
It exists where the elements of litis pendentia are present, namely: (a) identity of parties,
or at least such parties who represent the same interests in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts; and (c)
the identity with respect to the two preceding particulars in the two (2) cases is such that
any judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case. 57
In this case, records show that, except for the element of identity of parties, the
elements of forum shopping do not exist. Evidently, the First CA Petition was instituted to
question the ruling of the NLRC that Alcaraz was illegally dismissed. On the other hand,
the Second CA Petition pertains to the propriety of the enforcement of the judgment
award pending the resolution of the First CA Petition and the finality of the decision in the
labor dispute between Alcaraz and the petitioners. Based on the foregoing, a judgment in
the Second CA Petition will not constitute res judicata insofar as the First CA Petition is
concerned. Thus, considering that the two petitions clearly cover different subject
matters and causes of action, there exists no forum shopping.
As to the second, Alcaraz further imputes that the petitioners violated the certification
requirement under Section 5, Rule 7 of the Rules of Court 58 by not disclosing the fact that
it filed the June 16, 2010 Memorandum of Appeal before the NLRC in the instant petition.

Page 280 of 497

In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a plaintiff who files
a case should provide a complete statement of the present status of any pending case if
the latter involves the same issues as the one that was filed. If there is no such similar
pending case, Section 5(a) of the same rule provides that the plaintiff is obliged to
declare under oath that to the best of his knowledge, no such other action or claim is
pending.
Records show that the issues raised in the instant petition and those in the June 16, 2010
Memorandum of Appeal filed with the NLRC likewise cover different subject matters and
causes of action. In this case, the validity of Alcarazs dismissal is at issue whereas in the
said Memorandum of Appeal, the propriety of the issuance of a writ of execution was in
question.
Thus, given the dissimilar issues, petitioners did not have to disclose in the present
petition the filing of their June 16, 2010 Memorandum of Appeal with the NLRC. In any
event, considering that the issue on the propriety of the issuance of a writ of execution
had been resolved in the Second CA Petition which in fact had already attained finality
the matter of disclosing the June 16, 2010 Memorandum of Appeal is now moot and
academic.
Having settled the foregoing procedural matter, the Court now proceeds to resolve the
substantive issues.
B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys security of tenure. However, in
cases of probationary employment, aside from just or authorized causes of termination,
an additional ground is provided under Article 295 of the Labor Code, i.e., the
probationary employee may also be terminated for failure to qualify as a regular
employee in accordance with the reasonable standards made known by the employer to
the employee at the time of the engagement. 59 Thus, the services of an employee who
has been engaged on probationary basis may be terminated for any of the following: (a)
a just or (b) an authorized cause; and (c) when he fails to qualify as a regular employee
in accordance with reasonable standards prescribed by the employer. 60
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor
Code provides that if the employer fails to inform the probationary employee of the
reasonable standards upon which the regularization would be based on at the time of the
engagement, then the said employee shall be deemed a regular employee, viz.:
(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.
In other words, the employer is made to comply with two (2) requirements when dealing
with a probationary employee: first, the employer must communicate the regularization
standards to the probationary employee; and second, the employer must make such
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communication at the time of the probationary employees engagement. If the employer

fails to comply with either, the employee is deemed as a regular and not a probationary
employee.
Keeping with these rules, an employer is deemed to have made known the standards
that would qualify a probationary employee to be a regular employee when it has
exerted reasonable efforts to apprise the employee of what he is expected to do or
accomplish during the trial period of probation. This goes without saying that the
employee is sufficiently made aware of his probationary status as well as the length of
time of the probation.
The exception to the foregoing is when the job is self-descriptive in nature, for instance,
in the case of maids, cooks, drivers, or messengers. 61 Also, in Aberdeen Court, Inc. v.
Agustin,62 it has been held that the rule on notifying a probationary employee of the
standards of regularization should not be used to exculpate an employee who acts in a
manner contrary to basic knowledge and common sense in regard to which there is no
need to spell out a policy or standard to be met. In the same light, an employees failure
to perform the duties and responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employees non-regularization.
In this case, petitioners contend that Alcaraz was terminated because she failed to
qualify as a regular employee according to Abbotts standards which were made known
to her at the time of her engagement. Contrarily, Alcaraz claims that Abbott never
apprised her of these standards and thus, maintains that she is a regular and not a mere
probationary employee.
The Court finds petitioners assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed complied with
the above-stated requirements. This conclusion is largely impelled by the fact that
Abbott clearly conveyed to Alcaraz her duties and responsibilities as Regulatory Affairs
Manager prior to, during the time of her engagement, and the incipient stages of her
employment. On this score, the Court finds it apt to detail not only the incidents which
point out to the efforts made by Abbott but also those circumstances which would show
that Alcaraz was well-apprised of her employers expectations that would, in turn,
determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet
newspaper of its need for a Regulatory Affairs Manager, indicating therein the job
description for as well as the duties and responsibilities attendant to the aforesaid
position; this prompted Alcaraz to submit her application to Abbott on October 4,
2004;
(b) In Abbotts December 7, 2004 offer sheet, it was stated that Alcaraz was to be
employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which
specifically stated, inter alia, that she was to be placed on probation for a period
of six (6) months beginning February 15, 2005 to August 14, 2005;
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(d) On the day Alcaraz accepted Abbotts employment offer, Bernardo sent her
copies of Abbotts organizational structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar
informed her that she had to implement Abbotts Code of Conduct and office
policies on human resources and finance and that she would be reporting directly
to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her
orientation;
(g) Alcaraz received copies of Abbotts Code of Conduct and Performance Modules
from Misa who explained to her the procedure for evaluating the performance of
probationary employees; she was further notified that Abbott had only one
evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company
and had admitted to have an "extensive training and background" to acquire the
necessary skills for her job.63
Considering the totality of the above-stated circumstances, it cannot, therefore, be
doubted that Alcaraz was well-aware that her regularization would depend on her ability
and capacity to fulfill the requirements of her position as Regulatory Affairs Manager and
that her failure to perform such would give Abbott a valid cause to terminate her
probationary employment.
Verily, basic knowledge and common sense dictate that the adequate performance of
ones duties is, by and of itself, an inherent and implied standard for a probationary
employee to be regularized; such is a regularization standard which need not be literally
spelled out or mapped into technical indicators in every case. In this regard, it must be
observed that the assessment of adequate duty performance is in the nature of a
management prerogative which when reasonably exercised as Abbott did in this case
should be respected. This is especially true of a managerial employee like Alcaraz who
was tasked with the vital responsibility of handling the personnel and important matters
of her department.
In fine, the Court rules that Alcarazs status as a probationary employee and her
consequent dismissal must stand. Consequently, in holding that Alcaraz was illegally
dismissed due to her status as a regular and not a probationary employee, the Court
finds that the NLRC committed a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on the premise that Alcarazs
receipt of her job description and Abbotts Code of Conduct and Performance Modules
was not equivalent to being actually informed of the performance standards upon which
she should have been evaluated on.64 It, however, overlooked the legal implication of the
other attendant circumstances as detailed herein which should have warranted a
contrary finding that Alcaraz was indeed a probationary and not a regular employee
more particularly the fact that she was well-aware of her duties and responsibilities and

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that her failure to adequately perform the same would lead to her non-regularization and
eventually, her termination.
Accordingly, by affirming the NLRCs pronouncement which is tainted with grave abuse of
discretion, the CA committed a reversible error which, perforce, necessitates the reversal
of its decision.
C. Probationary employment;
termination procedure.
A different procedure is applied when terminating a probationary employee; the usual
two-notice rule does not govern.65 Section 2, Rule I, Book VI of the Implementing Rules of
the Labor Code states that "if the termination is brought about by the x x x failure of an
employee to meet the standards of the employer in case of probationary employment, it
shall be sufficient that a written notice is served the employee, within a reasonable time
from the effective date of termination."
As the records show, Alcaraz's dismissal was effected through a letter dated May 19,
2005 which she received on May 23, 2005 and again on May 27, 2005. Stated therein
were the reasons for her termination, i.e., that after proper evaluation, Abbott
determined that she failed to meet the reasonable standards for her regularization
considering her lack of time and people management and decision-making skills, which
are necessary in the performance of her functions as Regulatory Affairs
Manager.66 Undeniably, this written notice sufficiently meets the criteria set forth above,
thereby legitimizing the cause and manner of Alcarazs dismissal as a probationary
employee under the parameters set by the Labor Code. 67
D. Employers violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to terminate Alcarazs
employment and Abbotts compliance with the Labor Code termination procedure, it is
readily apparent that Abbott breached its contractual obligation to Alcaraz when it failed
to abide by its own procedure in evaluating the performance of a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract between the
employer and employee. In Parts Depot, Inc. v. Beiswenger, 68 it has been held that:
Employer statements of policy . . . can give rise to contractual rights in employees
without evidence that the parties mutually agreed that the policy statements would
create contractual rights in the employee, and, hence, although the statement of policy
is signed by neither party, can be unilaterally amended by the employer without notice
to the employee, and contains no reference to a specific employee, his job description or
compensation, and although no reference was made to the policy statement in preemployment interviews and the employee does not learn of its existence until after his
hiring. Toussaint, 292 N.W .2d at 892. The principle is akin to estoppel. Once an employer
establishes an express personnel policy and the employee continues to work while the
policy remains in effect, the policy is deemed an implied contract for so long as it
Page 284 of 497

remains in effect. If the employer unilaterally changes the policy, the terms of the
implied contract are also thereby changed.1wphi1 (Emphasis and underscoring
supplied.)
Hence, given such nature, company personnel policies create an obligation on the part of
both the employee and the employer to abide by the same.
Records show that Abbotts PPSE procedure mandates, inter alia, that the job
performance of a probationary employee should be formally reviewed and discussed with
the employee at least twice: first on the third month and second on the fifth month from
the date of employment. Abbott is also required to come up with a Performance
Improvement Plan during the third month review to bridge the gap between the
employees performance and the standards set, if any. 69 In addition, a signed copy of the
PPSE form should be submitted to Abbotts HRD as the same would serve as basis for
recommending the confirmation or termination of the probationary employment. 70
In this case, it is apparent that Abbott failed to follow the above-stated procedure in
evaluating Alcaraz. For one, there lies a hiatus of evidence that a signed copy of
Alcarazs PPSE form was submitted to the HRD. It was not even shown that a PPSE form
was completed to formally assess her performance. Neither was the performance
evaluation discussed with her during the third and fifth months of her employment. Nor
did Abbott come up with the necessary Performance Improvement Plan to properly
gauge Alcarazs performance with the set company standards.
While it is Abbotts management prerogative to promulgate its own company rules and
even subsequently amend them, this right equally demands that when it does create its
own policies and thereafter notify its employee of the same, it accords upon itself the
obligation to faithfully implement them. Indeed, a contrary interpretation would entail a
disharmonious relationship in the work place for the laborer should never be mired by
the uncertainty of flimsy rules in which the latters labor rights and duties would, to some
extent, depend.
In this light, while there lies due cause to terminate Alcarazs probationary employment
for her failure to meet the standards required for her regularization, and while it must be
further pointed out that Abbott had satisfied its statutory duty to serve a written notice
of termination, the fact that it violated its own company procedure renders the
termination of Alcarazs employment procedurally infirm, warranting the payment of
nominal damages. A further exposition is apropos.
Case law has settled that an employer who terminates an employee for a valid cause but
does so through invalid procedure is liable to pay the latter nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that where the dismissal is for a just
cause, the lack of statutory due process should not nullify the dismissal, or render it
illegal, or ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights.72 Thus, in Agabon, the employer was ordered to pay the
employee nominal damages in the amount of P30,000.00.73

Page 285 of 497

Proceeding from the same ratio, the Court modified Agabon in the case of Jaka Food
Processing Corporation v. Pacot (Jaka) 74 where it created a distinction between
procedurally defective dismissals due to a just cause, on one hand, and those due to an
authorized cause, on the other.
It was explained that if the dismissal is based on a just cause under Article 282 of the
Labor Code (now Article 296) but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should be tempered because the
dismissal process was, in effect, initiated by an act imputable to the employee; if the
dismissal is based on an authorized cause under Article 283 (now Article 297) but the
employer failed to comply with the notice requirement, the sanction should be stiffer
because the dismissal process was initiated by the employers exercise of his
management prerogative.75 Hence, in Jaka, where the employee was dismissed for an
authorized cause of retrenchment76 as contradistinguished from the employee in
Agabon who was dismissed for a just cause of neglect of duty 77 the Court ordered the
employer to pay the employee nominal damages at the higher amount of P50,000.00.
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the necessity to
deter employers from future violations of the statutory due process rights of
employees.78 In similar regard, the Court deems it proper to apply the same principle to
the case at bar for the reason that an employers contractual breach of its own company
procedure albeit not statutory in source has the parallel effect of violating the
laborers rights. Suffice it to state, the contract is the law between the parties and thus,
breaches of the same impel recompense to vindicate a right that has been violated.
Consequently, while the Court is wont to uphold the dismissal of Alcaraz because a valid
cause exists, the payment of nominal damages on account of Abbotts contractual
breach is warranted in accordance with Article 2221 of the Civil Code. 79
Anent the proper amount of damages to be awarded, the Court observes that Alcarazs
dismissal proceeded from her failure to comply with the standards required for her
regularization. As such, it is undeniable that the dismissal process was, in effect, initiated
by an act imputable to the employee, akin to dismissals due to just causes under Article
296 of the Labor Code. Therefore, the Court deems it appropriate to fix the amount of
nominal damages at the amount of P30,000.00, consistent with its rulings in both
Agabon and Jaka.
E. Liability of individual
petitioners as corporate
officers.
It is hornbook principle that personal liability of corporate directors, trustees or officers
attaches only when: (a) they assent to a patently unlawful act of the corporation, or
when they are guilty of bad faith or gross negligence in directing its affairs, or when
there is a conflict of interest resulting in damages to the corporation, its stockholders or
other persons; (b) they consent to the issuance of watered down stocks or when, having
knowledge of such issuance, do not forthwith file with the corporate secretary their
written objection; (c) they agree to hold themselves personally and solidarily liable with
the corporation; or (d) they are made by specific provision of law personally answerable
for their corporate action.80
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In this case, Alcaraz alleges that the individual petitioners acted in bad faith with regard
to the supposed crude manner by which her probationary employment was terminated
and thus, should be held liable together with Abbott. In the same vein, she further
attributes the loss of some of her remaining belongings to them. 81
Alcarazs contention fails to persuade.
A judicious perusal of the records show that other than her unfounded assertions on the
matter, there is no evidence to support the fact that the individual petitioners herein, in
their capacity as Abbotts officers and employees, acted in bad faith or were motivated
by ill will in terminating
Alcarazs services. The fact that Alcaraz was made to resign and not allowed to enter the
workplace does not necessarily indicate bad faith on Abbotts part since a sufficient
ground existed for the latter to actually proceed with her termination. On the alleged loss
of her personal belongings, records are bereft of any showing that the same could be
attributed to Abbott or any of its officers. It is a well-settled rule that bad faith cannot be
presumed and he who alleges bad faith has the onus of proving it. All told, since Alcaraz
failed to prove any malicious act on the part of Abbott or any of its officers, the Court
finds the award of moral or exemplary damages unwarranted.
WHEREFORE, the petition is GRANTED. The Decision dated December 10, 2009 and
Resolution dated June 9, 2010 of the Court of Appeals in CA-G.R. SP No. 101045 are
hereby REVERSED and SET ASIDE. Accordingly, the Decision dated March 30, 2006 of the
Labor Arbiter is REINSTATED with the MODIFICATION that petitioner Abbott Laboratories,
Philippines be ORDERED to pay respondent Pearlie Ann F. Alcaraz nominal damages in
the amount of P30,000.00 on account of its breach of its own company procedure.
SO ORDERED.
EN BANC

FELIX B. PEREZ and

G.R. No. 152048

AMANTE G. DORIA,
Petitioners,
Present:

- versus Page 287 of 497

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,*
CORONA,
CARPIO MORALES,

TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION and
PERALTA, JJ.

PHILIPPINE TELEGRAPH AND

TELEPHONE COMPANY and
JOSE LUIS SANTIAGO,
Respondents.

Promulgated:

April 7, 2009
x--------------------------------------------------x

DECISION
CORONA, J.:

Petitioners Felix B. Perez and Amante G. Doria were employed by respondent

Philippine Telegraph and Telephone Company (PT&T) as shipping clerk and supervisor,
respectively, in PT&Ts Shipping Section, Materials Management Group.

Acting on an alleged unsigned letter regarding anomalous transactions at the

Shipping Section, respondents formed a special audit team to investigate the matter. It
was discovered that the Shipping Section jacked up the value of the freight costs for
goods shipped and that the duplicates of the shipping documents allegedly showed
traces of tampering, alteration and superimposition.

On September 3, 1993, petitioners were placed on preventive suspension for 30

days for their alleged involvement in the anomaly. [1] Their suspension was extended for
15 days twice: first on October 3, 1993[2] and second on October 18, 1993.[3]

Page 288 of 497

On October 29, 1993, a memorandum with the following tenor was issued by
respondents:

In line with the recommendation of the AVP-Audit as presented in his report

of October 15, 1993 (copy attached) and the subsequent filing of criminal
charges against the parties mentioned therein, [Mr. Felix Perez and Mr.
Amante Doria are] hereby dismissed from the service for having falsified
company documents.[4] (emphasis supplied)

On November 9, 1993, petitioners filed a complaint for illegal suspension and

illegal dismissal.[5] They alleged that they were dismissed on November 8, 1993, the date
they received the above-mentioned memorandum.

The labor arbiter found that the 30-day extension of petitioners suspension and
their subsequent dismissal were both illegal. He ordered respondents to pay petitioners
their salaries during their 30-day illegal suspension, as well as to reinstate them with
backwages and 13th month pay.

The National Labor Relations Commission (NLRC) reversed the decision of the
labor arbiter. It ruled that petitioners were dismissed for just cause, that they were
accorded due process and that they were illegally suspended for only 15 days (without
stating the reason for the reduction of the period of petitioners illegal suspension). [6]

Petitioners appealed to the Court of Appeals (CA). In its January 29, 2002 decision,
the CA affirmed the NLRC decision insofar as petitioners illegal suspension for 15 days
and dismissal for just cause were concerned. However, it found that petitioners were
dismissed without due process.
[7]

Petitioners now seek a reversal of the CA decision. They contend that there was no
just cause for their dismissal, that they were not accorded due process and that they
were illegally suspended for 30 days.
We rule in favor of petitioners.

RESPONDENTS FAILED TO PROVE JUST

Page 289 of 497

CAUSE AND TO OBSERVE DUE PROCESS

The CA, in upholding the NLRCs decision, reasoned that there was sufficient basis
for respondents to lose their confidence in petitioners [8] for allegedly tampering with the
shipping documents. Respondents emphasized the importance of a shipping order or
request, as it was the basis of their liability to a cargo forwarder. [9]

We disagree.

Without undermining the importance of a shipping order or request, we find

respondents evidence insufficient to clearly and convincingly establish the facts from
which the loss of confidence resulted. [10] Other than their bare allegations and the fact
that such documents came into petitioners hands at some point, respondents should
have provided evidence of petitioners functions, the extent of their duties, the
procedure in the handling and approval of shipping requests and the fact that no
personnel other than petitioners were involved. There was, therefore, a patent paucity of
proof connecting petitioners to the alleged tampering of shipping documents.
The alterations on the shipping documents could not reasonably be attributed to
petitioners because it was never proven that petitioners alone had control of or access to
these documents. Unless duly proved or sufficiently substantiated otherwise, impartial
tribunals should not rely only on the statement of the employer that it has lost
confidence in its employee.[11]

Willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative is a just cause for termination. [12] However, in General Bank
and Trust Co. v. CA,[13] we said:

[L]oss of confidence should not be simulated. It should not be used as a

subterfuge for causes which are improper, illegal or unjustified. Loss of
confidence may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary. It must be genuine, not a mere afterthought to
justify an earlier action taken in bad faith.

The burden of proof rests on the employer to establish that the dismissal is for
cause in view of the security of tenure that employees enjoy under the Constitution and
the Labor Code. The employers evidence must clearly and convincingly show the facts
on which the loss of confidence in the employee may be fairly made to rest. [14] It must be

Page 290 of 497

adequately proven by substantial evidence. [15] Respondents failed to discharge this

burden.

Respondents illegal act of dismissing petitioners was aggravated by their failure

to observe due process. To meet the requirements of due process in the dismissal of an
employee, an employer must furnish the worker with two written notices: (1) a written
notice specifying the grounds for termination and giving to said employee a reasonable
opportunity to explain his side and (2) another written notice indicating that, upon due
consideration of all circumstances, grounds have been established to justify the
employer's decision to dismiss the employee.[16]

Petitioners were neither apprised of the charges against them nor given a chance
to defend themselves. They were simply and arbitrarily separated from work and served
notices of termination in total disregard of their rights to due process and security of
tenure. The labor arbiter and the CA correctly found that respondents failed to comply
with the two-notice requirement for terminating employees.

Petitioners likewise contended that due process was not observed in the absence
of a hearing in which they could have explained their side and refuted the evidence
against them.

There is no need for a hearing or conference. We note a marked difference in the

standards of due process to be followed as prescribed in the Labor Code and its
implementing rules. The Labor Code, on one hand, provides that an employer must
provide the employee ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires:

ART. 277. Miscellaneous provisions. x x x

(b) Subject to the constitutional right of workers to security of tenure
and their right to be protected against dismissal except for a just and
authorized cause and without prejudice to the requirement of notice under
Article 283 of this Code, the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance
of his representative if he so desires in accordance with company rules
and regulations promulgated pursuant to guidelines set by the Department
of Labor and Employment. Any decision taken by the employer shall be
without prejudice to the right of the worker to contest the validity or legality
of his dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission. The burden of proving that the
Page 291 of 497

termination was for a valid or authorized cause shall rest on the employer.
(emphasis supplied)

The omnibus rules implementing the Labor Code, on the other hand, require a
hearing and conference during which the employee concerned is given the opportunity
to respond to the charge, present his evidence or rebut the evidence presented against
him:[17]

Section 2. Security of Tenure. x x x

(d) In all cases of termination of employment, the following standards

of due process shall be substantially observed:

For termination of employment based on just causes as defined in

Article 282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or

grounds for termination, and giving said employee reasonable opportunity
within which to explain his side.

(ii) A hearing or conference during which the employee

concerned, with the assistance of counsel if he so desires, is given
opportunity to respond to the charge, present his evidence or
rebut the evidence presented against him.

(iii) A written notice of termination served on the employee,

indicating that upon due consideration of all the circumstances, grounds
have been established to justify his termination. (emphasis supplied)

Which one should be followed? Is a hearing (or conference) mandatory in cases

involving the dismissal of an employee? Can the apparent conflict between the law and
its IRR be reconciled?

Page 292 of 497

At the outset, we reaffirm the time-honored doctrine that, in case of conflict, the
law prevails over the administrative regulations implementing it. [18] The authority to
promulgate implementing rules proceeds from the law itself. To be valid, a rule or
regulation must conform to and be consistent with the provisions of the enabling statute.
[19]
As such, it cannot amend the law either by abridging or expanding its scope. [20]

Article 277(b) of the Labor Code provides that, in cases of termination for a just
cause, an employee must be given ample opportunity to be heard and to defend
himself.Thus, the opportunity to be heard afforded by law to the employee is qualified
by the word ample which ordinarily means considerably more than adequate or
sufficient.[21]In this regard, the phrase ample opportunity to be heard can be
reasonably interpreted as extensive enough to cover actual hearing or conference. To
this extent, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code is
in conformity with Article 277(b).

Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor
Code should not be taken to mean that holding an actual hearing or conference is a
condition sine qua non for compliance with the due process requirement in termination
of employment. The test for the fair procedure guaranteed under Article 277(b) cannot
be whether there has been a formal pretermination confrontation between the employer
and the employee. The ample opportunity to be heard standard is neither synonymous
nor similar to a formal hearing. To confine the employees right to be heard to a solitary
form narrows down that right. It deprives him of other equally effective forms of
adducing evidence in his defense. Certainly, such an exclusivist and absolutist
interpretation is overly restrictive. The very nature of due process negates any concept
of inflexible procedures universally applicable to every imaginable situation. [22]

The standard for the hearing requirement, ample opportunity, is couched in

general language revealing the legislative intent to give some degree of flexibility or
adaptability to meet the peculiarities of a given situation. To confine it to a single rigid
proceeding such as a formal hearing will defeat its spirit.
Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor
Code itself provides that the so-called standards of due process outlined therein shall be
observed substantially, not strictly. This is a recognition that while a formal hearing or
conference is ideal, it is not an absolute, mandatory or exclusive avenue of due process.

An employees right to be heard in termination cases under Article 277(b) as

implemented by Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor
Code should be interpreted in broad strokes. It is satisfied not only by a formal face to
face confrontation but by any meaningful opportunity to controvert the charges against
him and to submit evidence in support thereof.

Page 293 of 497

A hearing means that a party should be given a chance to adduce his evidence to
support his side of the case and that the evidence should be taken into account in the
adjudication of the controversy. [23] To be heard does not mean verbal argumentation
alone inasmuch as one may be heard just as effectively through written explanations,
submissions or pleadings.[24] Therefore, while the phrase ample opportunity to be heard
may in fact include an actual hearing, it is not limited to a formal hearing only. In other
words, the existence of an actual, formal trial-type hearing, although preferred, is not
absolutely necessary to satisfy the employees right to be heard.

This Court has consistently ruled that the due process requirement in cases of
termination of employment does not require an actual or formal hearing. Thus, we
categorically declared in Skippers United Pacific, Inc. v. Maguad:[25]

The Labor Code does not, of course, require a formal or trial type
proceeding before an erring employee may be dismissed. (emphasis
supplied)
In Autobus Workers Union v. NLRC,[26] we ruled:
The twin requirements of notice and hearing constitute the essential
elements of due process. Due process of law simply means giving
opportunity to be heard before judgment is rendered. In fact, there is no
violation of due process even if no hearing was conducted, where
the party was given a chance to explain his side of the controversy.
What is frowned upon is the denial of the opportunity to be heard.

xxx

xxx

xxx

A formal trial-type hearing is not even essential to due

process. It is enough that the parties are given a fair and
reasonable opportunity to explain their respective sides of the
controversy and to present supporting evidence on which a fair
decision can be based. This type of hearing is not even mandatory in
cases of complaints lodged before the Labor Arbiter. (emphasis supplied)

In Solid Development Corporation Workers Association v. Solid Development

Corporation,[27] we had the occasion to state:
[W]ell-settled is the dictum that the twin requirements of notice and
hearing constitute the essential elements of due process in the dismissal of
employees. It is a cardinal rule in our jurisdiction that the employer must
furnish the employee with two written notices before the termination of
employment can be effected: (1) the first apprises the employee of the
Page 294 of 497

particular acts or omissions for which his dismissal is sought; and (2) the
second informs the employee of the employers decision to dismiss
him. The requirement of a hearing, on the other hand, is complied
with as long as there was an opportunity to be heard, and not
necessarily that an actual hearing was conducted.

In separate infraction reports, petitioners were both apprised of the

particular acts or omissions constituting the charges against them. They
were also required to submit their written explanation within 12 hours from
receipt of the reports. Yet, neither of them complied. Had they found the 12hour period too short, they should have requested for an extension of time.
Further, notices of termination were also sent to them informing them of the
basis of their dismissal. In fine, petitioners were given due process before
they were dismissed. Even if no hearing was conducted, the
requirement of due process had been met since they were accorded a
chance to explain their side of the controversy. (emphasis supplied)
Our holding in National Semiconductor HK Distribution, Ltd. v. NLRC [28] is of similar
import:

That the investigations conducted by petitioner may not be

considered formal or recorded hearings
or
investigations
is
immaterial. A formal or trial type hearing is not at all times and in
all instances essential to due process, the requirements of which are
satisfied where the parties are afforded fair and reasonable opportunity to
explain their side of the controversy. It is deemed sufficient for the employer
to follow the natural sequence of notice, hearing and judgment.

The above rulings are a clear recognition that the employer may provide an
employee with ample opportunity to be heard and defend himself with the assistance of
a representative or counsel in ways other than a formal hearing. The employee can be
fully afforded a chance to respond to the charges against him, adduce his evidence or
rebut the evidence against him through a wide array of methods, verbal or written.
After receiving the first notice apprising him of the charges against him, the
employee may submit a written explanation (which may be in the form of a letter,
memorandum, affidavit or position paper) and offer evidence in support thereof, like
relevant company records (such as his 201 file and daily time records) and the sworn
statements of his witnesses. For this purpose, he may prepare his explanation personally
or with the assistance of a representative or counsel. He may also ask the employer to
provide him copy of records material to his defense. His written explanation may also
include a request that a formal hearing or conference be held. In such a case, the
conduct of a formal hearing or conference becomes mandatory, just as it is where there
exist substantial evidentiary disputes [29] or where company rules or practice requires an
actual hearing as part of employment pretermination procedure. To this extent, we refine
the decisions we have rendered so far on this point of law.
Page 295 of 497

This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of

the Labor Code reasonably implements the ample opportunity to be heard standard
under Article 277(b) of the Labor Code without unduly restricting the language of the law
or excessively burdening the employer. This not only respects the power vested in the
Secretary of Labor and Employment to promulgate rules and regulations that will lay
down the guidelines for the implementation of Article 277(b). More importantly, this is
faithful to the mandate of Article 4 of the Labor Code that [a]ll doubts in the
implementation and interpretation of the provisions of [the Labor Code], including its
implementing rules and regulations shall be resolved in favor of labor.

In sum, the following are the guiding principles in connection with the hearing
requirement in dismissal cases:
(a) ample opportunity to be heard means any meaningful opportunity (verbal or
written) given to the employee to answer the charges against him and
submit evidence in support of his defense, whether in a hearing, conference
or some other fair, just and reasonable way.
(b)

a formal hearing or conference becomes mandatory only when requested by

the employee in writing or substantial evidentiary disputes exist or a
company rule or practice requires it, or when similar circumstances justify
it.

(c)

the ample opportunity to be heard standard in the Labor Code prevails

over the hearing or conference requirement in the implementing rules
and regulations.

PETITIONERS WERE ILLEGALLY

SUSPENDED FOR 30 DAYS

An employee may be validly suspended by the employer for just cause provided
by law. Such suspension shall only be for a period of 30 days, after which the employee
shall either be reinstated or paid his wages during the extended period. [30]

In this case, petitioners contended that they were not paid during the two 15-day
extensions, or a total of 30 days, of their preventive suspension. Respondents failed to
adduce evidence to the contrary. Thus, we uphold the ruling of the labor arbiter on this
point.
Where the dismissal was without just or authorized cause and there was no due
process, Article 279 of the Labor Code, as amended, mandates that the employee is
entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent
computed from the time the compensation was not paid up to the time of actual
Page 296 of 497

reinstatement.[31] In this case, however, reinstatement is no longer possible because of

the length of time that has passed from the date of the incident to final resolution.
[32]
Fourteen years have transpired from the time petitioners were wrongfully dismissed.
To order reinstatement at this juncture will no longer serve any prudent or practical
purpose.[33]

WHEREFORE, the petition is hereby GRANTED. The decision of the Court of

Appeals dated January 29, 2002 in CA-G.R. SP No. 50536 finding that petitioners Felix B.
Perez and Amante G. Doria were not illegally dismissed but were not accorded due
process and were illegally suspended for 15 days, is SET ASIDE. The decision of the
labor arbiter dated December 27, 1995 in NLRC NCR CN. 11-06930-93 is
hereby AFFIRMED with the MODIFICATION that petitioners should be paid their
separation pay in lieu of reinstatement.

SO ORDERED.

CASES ON JURISDICTION
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 196539

October 10, 2012

MARIETTA N. PORTILLO, Petitioner,

vs.
RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF APPEALS Respondents.
DECISION
PEREZ, J.:
Before us is a petition for certiorari assailing the Resolution 1 dated 14 October 2010 of
the Court of Appeals in CA-G.R. SP No. I 065g I which modified its Decision 2 dated 31
March 2009, thus allowing the legal compensation or petitioner Marietta N. Portillo's
(Portillo) monetary claims against respondent corporation Rudolf Lietz, Inc.'s (Lietz
Inc.)3 claim for liquidated damages arising from Portillos alleged violation of the
"Goodwill Clause" in the employment contract executed by the parties.
The facts are not in dispute.

Page 297 of 497

In a letter agreement dated 3 May 1991, signed by individual respondent Rudolf Lietz
(Rudolf) and conformed to by Portillo, the latter was hired by the former under the
following terms and conditions:
A copy of [Lietz Inc.s] work rules and policies on personnel is enclosed and an inherent
part of the terms and conditions of employment.
We acknowledge your proposal in your application specifically to the effect that you will
not engage in any other gainful employment by yourself or with any other company
either directly or indirectly without written consent of [Lietz Inc.], and we hereby accept
and henceforth consider your proposal an undertaking on your part, a breach of which
will render you liable to [Lietz Inc.] for liquidated damages.
If you are in agreement with these terms and conditions of employment, please signify
your conformity below.4
On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was
promoted to Sales Representative and received a corresponding increase in basic
monthly salary and sales quota. In this regard, Portillo signed another letter agreement
containing a "Goodwill Clause:"
It remains understood and you agreed that, on the termination of your employment by
act of either you or [Lietz Inc.], and for a period of three (3) years thereafter, you shall
not engage directly or indirectly as employee, manager, proprietor, or solicitor for
yourself or others in a similar or competitive business or the same character of work
which you were employed by [Lietz Inc.] to do and perform. Should you breach this good
will clause of this Contract, you shall pay [Lietz Inc.] as liquidated damages the amount
of 100% of your gross compensation over the last 12 months, it being agreed that this
sum is reasonable and just.5
Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her
exit interview, Portillo declared that she intended to engage in businessa rice
dealership, selling rice in wholesale.
On 15 June 2005, Lietz Inc. accepted Portillos resignation and reminded her of the
"Goodwill Clause" in the last letter agreement she had signed. Upon receipt thereof,
Portillo jotted a note thereon that the latest contract she had signed in February 2004 did
not contain any "Goodwill Clause" referred to by Lietz Inc. In response thereto, Lietz Inc.
categorically wrote:
Please be informed that the standard prescription of prohibiting employees from
engaging in business or seeking employment with organizations that directly or indirectly
compete against [Lietz Inc.] for three (3) years after resignation remains in effect.

Page 298 of 497

The documentation you pertain to is an internal memorandum of your salary increase,

not an employment contract. The absence of the three-year prohibition clause in this
document (or any document for that matter) does not cancel the prohibition itself. We
did not, have not, and will not issue any cancellation of such in the foreseeable future[.]
[T]hus[,] regretfully, it is erroneous of you to believe otherwise. 6
In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the
exchange of correspondence between them regarding the "Goodwill Clause" in the
employment contract was a moot exercise since Portillos articulated intention to go into
business, selling rice, will not compete with Lietz Inc.s products.
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines,
Limited to head its Pharma Raw Material Department. Ed Keller Limited is purportedly a
direct competitor of Lietz Inc.
Meanwhile, Portillos demands from Lietz Inc. for the payment of her remaining salaries
and commissions went unheeded. Lietz Inc. gave Portillo the run around, on the pretext
that her salaries and commissions were still being computed.
On 14 September 2005, Portillo filed a complaint with the National Labor Relations
Commission (NLRC) for non-payment of 1 months salary, two (2) months commission,
13th month pay, plus moral, exemplary and actual damages and attorneys fees.
In its position paper, Lietz Inc. admitted liability for Portillos money claims in the total
amount of P110,662.16. However, Lietz Inc. raised the defense of legal compensation:
Portillos money claims should be offset against her liability to Lietz Inc. for liquidated
damages in the amount of 869,633.097 for Portillos alleged breach of the "Goodwill
Clause" in the employment contract when she became employed with Ed Keller
Philippines, Limited.
On 25 May 2007, Labor Arbiter Daniel J. Cajilig granted Portillos complaint:
WHEREFORE, judgment is hereby rendered ordering respondents Rudolf Lietz, Inc. to pay
complainant Marietta N. Portillo the amount of Php110,662.16, representing her salary
and commissions, including 13th month pay.8
On appeal by respondents, the NLRC, through its Second Division, affirmed the ruling of
Labor Arbiter Daniel J. Cajilig. On motion for reconsideration, the NLRC stood pat on its
ruling.
Expectedly, respondents filed a petition for certiorari before the Court of Appeals,
alleging grave abuse of discretion in the labor tribunals rulings.
As earlier adverted to, the appellate court initially affirmed the labor tribunals:
Page 299 of 497

WHEREFORE, considering the foregoing premises, judgment is hereby rendered by

us DENYING the petition filed in this case. The Resolution of the National Labor
Relations Commission (NLRC), Second Division, in the labor case docketed as NLRC NCR
Case No. 00-09- 08113-2005 [NLRC LAC No. 07-001965-07(5)] is herebyAFFIRMED.9
The disposition was disturbed. The Court of Appeals, on motion for reconsideration,
modified its previous decision, thus:
WHEREFORE, in view of the foregoing premises, we hereby MODIFY the decision
promulgated on March 31, 2009 in that, while we uphold the monetary award in favor of
the [petitioner] in the aggregate sum of 110,662.16 representing the unpaid salary,
commission and 13th month pay due to her, we hereby allow legal compensation or setoff of such award of monetary claims by her liability to [respondents] for liquidated
damages arising from her violation of the "Goodwill Clause" in her employment contract
with them.10
Portillos motion for reconsideration was denied.
Hence, this petition for certiorari listing the following acts as grave abuse of discretion of
the Court of Appeals:
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING TO
RECOGNIZE (sic) THAT THE RESPONDENTS EARLIER PETITION IS FATALLY DEFECTIVE;
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY OVERSTEPPING
THE BOUNDS OF APPELLATE JURISDICTION[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY MODIFYING ITS
PREVIOUS DECISION BASED ON AN ISSUE THAT WAS RAISED ONLY ON THE FIRST
INSTANCE AS AN APPEAL BUT WAS NEVER AT THE TRIAL COURT AMOUNTING TO DENIAL
OF DUE PROCESS[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING THE
POSITIVE DUTY TO UPHOLD THE RELEVANT LAWS[.]11
Simply, the issue is whether Portillos money claims for unpaid salaries may be offset
against respondents claim for liquidated damages.
Before anything else, we address the procedural error committed by Portillo, i.e., filing a
petition for certiorari, a special civil action under Rule 65 of the Rules of Court, instead of
a petition for review on certiorari, a mode of appeal, under Rule 45 thereof. On this score
alone, the petition should have been dismissed outright.

Page 300 of 497

Section 1, Rule 45 of the Rules of Court expressly provides that a party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of Appeals may file
a verified petition for review on certiorari. Considering that, in this case, appeal
by certiorari was available to Portillo, that available recourse foreclosed her right to
resort to a special civil action for certiorari, a limited form of review and a remedy of last
recourse, which lies only where there is no appeal or plain, speedy and adequate remedy
in the ordinary course of law.12
A petition for review on certiorari under Rule 45 and a petition for certiorari under Rule
65 are mutually exclusive remedies. Certiorari cannot co-exist with an appeal or any
other adequate remedy.13 If a petition for review is available, even prescribed, the nature
of the questions of law intended to be raised on appeal is of no consequence. It may well
be that those questions of law will treat exclusively of whether or not the judgment or
final order was rendered without or in excess of jurisdiction, or with grave abuse of
discretion. This is immaterial. The remedy is appeal, not certiorari as a special civil
action.14
Be that as it may, on more than one occasion, to serve the ultimate purpose of all rules
of proceduresattaining substantial justice as expeditiously as possible 15we have
accepted procedurally incorrect petitions and decided them on the merits. We do the
same here.
The Court of Appeals anchors its modified ruling on the ostensible causal connection
between Portillos money claims and Lietz Inc.s claim for liquidated damages, both
claims apparently arising from the same employment relations. Thus, did it say:
x x x This Court will have to take cognizance of and consider the "Goodwill Clause"
contained [in] the employment contract signed by and between [respondents and
Portillo]. There is no gainsaying the fact that such "Goodwill Clause" is part and parcel of
the employment contract extended to [Portillo], and such clause is not contrary to law,
morals and public policy. There is thus a causal connection between [Portillos] monetary
claims against [respondents] and the latters claim for liquidated damages against the
former. Consequently, we should allow legal compensation or set-off to take place.
[Respondents and Portillo] are both bound principally and, at the same time, are
creditors of each other. [Portillo] is a creditor of [respondents] in the sum of 110,662.16
in connection with her monetary claims against the latter. At the same time,
[respondents] are creditors of [Portillo] insofar as their claims for liquidated damages in
the sum of 980,295.2516 against the latter is concerned.17
We are not convinced.
Paragraph 4 of Article 217 of the Labor Code appears to have caused the reliance by the
Court of Appeals on the "causal connection between [Portillos] monetary claims against
[respondents] and the latters claim from liquidated damages against the former."
Page 301 of 497

Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as
otherwise provided under this code, the Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in the absence of
stenographic notes, the following case involving all workers, whether agricultural or
nonagricultural:
xxxx
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations; (Underscoring supplied)
Evidently, the Court of Appeals is convinced that the claim for liquidated damages
emanates from the "Goodwill Clause of the employment contract and, therefore, is a
claim for damages arising from the employeremployee relations."
As early as Singapore Airlines Limited v. Pao,18 we established that not all disputes
between an employer and his employee(s) fall within the jurisdiction of the labor
tribunals. We differentiated between abandonment per seand the manner and
consequent effects of such abandonment and ruled that the first, is a labor case, while
the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy must be
held to belong to the civil Courts. While seemingly petitioner's claim for damages arises
from employer-employee relations, and the latest amendment to Article 217 of the Labor
Code under PD No. 1691 and BP Blg. 130 provides that all other claims arising from
employer-employee relationship are cognizable by Labor Arbiters [citation omitted], in
essence, petitioner's claim for damages is grounded on the "wanton failure and refusal"
without just cause of private respondent Cruz to report for duty despite repeated notices
served upon him of the disapproval of his application for leave of absence without pay.
This, coupled with the further averment that Cruz "maliciously and with bad faith"
violated the terms and conditions of the conversion training course agreement to the
damage of petitioner removes the present controversy from the coverage of the Labor
Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se by private
respondent Cruz of his jobas the latter was not required in the Complaint to report
back to workbut on the manner and consequent effects of such abandonment of work
translated in terms of the damages which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale
Veneer & Plywood, Inc. [citation omitted], the pertinent portion of which reads:

Page 302 of 497

"Although the acts complained of seemingly appear to constitute 'matter involving

employee-employer' relations as Quisaba's dismissal was the severance of a pre-existing
employee-employer relations, his complaint is grounded not on his dismissal per se, as in
fact he does not ask for reinstatement or backwages, but on the manner of his dismissal
and the consequent effects of such dismissal.
"Civil law consists of that 'mass of precepts that determine or regulate the relations . . .
that exist between members of a society for the protection of private interest (1 Sanchez
Roman 3).
"The 'right' of the respondents to dismiss Quisaba should not be confused with the
manner in which the right was exercised and the effects flowing therefrom. If the
dismissal was done anti-socially or oppressively as the complaint alleges, then the
respondents violated Article 1701 of the Civil Code which prohibits acts of oppression by
either capital or labor against the other, and Article 21, which makes a person liable for
damages if he wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy, the sanction for which, by way of moral damages,
is provided in article 2219, No. 10. [citation omitted]"
Stated differently, petitioner seeks protection under the civil laws and claims
no benefits under the Labor Code. The primary relief sought is for liquidated
damages for breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation
pay. The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.19(Emphasis supplied)
Subsequent rulings amplified the teaching in Singapore Airlines. The reasonable causal
connection rule was discussed. Thus, in San Miguel Corporation v. National Labor
Relations Commission,20 we held:
While paragraph 3 above refers to "all money claims of workers," it is not necessary to
suppose that the entire universe of money claims that might be asserted by workers
against their employers has been absorbed into the original and exclusive jurisdiction of
Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but
rather within the context formed by paragraph 1 (relating to unfair labor practices),
paragraph 2 (relating to claims concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a particular species of employeremployee relations), and paragraph 5 (relating to certain activities prohibited to
employees or to employers). It is evident that there is a unifying element which runs
through paragraph 1 to 5 and that is, that they all refer to cases or disputes arising out
of or in connection with an employer-employee relationship. This is, in other words, a
situation where the rule of noscitur a sociis may be usefully invoked in clarifying the
scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as
Page 303 of 497

amended. We reach the above conclusion from an examination of the terms themselves
of Article 217, as last amended by B.P. Blg. 227, and even though earlier versions of
Article 217 of the Labor Code expressly brought within the jurisdiction of the Labor
Arbiters and the NLRC "cases arising from employer-employee relations, [citation
omitted]" which clause was not expressly carried over, in printer's ink, in Article 217 as it
exists today. For it cannot be presumed that money claims of workers which do not arise
out of or in connection with their employer-employee relationship, and which would
therefore fall within the general jurisdiction of regular courts of justice, were intended by
the legislative authority to be taken away from the jurisdiction of the courts and lodged
with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so
holds that the "money claims of workers" referred to in paragraph 3 of Article
217 embraces money claims which arise out of or in connection with the
employer-employee relationship, or some aspect or incident of such
relationship. Put a little differently, that money claims of workers which now
fall within the original and exclusive jurisdiction of Labor Arbiters are those
money claims which have some reasonable causal connectionwith the
employer-employee relationship.21 (Emphasis supplied)
We thereafter ruled that the "reasonable causal connection with the employer-employee
relationship" is a requirement not only in employees money claims against the employer
but is, likewise, a condition when the claimant is the employer.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,22 which reiterated
the San Miguel ruling and allied jurisprudence, we pronounced that a non-compete
clause, as in the "Goodwill Clause" referred to in the present case, with a stipulation that
a violation thereof makes the employee liable to his former employer for liquidated
damages, refers to post-employment relations of the parties.
In Dai-Chi, the trial court dismissed the civil complaint filed by the employer to recover
damages from its employee for the latters breach of his contractual obligation. We
reversed the ruling of the trial court as we found that the employer did not ask for any
relief under the Labor Code but sought to recover damages agreed upon in the contract
as redress for its employees breach of contractual obligation to its "damage and
prejudice." We iterated that Article 217, paragraph 4 does not automatically cover all
disputes between an employer and its employee(s). We noted that the cause of action
was within the realm of Civil Law, thus, jurisdiction over the controversy belongs to the
regular courts. At bottom, we considered that the stipulation referred to postemployment relations of the parties.
That the "Goodwill Clause" in this case is likewise a postemployment issue should brook
no argument. There is no dispute as to the cessation of Portillos employment with Lietz
Inc.23 She simply claims her unpaid salaries and commissions, which Lietz Inc. does not
contest. At that juncture, Portillo was no longer an employee of Lietz Inc. 24 The "Goodwill
Clause" or the "Non-Compete Clause" is a contractual undertaking effective after the
Page 304 of 497

cessation of the employment relationship between the parties. In accordance with

jurisprudence, breach of the undertaking is a civil law dispute, not a labor law case.
It is clear, therefore, that while Portillos claim for unpaid salaries is a money claim that
arises out of or in connection with an employer-employee relationship, Lietz Inc.s claim
against Portillo for violation of the goodwill clause is a money claim based on an act done
after the cessation of the employment relationship. And, while the jurisdiction over
Portillos claim is vested in the labor arbiter, the jurisdiction over Lietz Inc.s claim rests
on the regular courts. Thus:
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties' contract of employment as redress for
respondent's breach thereof. Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts. More so must this be in
the present case, what with the reality that the stipulation refers to the postemployment
relations of the parties.
For sure, a plain and cursory reading of the complaint will readily reveal that the subject
matter is one of claim for damages arising from a breach of contract, which is within the
ambit of the regular court's jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined upon the allegations
made in the complaint, irrespective of whether or not the plaintiff is entitled to recover
upon the claim asserted therein, which is a matter resolved only after and as a result of a
trial. Neither can jurisdiction of a court be made to depend upon the defenses made by a
defendant in his answer or motion to dismiss. If such were the rule, the question of
jurisdiction would depend almost entirely upon the defendant. 25 [citation omitted]
xxxx
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees [citation omitted], we hold that by
the designating clause "arising from the employer-employee relations" Article 217 should
apply with equal force to the claim of an employer for actual damages against its
dismissed employee, where the basis for the claim arises from or is necessarily
connected with the fact of termination, and should be entered as a counterclaim in the
illegal dismissal case.26
xxxx
This is, of course, to distinguish from cases of actions for damages where the
employer-employee relationship is merely incidental and the cause of action
proceeds from a different source of obligation. Thus, the jurisdiction of regular
courts was upheld where the damages, claimed for were based on tort[citation
Page 305 of 497

omitted], malicious prosecution [citation omitted], or breach of contract, as when

the claimant seeks to recover a debt from a former employee [citation
omitted] or seeks liquidated damages in enforcement of a prior employment
contract. [citation omitted]
Neither can we uphold the reasoning of respondent court that because the resolution of
the issues presented by the complaint does not entail application of the Labor Code or
other labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as
amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over
claims for damages arising from employer-employee relationsin other words, the Labor
Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also
damages governed by the Civil Code.27 (Emphasis supplied)
In the case at bar, the difference in the nature of the credits that one has against the
other, conversely, the nature of the debt one owes another, which difference in turn
results in the difference of the forum where the different credits can be enforced,
prevents the application of compensation. Simply, the labor tribunal in an employees
claim for unpaid wages is without authority to allow the compensation of such claims
against the post employment claim of the former employer for breach of a post
employment condition. The labor tribunal does not have jurisdiction over the civil case of
breach of contract.
We are aware that in Baez v. Hon. Valdevilla, we mentioned that:
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees [citation omitted], we hold that by
the designating clause "arising from the employer-employee relations" Article 217 should
apply with equal force to the claim of an employer for actual damages against its
dismissed employee, where the basis for the claim arises from or is necessarily
connected with the fact of termination, and should be entered as a counterclaim in the
illegal dismissal case.28
While on the surface, Baez supports the decision of the Court of Appeals, the facts
beneath premise an opposite conclusion. There, the salesman-employee obtained from
the NLRC a final favorable judgment of illegal dismissal. Afterwards, the employer filed
with the trial court a complaint for damages for alleged nefarious activities causing
damage to the employer. Explaining further why the claims for damages should be
entered as a counterclaim in the illegal dismissal case, we said:
Even under Republic Act No. 875 (the Industrial Peace Act, now completely superseded
by the Labor Code), jurisprudence was settled that where the plaintiffs cause of action
for damages arose out of, or was necessarily intertwined with, an alleged unfair labor
practice committed by the union, the jurisdiction is exclusively with the (now defunct)
Court of Industrial Relations, and the assumption of jurisdiction of regular courts over the
Page 306 of 497

same is a nullity. To allow otherwise would be "to sanction split jurisdiction, which is
prejudicial to the orderly administration of justice." Thus, even after the enactment of the
Labor Code, where the damages separately claimed by the employer were allegedly
incurred as a consequence of strike or picketing of the union, such complaint for
damages is deeply rooted from the labor dispute between the parties, and should be
dismissed by ordinary courts for lack of jurisdiction. As held by this Court in National
Federation of Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that on policy
grounds, and equally so in the interest of greater promptness in the disposition of labor
matters, a court is spared the often onerous task of determining what essentially is a
factual matter, namely, the damages that may be incurred by either labor or
management as a result of disputes or controversies arising from employer-employee
relations.29
Evidently, the ruling of the appellate court is modeled after the basis used
in Baez which is the "intertwined" facts of the claims of the employer and the employee
or that the "complaint for damages is deeply rooted from the labor dispute between the
parties." Thus, did the appellate court say that:
There is no gainsaying the fact that such "Goodwill Clause" is part and parcel of the
employment contract extended to [Portillo], and such clause is not contrary to law,
morals and public policy. There is thus a causal connection between [Portillos] monetary
claims against [respondents] and the latters claim for liquidated damages against the
former. Consequently, we should allow legal compensation or set-off to take place. 30
The Court of Appeals was misguided. Its conclusion was incorrect.
There is no causal connection between the petitioner employees claim for unpaid wages
and the respondent employers claim for damages for the alleged "Goodwill Clause"
violation. Portillos claim for unpaid salaries did not have anything to do with her alleged
violation of the employment contract as, in fact, her separation from employment is not
"rooted" in the alleged contractual violation. She resigned from her employment. She
was not dismissed. Portillos entitlement to the unpaid salaries is not even contested.
Indeed, Lietz Inc.s argument about legal compensation necessarily admits that it owes
the money claimed by Portillo.
The alleged contractual violation did not arise during the existence of the employeremployee relationship. It was a post-employment matter, a post-employment violation.
Reminders are apt. That is provided by the fairly recent case of Yusen Air and Sea
Services Phils., Inc. v. Villamor,31 which harked back to the previous rulings on the
necessity of "reasonable causal connection" between the tortious damage and the
damage arising from the employer-employee relationship. Yusen proceeded to pronounce
that the absence of the connection results in the absence of jurisdiction of the labor
Page 307 of 497

arbiter. Importantly, such absence of jurisdiction cannot be remedied by raising before

the labor tribunal the tortious damage as a defense. Thus:
When, as here, the cause of action is based on a quasi-delict or tort, which has no
reasonable causal connection with any of the claims provided for in Article 217,
jurisdiction over the action is with the regular courts. [citation omitted]
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties contract of employment as redress for
respondents breach thereof. Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts. More so must this be in
the present case, what with the reality that the stipulation refers to the postemployment
relations of the parties.
For sure, a plain and cursory reading of the complaint will readily reveal that the subject
matter is one of claim for damages arising from a breach of contract, which is within the
ambit of the regular courts jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined upon the allegations
made in the complaint, irrespective of whether or not the plaintiff is entitled to recover
upon the claim asserted therein, which is a matter resolved only after and as a result of a
trial. Neither can jurisdiction of a court be made to depend upon the defenses made by a
defendant in his answer or motion to dismiss. If such were the rule, the question of
jurisdiction would depend almost entirely upon the defendant. 32 (Underscoring supplied).
The error of the appellate court in its Resolution of 14 October 2010 is basic. The original
decision, the right ruling, should not have been reconsidered.1wphi1
Indeed, the application of compensation in this case is effectively barred by Article 113
of the Labor Code which prohibits wage deductions except in three circumstances:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on the
insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
Page 308 of 497

WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals in CAG.R. SP No. I 06581 dated 14 October 20 I 0 is SET ASIDE. The Decision of the Court of
Appeals in CA-G.R. SP No. I 06581 dated 3 I March :2009 is REINSTATED. No costs.
SO ORDERED.
G.R. No. 201298, February 05, 2014
RAUL C. COSARE, Petitioner, v. BROADCOM ASIA, INC. AND DANTE
AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court,
which assails the Decision2 dated November 24, 2011 and Resolution3 dated March 26,
2012 of the Court of Appeals (CA) in CAG.R. SP. No. 117356, wherein the CA ruled that
the Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the jurisdiction over
petitioner Raul C. Cosares (Cosare) complaint for illegal dismissal against Broadcom
Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom
(respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and
monetary claims filed with the National Capital Region Arbitration Branch of the National
Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television
networks and production houses. In December 2000, Arevalo set up the company
Broadcom, still to continue the business of trading communication and broadcast
equipment. Cosare was named an incorporator of Broadcom, having been assigned 100
shares of stock with par value of P1.00 per share. 5 In October 2001, Cosare was
promoted to the position of Assistant Vice President for Sales (AVP for Sales) and Head of
the Technical Coordination, having a monthly basic net salary and average commissions
of P18,000.00 and P37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcoms Vice President for
Sales and thus, became Cosares immediate superior. On March 23, 2009, Cosare sent a
confidential memo7 to Arevalo to inform him of the following anomalies which were
allegedly being committed by Abiog against the company: (a) he failed to report to work
on time, and would immediately leave the office on the pretext of client visits; (b) he
advised the clients of Broadcom to purchase camera units from its competitors, and
received commissions therefor; (c) he shared in the under thetable dealings or
confidential commissions which Broadcom extended to its clients personnel and
engineers; and (d) he expressed his complaints and disgust over Broadcoms
uncompetitive salaries and wages and delay in the payment of other benefits, even in
Page 309 of 497

the presence of office staff. Cosare ended his memo by clarifying that he was not
interested in Abiogs position, but only wanted Arevalo to know of the irregularities for
the corporations sake.
Apparently, Arevalo failed to act on Cosares accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to
tender his resignation in exchange for financial assistance in the amount of
P300,000.00.8 Cosare refused to comply with the directive, as signified in a letter 9 dated
March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcoms
Manager for Finance and Administration, a memo 10 signed by Arevalo, charging him of
serious misconduct and willful breach of trust, and providing in
part:chanRoblesvirtualLawlibrary
1. A confidential memo was received from the VP for Sales informing me that you
had directed, or at the very least tried to persuade, a customer to purchase a
camera from another supplier. Clearly, this action is a gross and willful violation of
the trust and confidence this company has given to you being its AVP for Sales
and is an attempt to deprive the company of income from which you, along with
the other employees of this company, derive your salaries and other benefits. x x
x.
2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned
in another place outside of the office without proper turnover from you to this
office which had assigned said vehicle to you. The vehicle was found to be
inoperable and in very bad condition, which required that the vehicle be towed to
a nearby auto repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the company
of your activities within and outside of company premises despite repeated
reminders. However, it has been observed that you have been both frequently
absent and/or tardy without proper information to this office or your direct
supervisor, the VP for Sales Mr. Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as
evidenced by the fact that you have not recorded any sales for the past
immediate twelve (12) months. This was inspite of the fact that my office decided
to relieve you of your duties as technical coordinator between Engineering and
Sales since June last year so that you could focus and concentrate [on] your
activities in sales.11cralawred
Cosare was given fortyeight (48) hours from the date of the memo within which to
present his explanation on the charges. He was also suspended from having access to
any and all company files/records and use of company assets effective
immediately.12 Thus, Cosare claimed that he was precluded from reporting for work on
March 31, 2009, and was instead instructed to wait at the offices receiving section.
Upon the specific instructions of Arevalo, he was also prevented by Villareal from
retrieving even his personal belongings from the office.
Page 310 of 497

On April 1, 2009, Cosare was totally barred from entering the company premises, and
was told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the
officials of Barangay San Antonio, Pasig City, and had the incident reported in
the barangay blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a memo 14 by which he
addressed and denied the accusations cited in Arevalos memo dated March 30, 2009.
The respondents refused to receive the memo on the ground of late filing, prompting
Cosare to serve a copy thereof by registered mail. The following day, April 3, 2009,
Cosare filed the subject labor complaint, claiming that he was constructively dismissed
from employment by the respondents. He further argued that he was illegally
suspended, as he placed no serious and imminent threat to the life or property of his
employer and coemployees.15
In refuting Cosares complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed
the following acts inimical to the interests of Broadcom: (a) he failed to sell any
broadcast equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150
Camera which was to be sourced from a competitor; and (c) he made an unauthorized
request in Broadcoms name for its principal, Panasonic USA, to issue an invitation for
Cosares friend, one Alex Paredes, to attend the National Association of Broadcasters
Conference in Las Vegas, USA.16 Furthermore, they contended that Cosare abandoned his
job17 by continually failing to report for work beginning April 1, 2009, prompting them to
issue on April 14, 2009 a memorandum18 accusing Cosare of absence without leave
beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his
Decision19 dismissing the complaint on the ground of Cosares failure to establish that he
was dismissed, constructively or otherwise, from his employment. For the LA, what
transpired on March 30, 2009 was merely the respondents issuance to Cosare of a
showcause memo, giving him a chance to present his side on the charges against him.
He explained:chanRoblesvirtualLawlibrary
It is obvious that [Cosare] DID NOT wait for respondents action regarding the charges
leveled against him in the showcause memo. What he did was to preempt that action
by filing this complaint just a day after he submitted his written explanation. Moreover,
by specifically seeking payment of Separation Pay instead of reinstatement,
[Cosares] motive for filing this case becomes more
evident.20ChanRoblesVirtualawlibrary
It was also held that Cosare failed to substantiate by documentary evidence his
allegations of illegal suspension and nonpayment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision 21 reversing the Decision of LA
Menese. The dispositive portion of the NLRC Decision reads:chanRoblesvirtualLawlibrary
Page 311 of 497

WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents

are found guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA[,] INC.
and Dante Arevalo are ordered to pay [Cosares] backwages, and separation pay, as well
as damages, in the total amount of [P]1,915,458.33, per attached Computation.
SO ORDERED.22ChanRoblesVirtualawlibrary
In ruling in favor of Cosare, the NLRC explained that due weight and credence is
accorded to [Cosares] contention that he was constructively dismissed by Respondent
Arevalo when he was asked to resign from his employment. 23 The fact that Cosare was
suspended from using the assets of Broadcom was also inconsistent with the
respondents claim that Cosare opted to abandon his employment.
Exemplary damages in the amount of P100,000.00 was awarded, given the NLRCs
finding that the termination of Cosares employment was effected by the respondents in
bad faith and in a wanton, oppressive and malevolent manner. The claim for unpaid
commissions was denied on the ground of the failure to include it in the prayer of
pleadings filed with the LA and in the appeal.
The respondents motion for reconsideration was denied. 24 Dissatisfied, they filed a
petition forcertiorari with the CA founded on the following arguments: (1) the
respondents did not have to prove just cause for terminating the employment of Cosare
because the latters complaint was based on an alleged constructive dismissal; (2)
Cosare resigned and was thus not dismissed from employment; (3) the respondents
should not be declared liable for the payment of Cosares monetary claims; and (4)
Arevalo should not be held solidarily liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they
raised a new argument, i.e., the case involved an intracorporate controversy which was
within the jurisdiction of the RTC, instead of the LA. 25 They argued that the case involved
a complaint against a corporation filed by a stockholder, who, at the same time, was a
corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision 26 granting the
respondents petition. It agreed with the respondents contention that the case involved
an intracorporate controversy which, pursuant to Presidential Decree No. 902A, as
amended, was within the exclusive jurisdiction of the RTC. It
reasoned:chanRoblesvirtualLawlibrary
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was
listed as one of its directors. Moreover, he held the position of [AVP] for Sales which is
listed as a corporate office. Generally, the president, vicepresident, secretary or
treasurer are commonly regarded as the principal or executive officers of a corporation,
and modern corporation statutes usually designate them as the officers of the
corporation. However, it bears mentioning that under Section 25 of the Corporation
Code, the Board of Directors of [Broadcom] is allowed to appoint such other officers as it
may deem necessary. Indeed, [Broadcoms] ByLaws
provides:chanRoblesvirtualLawlibrary

Page 312 of 497

Article IV
Officer
Section 1. Election / Appointment Immediately after their election, the Board of
Directors shall formally organize by electing the President, the VicePresident, the
Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may
determine to be necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that[Cosare]
indeed held a corporate office, as evidenced by the General Information Sheet which
was submitted to the Securities and Exchange Commission (SEC) on October 22,
2009.27 (Citations omitted and emphasis supplied)chanroblesvirtualawlibrary
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one
dismissing the labor complaint on the ground of lack of jurisdiction, finding it
unnecessary to resolve the main issues that were raised in the petition. Cosare filed a
motion for reconsideration, but this was denied by the CA via the Resolution28 dated
March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petitions full resolution are as follows: (1) whether or not the
case instituted by Cosare was an intracorporate dispute that was within the original
jurisdiction of the RTC, and not of the LAs; and (2) whether or not Cosare was
constructively and illegally dismissed from employment by the respondents.
The Courts Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling
of the CA, it is the LA, and not the regular courts, which has the original jurisdiction over
the subject controversy. An intracorporate controversy, which falls within the jurisdiction
of regular courts, has been regarded in its broad sense to pertain to disputes that involve
any of the following relationships: (1) between the corporation, partnership or
association and the public; (2) between the corporation, partnership or association and
the state in so far as its franchise, permit or license to operate is concerned; (3) between
the corporation, partnership or association and its stockholders, partners, members or
officers; and (4) among the stockholders, partners or associates, themselves. 29 Settled
jurisprudence, however, qualifies that when the dispute involves a charge of illegal
dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction, as
a rule, falls termination disputes and claims for damages arising from employer
employee relations as provided in Article 217 of the Labor Code. Consistent with this
jurisprudence, the mere fact that Cosare was a stockholder and an officer of Broadcom at
the time the subject controversy developed failed to necessarily make the case an intra
corporate dispute.

Page 313 of 497

In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished

between a regular employee and a corporate officer for purposes of establishing the
true nature of a dispute or complaint for illegal dismissal and determining which body
has jurisdiction over it. Succinctly, it was explained that [t]he determination of whether
the dismissed officer was a regular employee or corporate officer unravels the
conundrum of whether a complaint for illegal dismissal is cognizable by the LA or by the
RTC. In case of the regular employee, the LA has jurisdiction; otherwise, the RTC
exercises the legal authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for being
its AVP for Sales, was not a corporate officer as the term is defined by law. We
emphasized in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the
purpose of identifying an intracorporate controversy. Citing Garcia v. Eastern
Telecommunications Philippines, Inc.,33 we held:chanRoblesvirtualLawlibrary
Corporate officers in the context of Presidential Decree No. 902A are those officers of
the corporation who are given that character by the Corporation Code or by the
corporations bylaws. There are three specific officers whom a corporation must have
under Section 25 of the Corporation Code. These are the president, secretary and the
treasurer. The number of officers is not limited to these three. A corporation may have
such other officers as may be provided for by its bylaws like, but not limited to, the
vicepresident, cashier, auditor or general manager. The number of corporate officers is
thus limited by law and by the corporations bylaws. 34 (Emphasis
ours)chanroblesvirtualawlibrary
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of
corporate offices:chanRoblesvirtualLawlibrary
It has been held that an office is created by the charter of the corporation and the
officer is elected by the directors and stockholders. On the other hand, an employee
usually occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee.36 (Citations
omitted)chanroblesvirtualawlibrary
As may be deduced from the foregoing, there are two circumstances which must concur
in order for an individual to be considered a corporate officer, as against an ordinary
employee or officer, namely: (1) the creation of the position is under the corporations
charter or bylaws; and (2) theelection of the officer is by the directors or stockholders. It
is only when the officer claiming to have been illegally dismissed is classified as such
corporate officer that the issue is deemed an intracorporate dispute which falls within
the jurisdiction of the trial courts.
To support their argument that Cosare was a corporate officer, the respondents referred
to Section 1, Article IV of Broadcoms bylaws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment Immediately after their election, the Board of
Directors shall formally organize by electing the President, the VicePresident, the
Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may
Page 314 of 497

determine to be necessary or proper. Any two (2) or more compatible positions may
be held concurrently by the same person, except that no one shall act as President and
Treasurer or Secretary at the same time.37 (Emphasis ours)chanroblesvirtualawlibrary
This was also the CAs main basis in ruling that the matter was an intracorporate
dispute that was within the trial courts jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices
that are created under Broadcoms bylaws are the following: the President, Vice
President, Treasurer and Secretary. Although a blanket authority provides for the Boards
appointment of such other officers as it may deem necessary and proper, the
respondents failed to sufficiently establish that the position of AVP for Sales was created
by virtue of an act of Broadcoms board, and that Cosare was specifically elected or
appointed to such position by the directors. No board resolutions to establish such facts
form part of the case records. Further, it was held in Marc II Marketing, Inc. v. Joson38 that
an enabling clause in a corporations bylaws empowering its board of directors to create
additional officers, even with the subsequent passage of a board resolution to that effect,
cannot make such position a corporate office. The board of directors has no power to
create other corporate offices without first amending the corporate bylaws so as to
include therein the newly created corporate office. 39 To allow the creation of a corporate
officer position by a simple inclusion in the corporate bylaws of an enabling clause
empowering the board of directors to do so can result in the circumvention of that
constitutionally wellprotected right [of every employee to security of tenure]. 40
The CAs heavy reliance on the contents of the General Information Sheets 41 , which were
submitted by the respondents during the appeal proceedings and which plainly provided
that Cosare was an officer of Broadcom, was clearly misplaced. The said documents
could neither govern nor establish the nature of the office held by Cosare and his
appointment thereto. Furthermore, although Cosare could indeed be classified as an
officer as provided in the General Information Sheets, his position could only be deemed
a regular office, and not a corporate office as it is defined under the Corporation Code.
Incidentally, the Court noticed that although the Corporate Secretary of Broadcom, Atty.
Efren L. Cordero, declared under oath the truth of the matters set forth in the General
Information Sheets, the respondents failed to explain why the General Information Sheet
officially filed with the Securities and Exchange Commission in 2011 and submitted to
the CA by the respondents still indicated Cosare as an AVP for Sales, when among their
defenses in the charge of illegal dismissal, they asserted that Cosare had severed his
relationship with the corporation since the year 2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the
cases filing did not necessarily make the action an intra corporate controversy. [N]ot
all conflicts between the stockholders and the corporation are classified as intra
corporate. There are other facts to consider in determining whether the dispute involves
corporate matters as to consider them as intracorporate controversies. 42 Time and
again, the Court has ruled that in determining the existence of an intracorporate
dispute, the status or relationship of the parties and the nature of the question that is
the subject of the controversy must be taken into account. 43 Considering that the
pending dispute particularly relates to Cosares rights and obligations as a regular officer
of Broadcom, instead of as a stockholder of the corporation, the controversy cannot be
Page 315 of 497

deemed intracorporate. This is consistent with the controversy test explained by the
Court in Reyes v. Hon. RTC, Br. 142,44 to wit:chanRoblesvirtualLawlibrary
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra
corporate. The controversy must not only be rooted in the existence of an intra
corporate relationship, but must as well pertain to the enforcement of the parties
correlative rights and obligations under the Corporation Code and the internal and intra
corporate regulatory rules of the corporation. If the relationship and its incidents are
merely incidental to the controversy or if there will still be conflict even if the relationship
does not exist, then no intracorporate controversy exists. 45 (Citation
omitted)chanroblesvirtualawlibrary
It bears mentioning that even the CAs finding 46 that Cosare was a director of Broadcom
when the dispute commenced was unsupported by the case records, as even the
General Information Sheet of 2009 referred to in the CA decision to support such finding
failed to provide such detail.
All told, it is then evident that the CA erred in reversing the NLRCs ruling that favored
Cosare solely on the ground that the dispute was an intra corporate controversy within
the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the
correctness of the NLRCs ruling finding Cosare to have been illegally dismissed from
employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed,
citing among other circumstances the charges that were hurled and the suspension that
was imposed against himvia Arevalos memo dated March 30, 2009. Even prior to such
charge, he claimed to have been subjected to mental torture, having been locked out of
his files and records and disallowed use of his office computer and access to personal
belongings.47 While Cosare attempted to furnish the respondents with his reply to the
charges, the latter refused to accept the same on the ground that it was filed beyond the
48hour period which they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the
service of the memo, particularly the continued refusal of the respondents to allow
Cosares entry into the companys premises. These incidents were cited in the CA
decision as follows:chanRoblesvirtualLawlibrary
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could
retrieve his personal belongings, but the latter said that x x x Arevalo directed her to
deny his request, so [Cosare] again waited at the receiving section of the office. On April
1, 2009, [Cosare] was not allowed to enter the office premises. He was asked to just wait
outside of the Tektite (PSE) Towers, where [Broadcom] had its offices, for further
instructions on how and when he could get his personal belongings. [Cosare] waited until
8 p.m. for instructions but none were given. Thus, [Cosare] sought the assistance of the
officials of Barangay San Antonio, Pasig who advised him to file a labor or replevin case
to recover his personal belongings. x x x. 48 (Citation omitted)chanroblesvirtualawlibrary
It is also worth mentioning that a few days before the issuance of the memo dated March
30, 2009, Cosare was allegedly summoned to Arevalos office and was asked to tender
Page 316 of 497

his immediate resignation from the company, in exchange for a financial assistance of
P300,000.00.49 The directive was said to be founded on Arevalos choice to retain Abiogs
employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosares claim of constructive and illegal
dismissal. [C]onstructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely as when there
is a demotion in rank or diminution in pay or when a clear discrimination, insensibility, or
disdain by an employer becomes unbearable to the employee leaving the latter with no
other option but to quit.51 In Dimagan v. Dacworks United, Incorporated,52 it was
explained:chanRoblesvirtualLawlibrary
The test of constructive dismissal is whether a reasonable person in the employees
position would have felt compelled to give up his position under the circumstances. It is
an act amounting to dismissal but is made to appear as if it were not. Constructive
dismissal is therefore a dismissal in disguise. The law recognizes and resolves this
situation in favor of employees in order to protect their rights and interests from the
coercive acts of the employer.53 (Citation omitted)chanroblesvirtualawlibrary
It is clear from the cited circumstances that the respondents already rejected Cosares
continued involvement with the company. Even their refusal to accept the explanation
which Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny
Cosare of the opportunity to be heard prior to any decision on the termination of his
employment. The respondents allegedly refused acceptance of the explanation as it was
filed beyond the mere 48hour period which they granted to Cosare under the memo
dated March 30, 2009. However, even this limitation was a flaw in the memo or notice to
explain which only further signified the respondents discrimination, disdain and
insensibility towards Cosare, apparently resorted to by the respondents in order to deny
their employee of the opportunity to fully explain his defenses and ultimately, retain his
employment. The Court emphasized in King of Kings Transport, Inc. v. Mamac54 the
standards to be observed by employers in complying with the service of notices prior to
termination:
[T]he first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees are
given the opportunity to submit their written explanation within a reasonable period.
Reasonable opportunity under the Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to prepare adequately for
their defense. This should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the accusation
against them, consult a union official or lawyer, gather data and evidence, and decide on
the defenses they will raise against the complaint. Moreover, in order to enable the
employees to intelligently prepare their explanation and defenses, the notice should
contain a detailed narration of the facts and circumstances that will serve as basis for
the charge against the employees. A general description of the charge will not suffice.
Lastly, the notice should specifically mention which company rules, if any, are violated
and/or which among the grounds under Art. 282 is being charged against the
employees.55 (Citation omitted, underscoring ours, and emphasis
supplied)chanroblesvirtualawlibrary
In sum, the respondents were already resolute on a severance of their working
relationship with Cosare, notwithstanding the facts which could have been established by
his explanations and the respondents full investigation on the matter. In addition to this,
Page 317 of 497

the fact that no further investigation and final disposition appeared to have been made
by the respondents on Cosares case only negated the claim that they actually intended
to first look into the matter before making a final determination as to the guilt or
innocence of their employee. This also manifested from the fact that even before Cosare
was required to present his side on the charges of serious misconduct and willful breach
of trust, he was summoned to Arevalos office and was asked to tender his immediate
resignation in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their
persistent accusation that Cosare abandoned his post, allegedly signified by his failure to
report to work or file a leave of absence beginning April 1, 2009. This was even the
subject of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to explain
his absence within 48 hours from the date of the memo. As the records clearly indicated,
however, Arevalo placed Cosare under suspension beginning March 30, 2009. The
suspension covered access to any and all company files/records and the use of the
assets of the company, with warning that his failure to comply with the memo would be
dealt with drastic management action. The charge of abandonment was inconsistent
with this imposed suspension. Abandonment is the deliberate and unjustified refusal of
an employee to resume his employment. To constitute abandonment of work, two
elements must concur: (1) the employee must have failed to report for work or must
have been absent without valid or justifiable reason; and (2) there must have been a
clear intention on the part of the employee to sever the employer employee
relationship manifested by some overt act.57 Cosares failure to report to work
beginning April 1, 2009 was neither voluntary nor indicative of an intention to sever his
employment with Broadcom. It was illogical to be requiring him to report for work, and
imputing fault when he failed to do so after he was specifically denied access to all of the
companys assets. As correctly observed by the NLRC:chanRoblesvirtualLawlibrary
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on
April 1, 2009. However[,] the showcause letter dated March 3[0], 2009 (Annex F, ibid)
suspended [Cosare] from using not only the equipment but the assets of Respondent
[Broadcom]. This insults rational thinking because the Respondents tried to mislead us
and make [it appear] that [Cosare] failed to report for work when they had in fact had
[sic] placed him on suspension. x x x.58ChanRoblesVirtualawlibrary
Following a finding of constructive dismissal, the Court finds no cogent reason to modify
the NLRCs monetary awards in Cosares favor. In Robinsons Galleria/Robinsons
Supermarket Corporation v. Ranchez,59 the Court reiterated that an illegally or
constructively dismissed employee is entitled to: (1) either reinstatement, if viable, or
separation pay, if reinstatement is no longer viable; and (2) backwages. 60 The award of
exemplary damages was also justified given the NLRCs finding that the respondents
acted in bad faith and in a wanton, oppressive and malevolent manner when they
dismissed Cosare. It is also by reason of such bad faith that Arevalo was correctly
declared solidarily liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CAG.R. SP. No. 117356
are SET ASIDE. The Decision dated August 24, 2010 of the National Labor Relations
Commission in favor of petitioner Raul C. Cosare
is AFFIRMED.chanroblesvirtualawlibrary ChanRoblesVirtualawlibrary
SO ORDERED.
Page 318 of 497

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58877 March 15, 1982
PEPSI-COLA BOTTLING COMPANY, COSME DE ABOITIZ, and ALBERTO M.
DACUYCUY, petitioners,
vs.
HON. JUDGE ANTONIO M. MARTINEZ, in his official capacity, and ABRAHAM
TUMALA, JR., respondents.

ESCOLIN, J.:
This petition for certiorari, prohibition and mandamus raises anew the legal question
often brought to this Court: Which tribunal has exclusive jurisdiction over an action filed
by an employee against his employer for recovery of unpaid salaries, separation benefits
and damages the court of general jurisdiction or the Labor Arbiter of the National
Labor Relations Commission [NLRC]?
The facts that gave rise to this petition are as follows:
On September 19, 1980, respondent Abraham Tumala, Jr. filed a complaint in the Court of
First Instance of Davao, docketed as Civil Case No. 13494, against petitioners Pepsi-Cola
Bottling Co., Inc., its president Cosme de Aboitiz and other company officers. Under the
first cause of action, the complaint averred inter alia that Tumala was a salesman of the
company in Davao City from 1977 up to August 21, 1980; that in the annual "Sumakwel"
contest conducted by the company in 1979, Tumala was declared winner of the "LapuLapu Award" for his performance as top salesman of the year, an award which entitled
him to a prize of a house and lot; and that petitioners, despite demands, have unjustly
refused to deliver said prize Under the second cause of action, it was alleged that on
August 21, 1980, petitioners, "in a manner oppressive to labor" and "without prior
clearance from the Ministry of Labor", "arbitrarily and ilegally" terminated his
employment. He prayed that petitioners be ordered, jointly and severally, to deliver his
prize of house and lot or its cash equivalent, and to pay his back salaries and separation
benefits, plus moral and exemplary damages, attorney's fees and litigation expenses. He
did not ask for reinstatement.
Petitioners moved to dismiss the complaint on grounds of lack of jurisdiction and cause
of action. Petitioners further alleged that Tumala was not entitled to the "Sumakwel"
Page 319 of 497

prize for having misled the company into declaring him top salesman for 1979 through
various deceitful and fraudulent manipulations and machinations in the performance of
his duties as salesman and depot in-charge of the bottling company in Davao City, which
manipulations consisted of "unremitted cash collections, fictitious collections of trade
accounts, fictitious loaned empties, fictitious product deals, uncollected loaned empties,
advance sales confirmed as fictitious, and route shortages which resulted to the damage
and prejudice of the bottling company in the amount of P381,851.76." The alleged
commission of these fraudulent acts was also advanced by petitioners to justify Tumala's
dismissal.
The court below, sustaining its jurisdiction over the case, denied the motion for
reconsideration. Hence the present recourse.
We rule that the Labor Arbiter has exclusive jurisdiction over the case.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign
authority which organizes the court; and it is given only by law. 1 Jurisdiction is never
presumed; it must be conferred by law in words that do not admit of doubt. 2
Since the jurisdiction of courts and judicial tribunals is derived exclusively from the
statutes of the forum, the issue efore Us should be resolved on the basis of the law or
statute now in force. We find that law in Presidential Decree 1691 which took effect on
May 1, 1980, Section 3 of which reads as follows:
SEC. 3. Article 217, 222 and 262 of Book V of the Labor Code are hereby
amended to read as follows:
Article 217. Jurisdiction of Labor Arbiters and the Commission. The Labor
Arbiters shall have the original and exclusive jurisdiction to hear and decide
the following cases involving all workers, whether agricultural or nonagricultural:
1. Unfair labor practice cases;
2. Unresolved issues in collective bargaining, including those that involve
waged hours of work and other terms and conditions of employment;
3. All money claims of workers, including those based on non-payment or
underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and

Page 320 of 497

5. All other claims arising from employer-employee relations, unless

expressly excluded by this Code.
Under paragraphs 3 and 5 of the above Presidential Decree, the case is exclusively
cognizable by the Labor Arbiters of the National Labor Relations Commission.
It is to be noted that P.D. 1691 is an exact reproduction of Article 217 of the Labor Code
(P.D. 442), which took effect on May 1, 1974. In Garcia vs. Martinez 3, an action filed on
August 2, 1976 in the Court of First Instance of Davao by a dismissed employee against
his employer for actual, moral and exemplary damages, We held that under Article 217
of the Labor Code, the law then in force, the case was within the exclusive jurisdiction of
the Labor Arbiters and the National Labor Relations Commission [NLRC]. This Court, per
Justice Aquino, rational this holding thus:
The provisions of paragraph 3 and 5 of Article 217 are broad and
comprehensive enough to cover Velasco's [employee's] claim for damages
allegedly arising from his unjustified dismissal by Garcia [employer]. His
claim was a consequence of the termination of their employer-employee
relations [Compare with Ruby Industrial Corporation vs. Court of First
Instance of Manila, L- 38893, August 31, 1977, 78 SCRA 499].
Article 217 of the Labor Code words amended by P.D. 1367, which was promulgated on
May 1, 1978, the full text of which is quoted as follows:
SECTION 1. Paragraph [a] of Art, 217 of the Labor Code as amended is
hereby further amended to read as follows:
[a] The Labor Arbiters shall have exclusive jurisdiction hear and decide the
following cases involving all workers, whether agricultural or nonagricultural:
1] Unfair labor practice cases;
2] Unresolved issues in collective bargaining, including those
which involve wages, hours of work, and other terms
conditions of employment; and
3] All other cases arising from employer-employee relations
duly indorsed by the Regional Directors in accordance with the
provisions of this Code.
Provided, that the Regional Directors shall not indorse and Labor Arbiters
shall not entertain claims for moral or other forms of damages.

Page 321 of 497

It will be noted that paragraphs 3 and 5 of Article 217 were deleted from the text of the
above decree and a new provision incorporated therein, to wit: "Provided that the
Regional Directors shall not indorse and Labor Arbiters shall not en certain claims for
moral or other forms of damages." This amendatory act thus divested the Labor Arbiters
of their competence to pass upon claims for damages by employees against their
employers.
However, on May 1, 1980, Article 217, as amended by P.D. 1367, was amended anew by
P.D. 1691. This last decree, which is a verbatim reproduction of the original test of Article
217 of the Labor Code, restored to the Labor Arbiters of the NLRC exclusive jurisdiction
over claims, money or otherwise, arising from employer-employee relations, except
those expressly excluded therefrom.
In sustaining its jurisdiction over the case at bar, the respondent court relied on Calderon
vs. Court of Appeals 4 , where We ruled that an employee's action for unpaid salaries,
alowances and other reimbursable expenses and damages was beyond the periphery of
the jurisdictional competence of the Labor Arbiters. Our ruling in Calderon, however, no
longer applaies to this case because P.D. 1367, upon which said decision was based, had
already been superceded by P.D. 1691. As heretofore stated, P.D. 1691 restored to the
Labor Arbiters their exlcusive jurisdiction over said classes of claims.
Respondent Tumala maintains that his action for delivery of the house and lot, his prize
as top salesman of the company for 1979, is a civil controversy triable exclusively by the
court of the general jurisdiction. We do not share this view. The claim for said prize
unquestionably arose from an employer-employee relation and, therefore, falls within the
coverage of par. 5 of P.D. 1691, which speaks of "all claims arising from employeremployee relations, unless expressly excluded by this Code." Indeed, Tumala would not
have qualitfied for the content, much less won the prize, if he was not an employee of
the company at the time of the holding of the contest. Besides, the cause advanced by
petitioners to justify their refusal to deliver the prizethe alleged fraudulent
manipulations committed by Tumala in connection with his duties as salesman of the
companyinvolves an inquiry into his actuations as an employee.
Besides, to hold that Tumala's claim for the prize should be passed upon by the regular
court of justice, independently and separately from his claim for back salaries,
retirement benefits and damages, would be to sanction split juridiction and multiplicity of
suits which are prejudicial to the orderly administration of justice.
One last point. Petitioners content that Tumala has no cause of action to as for back
salaries and damages because his dimissal was authorized by the Regional Director of
the MInistry of Labor. This question calls for the presentaiton of evidence and the same
may well be entilated before the labor Arbiter who has jurisdiction over the case.
Besides, the issue raised is not for Us to determine in this certiorari proceeding. The
extraordinary remedy of certiorari proceeding. The extraordinary remedy of certiorari
Page 322 of 497

offers only a limited form of review and its principal function is to keep an inferior
tribunal within its jurisdiction. 5
WHEREFORE, the petition is granted, and respondent judge is hereby directed to dismiss
Civil Case No. 13494, without prejudice to the right of respondent Tumala to refile the
same with the Labor Arbiter. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 80774 May 31, 1988
SAN MIGUEL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and RUSTICO VEGA, respondents.
Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner.
The Solicitor General for public respondent.

FELICIANO, J.:
In line with an Innovation Program sponsored by petitioner San Miguel Corporation
("Corporation;" "SMC") and under which management undertook to grant cash awards to
"all SMC employees ... except [ED-HO staff, Division Managers and higher-ranked
personnel" who submit to the Corporation Ideas and suggestions found to be beneficial
to the Corporation, private respondent Rustico Vega submitted on 23 September 1980 an
innovation proposal. Mr. Vega's proposal was entitled "Modified Grande Pasteurization
Process," and was supposed to eliminate certain alleged defects in the quality and taste
of the product "San Miguel Beer Grande:"
Title of Proposal
Modified Grande Pasteurization Process
Present Condition or Procedure

Page 323 of 497

At the early stage of beer grande production, several cases of beer grande
full goods were received by MB as returned beer fulls (RBF). The RBF's were
found to have sediments and their contents were hazy. These effects are
usually caused by underpasteurization time and the pasteurzation units for
beer grande were almost similar to those of the steinie.
Proposed lnnovation (Attach necessary information)
In order to minimize if not elienate underpasteurization of beer grande,
reduce the speed of the beer grande pasteurizer thereby, increasing the
pasteurization time and the pasteurization acts for grande beer. In this way,
the self-life (sic) of beer grande will also be increased. 1
Mr. Vega at that time had been in the employ of petitioner Corporation for thirteen (1 3)
years and was then holding the position of "mechanic in the Bottling Department of the
SMC Plant Brewery situated in Tipolo, Mandaue City.
Petitioner Corporation, however, did not find the aforequoted proposal acceptable and
consequently refused Mr. Vega's subsequent demands for a cash award under the
Innovation Program. On 22 February 1983., a Complaint 2 (docketed as Case No. RAB-VII0170-83) was filed against petitioner Corporation with Regional Arbitration Branch No. VII
(Cebu City) of the then.", Ministry of Labor and Employment. Frivate respondent Vega
alleged there that his proposal "[had] been accepted by the methods analyst and
implemented by the Corporation [in] October 1980," and that the same "ultimately and
finally solved the problem of the Corporation in the production of Beer Grande." Private
respondent thus claimed entitlement to a cash prize of P60,000.00 (the maximum award
per proposal offered under the Innovation Program) and attorney's fees.
In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation alleged that
private respondent had no cause of action. It denied ever having approved or adopted
Mr. Vega's proposal as part of the Corporation's brewing procedure in the production of
San Miguel Beer Grande. Among other things, petitioner stated that Mr. Vega's proposal
was tumed down by the company "for lack of originality" and that the same, "even if
implemented [could not] achieve the desired result." Petitioner further alleged that the
Labor Arbiter had no jurisdiction, Mr. Vega having improperly bypassed the grievance
machinery procedure prescribed under a then existing collective bargaining agreement
between management and employees, and available administrative remedies provided
under the rules of the Innovation Program. A counterclaim for moral and exemplary
damages, attorney's fees, and litigation expenses closed out petitioner's pleading.
In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money claim of
complainant Vega in this case is "not a necessary incident of his employment" and that
said claim is not among those mentioned in Article 217 of the Labor Code, dismissed the
complaint for lack of jurisdiction. However, in a gesture of "compassion and to show the
Page 324 of 497

government's concern for the workingman," the Labor Arbiter also directed petitioner to
pay Mr. Vega the sum of P2,000.00 as "financial assistance."
The Labor Arbiter's order was subsequently appealed by both parties, private respondent
Vega assailing the dismissal of his complaint for lack of jurisdiction and petitioner
Corporation questioning the propriety of the award of "financial assistance" to Mr. Vega.
Acting on the appeals, the public respondent National Labor Relations Commission, on 4
September 1987, rendered a Decision, 5 the dispositive portion of which reads:
WHEREFORE, the appealed Order is hereby set aside and another udgment
entered, order the respondent to pay the complainant the amount of
P60,000.00 as explained above.
SO ORDERED.
In the present Petition for certiorari filed on 4 December 1987, petitioner Corporation,
invoking Article 217 of the Labor Code, seeks to annul the Decision of public respondent
Commission in Case No. RAB-VII-01 70-83 upon the ground that the Labor Arbiter and the
Commission have no jurisdiction over the subject matter of the case.
The jurisdiction of Labor Arbiters and the National Labor Relations Commission is
outlined in Article 217 of the Labor Code, as last amended by Batas Pambansa Blg. 227
which took effect on 1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the commission. (a) The Labor
Arbiters shall have theoriginal and exclusive jurisdiction to hear and decide
within thirty (30) working days after submission of the case by the parties
for decision, the following cases involving are workers, whether agricultural
or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work
and other terms and conditions of employment;
3. All money claims of workers, including those based on nonpayment or underpayment of wages, overtime compensation,
separation pay and other benefits provided by law or
appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity
benefits;
4. Cases involving household services; and

Page 325 of 497

5. Cases arising from any violation of Article 265 of this; Code,

including questions involving the legality of strikes and
lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters. (Emphasis supplied)
While paragraph 3 above refers to "all money claims of workers," it is not necessary to
suppose that the entire universe of money claims that might be asserted by workers
against their employers has been absorbed into the original and exclusive jurisdiction of
Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but
rather within the context formed by paragraph 1 related to unfair labor practices),
paragraph 2 (relating to claims concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a particular species of employeremployee relations), and paragraph 5 (relating to certain activities prohibited to
employees or to employers).<re||an1w> It is evident that there is a unifying
element which runs through paragraphs 1 to 5 and that is, that they all refer to cases or
disputes arising out of or in connection with an employer-employee relationship. This is,
in other words, a situation where the rule of noscitur a sociis may be usefully invoked in
clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the Labor
Code, as amended. We reach the above conclusion from an examination of the terms
themselves of Article 217, as last amended by B.P. Blg. 227, and even though earlier
versions of Article 217 of the Labor Code expressly brought within the jurisdiction of the
Labor Arbiters and the NLRC "cases arising from employer employee relations," 6 which
clause was not expressly carried over, in printer's ink, in Article 217 as it exists today. For
it cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall
within the general jurisdiction of the regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and lodged with
Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the
money claims of workers" referred to in paragraph 3 of Article 217 embraces money
claims which arise out of or in connection with the employer-employee relationship, or
some aspect or incident of such relationship. Put a little differently, that money claims of
workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are
those money claims which have some reasonable causal connection with the employeremployee relationship.
Applying the foregoing reading to the present case, we note that petitioner's Innovation
Program is an employee incentive scheme offered and open only to employees of
petitioner Corporation, more specifically to employees below the rank of manager.
Without the existing employer-employee relationship between the parties here, there
would have been no occasion to consider the petitioner's Innovation Program or the
submission by Mr. Vega of his proposal concerning beer grande; without that relationship,
private respondent Vega's suit against petitioner Corporation would never have arisen.
Page 326 of 497

The money claim of private respondent Vega in this case, therefore, arose out of or in
connection with his employment relationship with petitioner.
The next issue that must logically be confronted is whether the fact that the money
claim of private respondent Vega arose out of or in connection with his employment
relation" with petitioner Corporation, is enough to bring such money claim within the
original and exclusive jurisdiction of Labor Arbiters.
In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation engaged in the
sale and repair of motor vehicles, while private respondent was the sales Manager of
petitioner. Petitioner had sued private respondent for non-payment of accounts which
had arisen from private respondent's own purchases of vehicles and parts, repair jobs on
cars personally owned by him, and cash advances from the corporation. At the pre-trial
in the lower court, private respondent raised the question of lack of jurisdiction of the
court, stating that because petitioner's complaint arose out of the employer-employee
relationship, it fell outside the jurisdiction of the court and consequently should be
dismissed. Respondent Judge did dismiss the case, holding that the sum of money and
damages sued for by the employer arose from the employer-employee relationship and,
hence, fell within the jurisdiction of the Labor Arbiter and the NLRC. In reversing the
order of dismissal and requiring respondent Judge to take cognizance of the case below,
this Court, speaking through Mme. Justice Melencio-Herrera, said:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under
paragraph 5 of Article 217 of the Labor Code had jurisdiction over" all other
cases arising from employer-employee relation, unless, expressly excluded
by this Code." Even then, the principle followed by this Court was that,
although a controversy is between an employer and an employee, the
Labor Arbiters have no jurisdiction if the Labor Code is not
involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, 604, in negating
jurisdiction of the Labor Arbiter, although the parties were an employer and
two employees, Mr. Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor
Code has any relevance to the reliefs sought by the plaintiffs.
For if the Labor Code has no relevance, any discussion
concerning the statutes amending it and whether or not they
have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not
alleged any unfair labor practice. Theirs is a simple action for
damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is the
Civil Code and not the Labor Code. It results that the orders
under review are based on a wrong premise.
Page 327 of 497

And in Singapore Airlines Limited v. Pao, 122 SCRA 671, 677, the following
was said:
Stated differently, petitioner seeks protection under the civil
laws and claims no benefits under the Labor Code. The
primary relief sought is for liquidated damages for breach of a
contractual obligation. The other items demanded are not
labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed
are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT,
the cost of repair jobs made on his personal cars, and for the purchase price
of vehicles and parts sold to him. Those accounts have no relevance to the
Labor Code. The cause of action was one under the civil laws, and it does
not breach any provision of the Labor Code or the contract of employment
of DEFENDANT. Hence the civil courts, not the Labor Arbiters and the NLRC
should have jurisdiction. 8
It seems worth noting that Medina v. Castro-Bartolome, referred to in the above excerpt,
involved a claim for damages by two (2) employees against the employer company and
the General Manager thereof, arising from the use of slanderous language on the
occasion when the General Manager fired the two (2) employees (the Plant General
Manager and the Plant Comptroller). The Court treated the claim for damages as "a
simple action for damages for tortious acts" allegedly committed by private respondents,
clearly if impliedly suggesting that the claim for damages did not necessarily arise out of
or in connection with the employer-employee relationship.Singapore Airlines Limited v.
Pao, also cited in Molave, involved a claim for liquidated damages not by a worker but
by the employer company, unlike Medina. The important principle that runs through
these three (3) cases is that where the claim to the principal relief sought 9 is to be
resolved not by reference to the Labor Code or other labor relations statute or a
collective bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the Labor Arbiter and the
NLRC. In such situations, resolution of the dispute requires expertise, not in labor
management relations nor in wage structures and other terms and conditions of
employment, but rather in the application of the general civil law. Clearly, such claims
fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiters and
the NLRC and the rationale for granting jurisdiction over such claims to these agencies
disappears.
Applying the foregoing to the instant case, the Court notes that the SMC Innovation
Program was essentially an invitation from petitioner Corporation to its employees to
Page 328 of 497

submit innovation proposals, and that petitioner Corporation undertook to grant cash
awards to employees who accept such invitation and whose innovation suggestions, in
the judgment of the Corporation's officials, satisfied the standards and requirements of
the Innovation Program 10 and which, therefore, could be translated into some
substantial benefit to the Corporation. Such undertaking, though unilateral in origin,
could nonetheless ripen into an enforceable contractual (facio ut des) 11 obligation on the
part of petitioner Corporation under certain circumstances. Thus, whether or not an
enforceable contract, albeit implied arid innominate, had arisen between petitioner
Corporation and private respondent Vega in the circumstances of this case, and if so,
whether or not it had been breached, are preeminently legal questions, questions not to
be resolved by referring to labor legislation and having nothing to do with wages or other
terms and conditions of employment, but rather having recourse to our law on contracts.
WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4 September 1987
of public respondent National Labor Relations Commission is SET ASIDE and the
complaint in Case No. RAB-VII-0170-83 is hereby DISMISSED, without prejudice to the
right of private respondent Vega to file a suit before the proper court, if he so desires. No
pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-47739 June 22, 1983
SINGAPORE AIRLINES LIMITED, petitioner,
vs.
HON. ERNANI CRUZ PAO as Presiding Judge of Branch XVIII, Court of First
Instance of Rizal, CARLOS E. CRUZ and B. E. VILLANUEVA, respondents.
Bengzon, Zarraga, Narciso, Cudala Pecson, Azucena & Bengzon Law Offices for
petitioner.
Celso P. Mariano Law Office for private respondent Carlos Cruz.
Romeo Comia for private respondent B. E. Villanueva.

MELENCIO-HERRERA, J.:
Page 329 of 497

On the basic issue of lack of jurisdiction, petitioner company has elevated to us for
review the two Orders of respondent Judge dated October 28, 1977 and January 24, 1978
dismissing petitioner's complaint for damages in the first Order, and denying its Motion
for Reconsideration in the second.
On August 21, 1974, private respondent Carlos E. Cruz was offered employment by
petitioner as Engineer Officer with the opportunity to undergo a B-707 I conversion
training course," which he accepted on August 30, 1974. An express stipulation in the
letter-offer read:
3. BONDING. As you win be provided with conversion training you are
required to enter into a bond with SIA for a period of 5 years. For this
purpose, please inform me of the names and addresses of your sureties as
soon as possible.
Twenty six days thereafter, or on October 26, 1974, Cruz entered into an "Agreement for
a Course of Conversion Training at the Expense of Singapore Airlines Limited" wherein it
was stipulated among others:
4. The Engineer Officer shall agree to remain in the service of the Company
for a period of five years from the date of commencement of such aforesaid
conversion training if so required by the Company.
5. In the event of the Engineer Officer:
1. Leaving the service of the company during the
period of five years referred to in Clause 4 above,
or
2. Being dismissed or having his services
terminated by the company for misconduct,
the Engineer Officer and the Sureties hereby bind themselves jointly and
severally to pay to the Company as liquidated damages such sums of
money as are set out hereunder:
(a) during the first year of the period of five years referred to in
Clause 4
above ...................................................................................... $
67,460/
(b) during the second year of the period of five years referred
to in Clause 4

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above ................................................................................. $
53,968/
(c) during the third year of the period of five years referred to
in Clause 4
above ...................................................................................... $
40,476/
(d) during the fourth year of the period of five years referred to
in Clause 4
above .................................................................................. $
26,984/
(e) during the fifth year of the period of five years referred to in
Clause 4
above .......................................................................................
$ 13,492/
6. The provisions of Clause 5 above shall not apply in a case where an
Engineer Officer has his training terminated by the Company for reasons
other than misconduct or where, subsequent to the completion of training,
he 1. loses his license to operate as a Flight Engineer due to
medical reasons which can in no way be attributable to any act
or omission on his part;
2. is unable to continue in employment with the Company
because his employment pass or work permit, as the case may
be, has been withdrawn or has not been renewed due to no act
or omission on his part;
3. has his services terminated by the Company as a result of
being replaced by a national Flight Engineer;
4. has to leave the service of the Company on valid
compassionate grounds stated to and accepted by the
Company in writing. 1
Cruz signed the Agreement with his co-respondent, B. E. Villanueva, as surety.
Claiming that Cruz had applied for "leave without pay" and had gone on leave without
approval of the application during the second year of the Period of five years, petitioner
filed suit for damages against Cruz and his surety, Villanueva, for violation of the terms
Page 331 of 497

and conditions of the aforesaid Agreement. Petitioner sought the payment of the
following sums: liquidated damages of $53,968.00 or its equivalent of P161,904.00 (lst
cause of action); $883.91 or about P2,651.73 as overpayment in salary (2nd clause of
action); $61.00 or about P183.00 for cost of uniforms and accessories supplied by the
company plus $230.00, or roughly P690.00, for the cost of a flight manual (3rd cause of
action); and $1,533.71, or approximately P4,601.13 corresponding to the vacation leave
he had availed of but to which he was no longer entitled (4th cause Of action);
exemplary damages attorney's fees; and costs.
In his Answer, Cruz denied any breach of contract contending that at no time had he
been required by petitioner to agree to a straight service of five years under Clause 4 of
the Agreement (supra) and that he left the service on "valid compassionate grounds
stated to and accepted by the company so that no damages may be awarded against
him. And because of petitioner-plaintiff's alleged ungrounded causes of action, Cruz
counterclaimed for attorney's fees of P7,000.00.
The surety, Villanueva, in his own Answer, contended that his undertaking was merely
that of one of two guarantors not that of surety and claimed the benefit of excussion, if
at an found liable. He then filed a cross-claim against Cruz for damages and for whatever
amount he may be held liable to petitioner-plaintiff, and a counterclaim for actual,
exemplary, moral and other damages plus attorney's fees and litigation expenses
against petitioner-plaintiff.
The issue of jurisdiction having been raised at the pre-trial conference, the parties were
directed to submit their respective memoranda on that question, which they complied
with in due time. On October 28, 1977, respondent Judge issued the assailed Order
dismissing the complaint, counterclaim and cross-claim for lack of jurisdiction stating.
2. The present case therefore involves a money claim arising from an
employer-employee relation or at the very least a case arising from
employer-employee relations, which under Art. 216 of the Labor Code is
vested exclusively with the Labor Arbiters of the National Labor Relations
Commission. 2
Reconsideration thereof having been denied in the Order of January 24, 1978, petitioner
availed of the present recourse. We gave due course.
We are here confronted with the issue of whether or not this case is properly cognizable
by Courts of justice or by the Labor Arbiters of the National Labor Relations Commission.
Upon the facts and issues involved, jurisdiction over the present controversy must be
held to belong to the civil Courts. While seemingly petitioner's claim for damages arises
from employer-employee relations, and the latest amendment to Article 217 of the Labor
Code under PD No. 1691 and BP Blg. 130 provides that all other claims arising from
Page 332 of 497

employer-employee relationship are cognizable by Labor Arbiters, 3 in essence,

petitioner's claim for damages is grounded on the "wanton failure and refusal" without
just cause of private respondent Cruz to report for duty despite repeated notices served
upon him of the disapproval of his application for leave of absence without pay. This,
coupled with the further averment that Cruz "maliciously and with bad faith" violated the
terms and conditions of the conversion training course agreement to the damage of
petitioner removes the present controversy from the coverage of the Labor Code and
brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se by private
respondent Cruz of his job as the latter was not required in the Complaint to report back
to work but on the manner and consequent effects of such abandonment of work
translated in terms of the damages which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale
Veneer & Plywood, Inc.4 the pertinent portion of which reads:
Although the acts complied of seemingly appear to constitute "matter
involving employee employer" relations as Quisaba's dismiss was the
severance of a pre-existing employee-employer relations, his complaint is
grounded not on his dismissal per se, as in fact he does not ask for
reinstatement or backwages, but on the manner of his dismiss and the
consequent effects of such
Civil law consists of that 'mass of precepts that determine or regulate the
relations ... that exist between members of a society for the protection of
private interest (1 Sanchez Roman 3).
The "right" of the respondents to dismiss Quisaba should not be confused
with the manner in which the right was exercised and the effects flowing
therefrom. If the dismiss was done anti-socially or oppressively, as the
complaint alleges, then the respondents violated article 1701 of the Civil
Code which prohibits acts of oppression by either capital or labor against
the other, and article 21, which makers a person liable for damages if he
wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy, the sanction for which, by way of
moral damages, is provided in article 2219, No. 10 (Cf, Philippine Refining
Co. vs. Garcia, L-21962, Sept. 27, 1966, 18 SCRA 107).
Stated differently, petitioner seeks protection under the civil laws and claims no benefits
under the labor Code. The primary relief sought is for liquidated damages for breach of a
contractual obligation. The other items demanded are not labor benefits demanded by
workers generally taken cognizance of in labor disputes, such as payment of wages,

Page 333 of 497

overtime compensation or separation pay. The items claimed are the natural
consequences flowing from breach of an obligation, intrinsically a civil dispute.
Additionally, there is a secondary issue involved that is outside the pale of competence
of Labor Arbiters. Is the liability of Villanueva one of suretyship or one of guaranty?
Unquestionably, this question is beyond the field of specialization of Labor Arbiters.
WHEREFORE, the assailed Orders of respondent Judge are hereby set aside. The records
are hereby ordered remanded to the proper Branch of the Regional Trial Court of Quezon
City, to which this case belongs, for further proceedings. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-38088 August 30, 1974
JOVITO N. QUISABA, petitioner,
vs.
STA. INES-MELALE VENEER & PLYWOOD, INC., et al., respondents.
Pedro F. Alcantara Jr. for petitioner.
Armando Dominguez for respondents.

CASTRO, J.:p
In this special civil action for certiorari, 1 the sole issue of law posed for resolution is
whether a complaint for moral damages, exemplary damages, termination pay and
attorney's fees, arising from an employer's constructive dismissal of an employee, is
exclusively cognizable by the regular courts of justice or by the National Labor Relations
Commission created by Presidential Decree No. 21, promulgated on October 14, 1972. 2
On February 5, 1973 the petitioner Jovito N. Quisaba filed with the Court of First Instance
of Davao a complaint for moral damages, exemplary damages, termination pay and
attorney's fees against the Sta. Ines-Melale Veneer & Plywood, Inc. and its vice-president
Robert Hyde. The complaint avers that Quisaba, for eighteen years prior to his dismissal,
was in the employ of the defendant corporation; that on January 11, 1973 the
Page 334 of 497

respondent Robert Hyde instructed him to purchase logs for the company's plant; that he
refused on the ground that the work of purchasing logs is inconsistent with his position
as internal auditor; that on the following day Hyde informed him of his temporary relief
as internal auditor so that he could carry out immediately the instructions thus given,
and he was warned that his failure to comply would be considered a ground for his
dismissal; that on January 16, 1973 he responded with a plea for fairness and mercy as
he would be without a job during an economic crisis; that he was demoted from a
position of dignity to a servile and menial job; that the defendants did not reconsider
their "clever and subterfugial dismissal" of him which for all purposes constituted a
"constructive discharge;" and that because of the said acts of the defendants, he
suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings,
moral shock and social humiliate on. The complaint does not pray for reinstatement or
payment of backwages.
After the defendants filed their answer, they moved to dismiss the complaint on the
ground of lack of jurisdiction of the Davao Court of First Instance, asserting that the
proper forum is the National Labor Relations Commission established by Presidential
Decree No. 21. Quisaba opposed the motion and at the same time informed the court
that in response to a "consults" presented by his counsel, the NLRC's authorized
representative in Davao City opined as follows:
In response to your query dated September 12, 1973, inquiring as to
whether or not the National Labor Relations Commission has jurisdiction
over claims or suits for damages, such as moral, exemplary and other
related damages including attorney's fees, arising out of employeeemployer relationship, we regret to inform you that the National Labor
Relations Commission has no such power.
The Commission's disclaimer of jurisdiction notwithstanding, the court a quo, in an order
of September 18, 1973, granted the motion to dismiss on the ground that the complaint
basically involves an employee-employer relation.
Hence the present recourse.
The jurisdiction of the National Labor Relations Commission is defined by section 2 of
Presidential Decree No. 21 which reads:
SEC. 2. The Commission shall have original and exclusive jurisdiction over
the following.
(1) All matters involving employee employer relations including all disputes
and grievances which may otherwise lead to strikes and lockouts under
Republic Act No. 875;

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(2) All strikes overtaken by Proclamation No. 1081; and

(3) All pending cases in the Bureau of Labor Relations.
Although the acts complained of seemingly appear to constitute "matters involving
employee-employer relations" as Quisaba's dismissal was the severance of a pre-existing
employee-employer relation, his complaint is grounded not on his dismissal per se as in
fact he does not ask for reinstatement or backwages, but on themanner of his dismissal
and the consequent effects of such dismissal.
Civil law consists of that "mass of precepts that determine or regulate the relations ...
that exist between members of a society for the protection of private interests. 3
The "right" of the respondents to dismiss Quisaba should not be confused with
the manner in which the right was exercised and the effects flowing therefrom. If the
dismissal was done anti-socially or oppressively, as the complaint alleges, then the
respondents violated article 1701 of the Civil Code which prohibits acts of oppression by
either capital or labor against the other, and article 21, which makes a person liable for
damages if he wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy, the sanction for which, by way of moral damages,
is provided in article 2219, no. 10. 4
Art. 2219. Moral damages may be recovered in the following and analogous
cages:
xxx xxx xxx
(10) Acts and actions referred to in articles 21, ....
The case at bar is intrinsically concerned with a civil (not a labor)
dispute; 5 it has to do with an alleged violation of Quisaba's rights as a
member of society, and does not involve an existing employee-employer
relation within the meaning of section 2(1) of Presidential Decree No. 21.
The complaint is thus properly and exclusively cognizable by the regular
courts of justice, not by the National Labor Relations Commission.
ACCORDINGLY, the order of September 18, 1973 is set aside, and this case is hereby
ordered remanded to the court a quo for further proceedings in accordance with law.
Costs against the private respondents.
Republic of the Philippines
SUPREME COURT
Manila

Page 336 of 497

SECOND DIVISION
G.R. No. 162419

July 10, 2007

PAUL V. SANTIAGO, petitioner,

vs.
CF SHARP CREW MANAGEMENT, INC., respondent.
DECISION
TINGA, J.:
At the heart of this case involving a contract between a seafarer, on one hand, and the
manning agent and the foreign principal, on the other, is this erstwhile unsettled legal
quandary: whether the seafarer, who was prevented from leaving the port of Manila and
refused deployment without valid reason but whose POEA-approved employment
contract provides that the employer-employee relationship shall commence only upon
the seafarers actual departure from the port in the point of hire, is entitled to relief?
This treats of the petition for review filed by Paul V. Santiago (petitioner) assailing the
Decision and Resolution of the Court of Appeals dated 16 October 2003 and 19 February
2004, respectively, in CA-G.R. SP No. 68404.1
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent)
for about five (5) years.2On 3 February 1998, petitioner signed a new contract of
employment with respondent, with the duration of nine (9) months. He was assured of a
monthly salary of US$515.00, overtime pay and other benefits. The following day or on 4
February 1998, the contract was approved by the Philippine Overseas Employment
Administration (POEA). Petitioner was to be deployed on board the "MSV Seaspread"
which was scheduled to leave the port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondents
Vice President, sent a facsimile message to the captain of "MSV Seaspread," which reads:
I received a phone call today from the wife of Paul Santiago in Masbate asking me
not to send her husband to MSV Seaspread anymore. Other callers who did not
reveal their identity gave me some feedbacks that Paul Santiago this time if
allowed to depart will jump ship in Canada like his brother Christopher Santiago,
O/S who jumped ship from the C.S. Nexus in Kita-kyushu, Japan last December,
1997.
We do not want this to happen again and have the vessel penalized like the C.S.
Nexus in Japan.

Page 337 of 497

Forewarned is forearmed like his brother when his brother when he was applying
he behaved like a Saint but in his heart he was a serpent. If you agree with me
then we will send his replacement.
Kindly advise.3
To this message the captain of "MSV Seaspread" replied:
Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for
him to return to Seaspread.4
On 9 February 1998, petitioner was thus told that he would not be leaving for Canada
anymore, but he was reassured that he might be considered for deployment at some
future date.
Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees against
respondent and its foreign principal, Cable and Wireless (Marine) Ltd. 5 The case was
raffled to Labor Arbiter Teresita Castillon-Lora, who ruled that the employment contract
remained valid but had not commenced since petitioner was not deployed. According to
her, respondent violated the rules and regulations governing overseas employment when
it did not deploy petitioner, causing petitioner to suffer actual damages representing lost
salary income for nine (9) months and fixed overtime fee, all amounting to US$7, 209.00.
The labor arbiter held respondent liable. The dispositive portion of her Decision dated 29
January 1999 reads:
WHEREFORE, premises considered, respondent is hereby Ordered to pay
complainant actual damages in the amount of US$7,209.00 plus 10% attorney's
fees, payable in Philippine peso at the rate of exchange prevailing at the time of
payment.
All the other claims are hereby DISMISSED for lack of merit.
SO ORDERED.6
On appeal by respondent, the National Labor Relations Commission (NLRC) ruled that
there is no employer-employee relationship between petitioner and respondent because
under the Standard Terms and Conditions Governing the Employment of Filipino
Seafarers on Board Ocean Going Vessels (POEA Standard Contract), the employment
contract shall commence upon actual departure of the seafarer from the airport or
seaport at the point of hire and with a POEA-approved contract. In the absence of an
employer-employee relationship between the parties, the claims for illegal dismissal,
actual damages, and attorneys fees should be dismissed. 7 On the other hand, the NLRC

Page 338 of 497

found respondents decision not to deploy petitioner to be a valid exercise of its

management prerogative.8 The NLRC disposed of the appeal in this wise:
WHEREFORE, in the light of the foregoing, the assailed Decision dated January 29,
1999 is hereby AFFIRMED in so far as other claims are concerned and with
MODIFICATION by VACATING the award of actual damages and attorneys fees as
well as excluding Pacifico Fernandez as party respondent.
SO ORDERED.9
Petitioner moved for the reconsideration of the NLRCs Decision but his motion was
denied for lack of merit.10 He elevated the case to the Court of Appeals through a petition
for certiorari.
In its Decision11 dated 16 October 2003, the Court of Appeals noted that there is an
ambiguity in the NLRCs Decision when it affirmed with modification the labor arbiters
Decision, because by the very modification introduced by the Commission (vacating the
award of actual damages and attorneys fees), there is nothing more left in the labor
arbiters Decision to affirm.12
According to the appellate court, petitioner is not entitled to actual damages because
damages are not recoverable by a worker who was not deployed by his agency within
the period prescribed in
the POEA Rules.13 It agreed with the NLRCs finding that petitioners non-deployment was
a valid exercise of respondents management prerogative. 14 It added that since petitioner
had not departed from the Port of Manila, no employer-employee relationship between
the parties arose and any claim for damages against the so-called employer could have
no leg to stand on.15
Petitioners subsequent motion for reconsideration was denied on 19 February 2004. 16
The present petition is anchored on two grounds, to wit:
A. The Honorable Court of Appeals committed a serious error of law when it
ignored [S]ection 10 of Republic Act [R.A.] No. 8042 otherwise known as the
Migrant Workers Act of 1995 as well as Section 29 of the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going
Vessels (which is deemed incorporated under the petitioners POEA approved
Employment Contract) that the claims or disputes of the Overseas Filipino Worker
by virtue of a contract fall within the jurisdiction of the Labor Arbiter of the NLRC.

Page 339 of 497

B. The Honorable Court of Appeals committed a serious error when it disregarded

the required quantum of proof in labor cases, which is substantial evidence, thus a
total departure from established jurisprudence on the matter. 17
Petitioner maintains that respondent violated the Migrant Workers Act and the POEA
Rules when it failed to deploy him within thirty (30) calendar days without a valid reason.
In doing so, it had unilaterally and arbitrarily prevented the consummation of the POEAapproved contract. Since it prevented his deployment without valid basis, said
deployment being a condition to the consummation of the POEA contract, the contract is
deemed consummated, and therefore he should be awarded actual damages, consisting
of the stipulated salary and fixed overtime pay. 18 Petitioner adds that since the contract
is deemed consummated, he should be considered an employee for all intents and
purposes, and thus the labor arbiter and/or the NLRC has jurisdiction to take cognizance
of his claims.19
Petitioner additionally claims that he should be considered a regular employee, having
worked for five (5) years on board the same vessel owned by the same principal and
manned by the same local agent. He argues that respondents act of not deploying him
was a scheme designed to prevent him from attaining the status of a regular employee. 20
Petitioner submits that respondent had no valid and sufficient cause to abandon the
employment contract, as it merely relied upon alleged phone calls from his wife and
other unnamed callers in arriving at the conclusion that he would jump ship like his
brother. He points out that his wife had executed an affidavit 21 strongly denying having
called respondent, and that the other alleged callers did not even disclose their identities
to respondent.22Thus, it was error for the Court of Appeals to adopt the unfounded
conclusion of the NLRC, as the same was not based on substantial evidence. 23
On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award
petitioners monetary claims. His employment with respondent did not commence
because his deployment was withheld for a valid reason. Consequently, the labor arbiter
and/or the NLRC cannot entertain adjudication of petitioners case much less award
damages to him. The controversy involves a breach of contractual obligations and as
such is cognizable by civil courts.24 On another matter, respondent claims that the
second issue posed by petitioner involves a recalibration of facts which is outside the
jurisdiction of this Court.25
There is some merit in the petition.
There is no question that the parties entered into an employment contract on 3 February
1998, whereby petitioner was contracted by respondent to render services on board
"MSV Seaspread" for the consideration of US$515.00 per month for nine (9) months, plus
overtime pay. However, respondent failed to deploy petitioner from the port of Manila to
Canada. Considering that petitioner was not able to depart from the airport or seaport in
Page 340 of 497

the point of hire, the employment contract did not commence, and no employeremployee relationship was created between the parties. 26
However, a distinction must be made between the perfection of the employment
contract and the commencement of the employer-employee relationship. The perfection
of the contract, which in this case coincided with the date of execution thereof, occurred
when petitioner and respondent agreed on the object and the cause, as well as the rest
of the terms and conditions therein. The commencement of the employer-employee
relationship, as earlier discussed, would have taken place had petitioner been actually
deployed from the point of hire. Thus, even before the start of any employer-employee
relationship, contemporaneous with the perfection of the employment contract was the
birth of certain rights and obligations, the breach of which may give rise to a cause of
action against the erring party. Thus, if the reverse had happened, that is the seafarer
failed or refused to be deployed as agreed upon, he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized and respected, neither
the manning agent nor the employer can simply prevent a seafarer from being deployed
without a valid reason.
Respondents act of preventing petitioner from departing the port of Manila and boarding
"MSV Seaspread" constitutes a breach of contract, giving rise to petitioners cause of
action. Respondent unilaterally and unreasonably reneged on its obligation to deploy
petitioner and must therefore answer for the actual damages he suffered.
We take exception to the Court of Appeals conclusion that damages are not recoverable
by a worker who was not deployed by his agency. The fact that the POEA Rules 27 are
silent as to the payment of damages to the affected seafarer does not mean that the
seafarer is precluded from claiming the same. The sanctions provided for nondeployment do not end with the suspension or cancellation of license or fine and the
return of all documents at no cost to the worker. They do not forfend a seafarer from
instituting an action for damages against the employer or agency which has failed to
deploy him.
The POEA Rules only provide sanctions which the POEA can impose on erring agencies. It
does not provide for damages and money claims recoverable by aggrieved employees
because it is not the POEA, but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and
respondent, the Court rules that the NLRC has jurisdiction over petitioners complaint.
The jurisdiction of labor arbiters is not limited to claims arising from employer-employee
relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
Page 341 of 497

original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an employeremployee relationship or by virtue of any law or contract involving Filipino workers
for overseas deployment including claims for actual, moral, exemplary and other
forms of damages. x x x [Emphasis supplied]
Since the present petition involves the employment contract entered into by petitioner
for overseas employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation
only for such pecuniary loss suffered by him as he has duly proved. Respondent is thus
liable to pay petitioner actual damages in the form of the loss of nine (9) months worth
of salary as provided in the contract. He is not, however, entitled to overtime pay. While
the contract indicated a fixed overtime pay, it is not a guarantee that he would receive
said amount regardless of whether or not he rendered overtime work. Even though
petitioner was "prevented without valid reason from rendering regular much less
overtime service,"28 the fact remains that there is no certainty that petitioner will
perform overtime work had he been allowed to board the vessel. The amount of
US$286.00 stipulated in the contract will be paid only if and when the employee
rendered overtime work. This has been the tenor of our rulings in the case of StoltNielsen Marine Services (Phils.), Inc. v. National Labor Relations Commission 29 where we
discussed the matter in this light:
The contract provision means that the fixed overtime pay of 30% would be the
basis for computing the overtime pay if and when overtime work would be
rendered. Simply stated, the rendition of overtime work and the submission of
sufficient proof that said work was actually performed are conditions to be
satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the entitlement to such benefit
must first be established. Realistically speaking, a seaman, by the very nature of
his job, stays on board a ship or vessel beyond the regular eight-hour work
schedule. For the employer to give him overtime pay for the extra hours when he
might be sleeping or attending to his personal chores or even just lulling away his
time would be extremely unfair and unreasonable. 30
The Court also holds that petitioner is entitled to attorneys fees in the concept of
damages and expenses of litigation. Attorney's fees are recoverable when the
defendant's act or omission has compelled the plaintiff to incur expenses to protect his
interest.31 We note that respondents basis for not deploying petitioner is the belief that
he will jump ship just like his brother, a mere suspicion that is based on alleged phone
calls of several persons whose identities were not even confirmed. Time and again, this
Court has upheld management prerogatives so long as they are exercised in good faith
for the advancement of the employers interest and not for the purpose of defeating or
Page 342 of 497

circumventing the rights of the employees under special laws or under valid
agreements.32Respondents failure to deploy petitioner is unfounded and unreasonable,
forcing petitioner to institute the suit below. The award of attorneys fees is thus
warranted.
However, moral damages cannot be awarded in this case. While respondents failure to
deploy petitioner seems baseless and unreasonable, we cannot qualify such action as
being tainted with bad faith, or done deliberately to defeat petitioners rights, as to
justify the award of moral damages. At most, respondent was being overzealous in
protecting its interest when it became too hasty in making its conclusion that petitioner
will jump ship like his brother.
We likewise do not see respondents failure to deploy petitioner as an act designed to
prevent the latter from attaining the status of a regular employee. Even if petitioner was
able to depart the port of Manila, he still cannot be considered a regular employee,
regardless of his previous contracts of employment with respondent. InMillares v.
National Labor Relations Commission,33 the Court ruled that seafarers are considered
contractual employees and cannot be considered as regular employees under the Labor
Code. Their employment is governed by the contracts they sign every time they are
rehired and their employment is terminated when the contract expires. The exigencies of
their work necessitates that they be employed on a contractual basis. 34
WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003 and the
Resolution dated 19 February 2004 of the Court of Appeals are REVERSED and SET
ASIDE. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated 29 January 1999 is
REINSTATED with the MODIFICATION that respondent CF Sharp Crew Management, Inc. is
ordered to pay actual or compensatory damages in the amount of US$4,635.00
representing salary for nine (9) months as stated in the contract, and attorneys fees at
the reasonable rate of 10% of the recoverable amount.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 152396

November 20, 2007

EX-BATAAN VETERANS SECURITY AGENCY, INC., petitioner,

vs.
THE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA, REGIONAL DIRECTOR
BRENDA A. VILLAFUERTE, ALEXANDER POCDING, FIDEL BALANGAY, BUAGEN
Page 343 of 497

CLYDE, DENNIS EPI, DAVID MENDOZA, JR., GABRIEL TAMULONG, ANTON PEDRO,
FRANCISCO PINEDA, GASTON DUYAO, HULLARUB, NOLI DIONEDA, ATONG
CENON, JR., TOMMY BAUCAS, WILLIAM PAPSONGAY, RICKY DORIA, GEOFREY
MINO, ORLANDO RILLASE, SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO, and P.
C. DINTAN,respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 with prayer for the issuance of a temporary restraining order
or writ of preliminary injunction of the 29 May 2001 Decision 2 and the 26 February 2002
Resolution3 of the Court of Appeals in CA-G.R. SP No. 57653. The 29 May 2001 Decision
of the Court of Appeals affirmed the 4 October 1999 Order of the Secretary of Labor in
OS-LS-04-4-097-280. The 26 February 2002 Resolution denied the motion for
reconsideration.
The Facts
Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing
security services while private respondents are EBVSAI's employees assigned to the
National Power Corporation at Ambuklao Hydro Electric Plant, Bokod, Benguet (Ambuklao
Plant).
On 20 February 1996, private respondents led by Alexander Pocding (Pocding) instituted
a complaint4 for underpayment of wages against EBVSAI before the Regional Office of
the Department of Labor and Employment (DOLE).
On 7 March 1996, the Regional Office conducted a complaint inspection at the Ambuklao
Plant where the following violations were noted: (1) non-presentation of records; (2) nonpayment of holiday pay; (3) non-payment of rest day premium; (4) underpayment of
night shift differential pay; (5) non-payment of service incentive leave; (6) underpayment
of 13th month pay; (7) no registration; (8) no annual medical report; (9) no annual work
accidental report; (10) no safety committee; and (11) no trained first aider. 5 On the same
date, the Regional Office issued a notice of hearing 6 requiring EBVSAI and private
respondents to attend the hearing on 22 March 1996. Other hearings were set for 8 May
1996, 27 May 1996 and 10 June 1996.
On 19 August 1996, the Director of the Regional Office (Regional Director) issued an
Order, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent EX-BATAAN VETERANS
SECURITY AGENCY is herebyORDERED to pay the computed deficiencies owing
to the affected employees in the total amount of SEVEN HUNDRED SIXTY
THREE THOUSAND NINE HUNDRED NINETY SEVEN PESOS and
85/PESOS within ten (10) calendar days upon receipt hereof. Otherwise, a Writ of
Execution shall be issued to enforce compliance of this Order.
Page 344 of 497

xxxx
SO ORDERED.7
EBVSAI filed a motion for reconsideration8 and alleged that the Regional Director does
not have jurisdiction over the subject matter of the case because the money claim of
each private respondent exceeded P5,000. EBVSAI pointed out that the Regional Director
should have endorsed the case to the Labor Arbiter.
In a supplemental motion for reconsideration,9 EBVSAI questioned the Regional Director's
basis for the computation of the deficiencies due to each private respondent.
In an Order10 dated 16 January 1997, the Regional Director denied EBVSAI's motion for
reconsideration and supplemental motion for reconsideration. The Regional Director
stated that, pursuant to Republic Act No. 7730 (RA 7730), 11 the limitations under Articles
12912 and 217(6)13 of the Labor Code no longer apply to the Secretary of Labor's visitorial
and enforcement powers under Article 128(b). 14 The Secretary of Labor or his duly
authorized representatives are now empowered to hear and decide, in a summary
proceeding, any matter involving the recovery of any amount of wages and other
monetary claims arising out of employer-employee relations at the time of the
inspection.
EBVSAI appealed to the Secretary of Labor.
The Ruling of the Secretary of Labor
In an Order15 dated 4 October 1999, the Secretary of Labor affirmed with modification
the Regional Director's 19 August 1996 Order. The Secretary of Labor ordered that
the P1,000 received by private respondents Romeo Alejo, Atong Cenon, Jr., Geofrey Mino,
Dennis Epi, and Ricky Doria be deducted from their respective claims. The Secretary of
Labor ruled that, pursuant to RA 7730, the Court's decision in the Servando16 case is no
longer controlling insofar as the restrictive effect of Article 129 on the visitorial and
enforcement power of the Secretary of Labor is concerned.
The Secretary of Labor also stated that there was no denial of due process because
EBVSAI was accorded several opportunities to present its side but EBVSAI failed to
present any evidence to controvert the findings of the Regional Director. Moreover, the
Secretary of Labor doubted the veracity and authenticity of EBVSAI's documentary
evidence. The Secretary of Labor noted that these documents were not presented at the
initial stage of the hearing and that the payroll documents did not indicate the periods
covered by EBVSAI's alleged payments.
EVBSAI filed a motion for reconsideration which was denied by the Secretary of Labor in
his 3 January 2000 Order.17
EBVSAI filed a petition for certiorari before the Court of Appeals.
The Ruling of the Court of Appeals

Page 345 of 497

In its 29 May 2001 Decision, the Court of Appeals dismissed the petition and affirmed the
Secretary of Labor's decision. The Court of Appeals adopted the Secretary of Labor's
ruling that RA 7730 repealed the jurisdictional limitation imposed by Article 129 on
Article 128 of the Labor Code. The Court of Appeals also agreed with the Secretary of
Labor's finding that EBVSAI was accorded due process.
The Court of Appeals also denied EBVSAI's motion for reconsideration in its 26 February
2002 Resolution.
Hence, this petition.
The Issues
This case raises the following issues:
1. Whether the Secretary of Labor or his duly authorized representatives acquired
jurisdiction over EBVSAI; and
2. Whether the Secretary of Labor or his duly authorized representatives have
jurisdiction over the money claims of private respondents which exceed P5,000.
The Ruling of the Court
The petition has no merit.
On the Regional Director's Jurisdiction over EBVSAI
EBVSAI claims that the Regional Director did not acquire jurisdiction over EBVSAI
because he failed to comply with Section 11, Rule 14 of the 1997 Rules of Civil
Procedure.18 EBVSAI points out that the notice of hearing was served at the Ambuklao
Plant, not at EBVSAI's main office in Makati, and that it was addressed to Leonardo
Castro, Jr., EBVSAI's Vice-President.
The Rules on the Disposition of Labor Standards Cases in the Regional Offices 19 (rules)
specifically state that notices and copies of orders shall be served on the parties or their
duly authorized representatives at their last known address or, if they are represented by
counsel, through the latter.20 The rules shall be liberally construed21 and only in the
absence of any applicable provision will the Rules of Court apply in a suppletory
character.22
In this case, EBVSAI does not deny having received the notices of hearing. In fact, on 29
March and 13 June 1996, Danilo Burgos and Edwina Manao, detachment commander and
bookkeeper of EBVSAI, respectively, appeared before the Regional Director. They claimed
that the 22 March 1996 notice of hearing was received late and manifested that the
notices should be sent to the Manila office. Thereafter, the notices of hearing were sent
to the Manila office. They were also informed of EBVSAI's violations and were asked to
present the employment records of the private respondents for verification. They were,
moreover, asked to submit, within 10 days, proof of compliance or their position paper.
The Regional Director validly acquired jurisdiction over EBVSAI. EBVSAI can no longer
Page 346 of 497

question the jurisdiction of the Regional Director after receiving the notices of hearing
and after appearing before the Regional Director.
On the Regional Director's Jurisdiction over the Money Claims
EBVSAI maintains that under Articles 129 and 217(6) of the Labor Code, the Labor
Arbiter, not the Regional Director, has exclusive and original jurisdiction over the case
because the individual monetary claim of private respondents exceeds P5,000. EBVSAI
also argues that the case falls under the exception clause in Article 128(b) of the Labor
Code. EBVSAI asserts that the Regional Director should have certified the case to the
Arbitration Branch of the National Labor Relations Commission (NLRC) for a full-blown
hearing on the merits.
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:
While it is true that under Articles 129 and 217 of the Labor Code, the Labor
Arbiter has jurisdiction to hear and decide cases where the aggregate money
claims of each employee exceeds P5,000.00, said provisions of law do not
contemplate nor cover the visitorial and enforcement powers of the Secretary of
Labor or his duly authorized representatives.
Rather, said powers are defined and set forth in Article 128 of the Labor Code (as
amended by R.A. No. 7730) thus:
Art. 128 Visitorial and enforcement power. --- x x x
(b) Notwithstanding the provisions of Article[s] 129 and 217 of this Code to
the contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give
effect to [the labor standards provisions of this Code and other] labor
legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of inspection.
xxxx
The aforequoted provision explicitly excludes from its coverage Articles 129 and
217 of the Labor Code by the phrase "(N)otwithstanding the provisions of Articles
129 and 217of this Code to the contrary x x x" thereby retaining and further
strengthening the power of the Secretary of Labor or his duly authorized
representatives to issue compliance orders to give effect to the labor standards
provisions of said Code and other labor legislation based on the findings of labor
employment and enforcement officer or industrial safety engineer made in the
course of inspection.23 (Italics in the original)
Page 347 of 497

This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v. Sensing,24 where
we sustained the jurisdiction of the DOLE Regional Director and held that "the visitorial
and enforcement powers of the DOLE Regional Director to order and enforce
compliance with labor standard laws can be exercised even where the
individual claim exceeds P5,000."
However, if the labor standards case is covered by the exception clause in Article 128(b)
of the Labor Code, then the Regional Director will have to endorse the case to the
appropriate Arbitration Branch of the NLRC. In order to divest the Regional Director or his
representatives of jurisdiction, the following elements must be present: (a) that the
employer contests the findings of the labor regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine evidentiary matters;
and (c) that such matters are not verifiable in the normal course of inspection. 25 The
rules also provide that the employer shall raise such objections during the hearing of the
case or at any time after receipt of the notice of inspection results. 26
In this case, the Regional Director validly assumed jurisdiction over the money claims of
private respondents even if the claims exceeded P5,000 because such jurisdiction was
exercised in accordance with Article 128(b) of the Labor Code and the case does not fall
under the exception clause.
The Court notes that EBVSAI did not contest the findings of the labor regulations officer
during the hearing or after receipt of the notice of inspection results. It was only in its
supplemental motion for reconsideration before the Regional Director that EBVSAI
questioned the findings of the labor regulations officer and presented documentary
evidence to controvert the claims of private respondents. But even if this was the case,
the Regional Director and the Secretary of Labor still looked into and considered EBVSAI's
documentary evidence and found that such did not warrant the reversal of the Regional
Director's order. The Secretary of Labor also doubted the veracity and authenticity of
EBVSAI's documentary evidence. Moreover, the pieces of evidence presented by EBVSAI
were verifiable in the normal course of inspection because all employment records of the
employees should be kept and maintained in or about the premises of the workplace,
which in this case is in Ambuklao Plant, the establishment where private respondents
were regularly assigned.27
WHEREFORE, we DENY the petition. We AFFIRM the 29 May 2001 Decision and the 26
February 2002 Resolution of the Court of Appeals in CA-G.R. SP No. 57653.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 178909

Page 348 of 497

October 10, 2012

SUPERIOR PACKAGING CORPORATION, Petitioner,

vs.
ARNEL BALAGSA Y, ZALDY ALFORGNE, JAIME ANGELES, REY APURA, GERALD
CABALAN, JONALD CALENTENG, RAMIL CROIJERO, JUNREY CABALGUINTO,
OSCAR DAYTO, RUFO DIONOLA, DIONILO ESMERALDA, BOOTS LADRILLO,
ELIEZER MAGHAMOY, LEO FLORES, RENATOPAGADORA,REYNALDO PLAZA,
H.OGER SJBNEAO, EDWIN TONALBA, .JOHN ACHARON, RODERICK RAMAS,
SALVADOR ACURATO, JULUIS BASUL, CARLOS RAYTA, LITO BELANO, ROGER
CASIMIRO, RENE CURADA, NESTRO ESTE, ROMMEL IMPELIOO, ZOILO ISLA,
JHONIE OGARDO, EDWIN POSADAS, ALEXANDER REGPALA, CHRISTOPHER
SAMPIANO, RITCHIE SANCHES, ROLANDO SORIANO, ROWELL ANCHETA, RICKY
BORDAS, ANTONIO BEHEN, RONALD DOMINGO, JERRY MORENO, ROLLY
ROSALES, RENATO RESTANO and ISIDRO SARIGNE, Respondents.
RESOLUTION
REYES, J.:
The main issue in this case is whether Superior Packaging Corporation (petitioner) may
be held solidarily liable with Lancer Staffing & Services Network, Inc. (Lancer) for
respondents unpaid money claims.
The facts are undisputed.
The petitioner engaged the services of Lancer to provide reliever services to its business,
which involves the manufacture and sale of commercial and industrial corrugated boxes.
According to petitioner, the respondents were engaged for four (4) months from
February to June 1998 and their tasks included loading, unloading and segregation of
corrugated boxes.
Pursuant to a complaint filed by the respondents against the petitioner and its President,
Cesar Luz (Luz), for underpayment of wages, non-payment of premium pay for worked
rest, overtime pay and non-payment of salary, the Department of Labor and Employment
(DOLE) conducted an inspection of the petitioners premises and found several
violations, to wit: (1) non-presentation of payrolls and daily time records; (2) nonsubmission of annual report of safety organization; (3) medical and accident/illness
reports; (4) non-registration of establishment under Rule 1020 of Occupational and
Health Standards; and (5) no trained first aide 1 Due to the petitioners failure to appear
in the summary investigations conducted by the DOLE, an Order 2 was issued on June 18,
2003 finding in favor of the respondents and adopting the computation of the claims
submitted. Petitioner and Luz were ordered, among others, to pay respondents their total
claims in the amount of Eight Hundred Forty Thousand Four Hundred Sixty-Three Pesos
and 38/100 (P 840,463.38).3

Page 349 of 497

They filed a motion for reconsideration on the ground that respondents are not its
employees but of Lancer and that they pay Lancer in lump sum for the services
rendered. The DOLE, however, denied its motion in its Resolution 4 dated February 16,
2004, ruling that the petitioner failed to support its claim that the respondents are not its
employees, and even assuming that they were employed by Lancer, the petitioner still
cannot escape liability as Section 13 of the Department Order No. 10, Series of 1997,
makes a principal jointly and severally liable with the contractor to contractual
employees to the extent of the work performed when the contractor fails to pay its
employees wages.
Their appeal to the Secretary of DOLE was dismissed per Order 5 dated July 30, 2004 and
the Order dated June 18, 2003 and Resolution dated February 16, 2004 were
affirmed.6 Their motion for reconsideration likewise having been dismissed by the
Secretary of DOLE in an Order dated January 21, 2005, 7 petitioner and Luz filed a petition
for certiorari with the Court of Appeals (CA).
On November 17, 2006, the CA affirmed the Secretary of DOLEs orders, with the
modification in that Luz was absolved of any personal liability under the award. 8 The
petitioner filed a partial motion for reconsideration insofar as the finding of solidary
liability with Lancer is concerned but it was denied by the CA in a Resolution 9 dated July
10, 2007.
The petitioner is now before the Court on petition for review under Rule 45 of the Rules
of Court, alleging that:
I
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AFFIRMING THE RULING OF THE SECRETARY OF LABOR AND EMPLOYMENT THAT THE
COMPANY IS SOLIDARILY LIABLE WITH THE CONTRACTOR NOTWITHSTANDING THE FACT
THAT:
A. THE COMPANY CANNOT BE HELD SOLIDARILY LIABLE WITH THE CONTRACTOR
FOR THE PENALTY OR SANCTION IMPOSED BY WAY OF "DOUBLE INDEMNITY"
UNDER REPUBLIC ACT NO. 6727.
B. THERE IS NO EVIDENCE TO SHOW THAT PRIVATE RESPONDENTS RENDERED
OVERTIME WORK AND ACTUALLY WORKED ON THEIR RESTDAYS FOR THE
COMPANY FOR THE PERIOD IN QUESTION.
II

Page 350 of 497

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AFFIRMING THE FINDINGS OF THE SECRETARY OF LABOR AND EMPLOYMENT THAT THE
CONTRACTOR IS ENGAGED IN LABOR-ONLY CONTRACTING.10
On the first ground, the petitioner argues that the DOLE erred in doubling respondents
underpayment of wages and regular holiday pay under Republic Act No. 6727 (Wage
Rationalization Act) inasmuch as the solidary liability of a principal does not extend to a
punitive award against a contractor.11 The petitioner also contends that there is no
evidence showing that the respondents rendered overtime work and that they actually
worked on their rest days for them to be entitled to such pay. 12
On the second ground, the petitioner objects to the finding that it is engaged in laboronly contracting and is consequently an indirect employer, considering that it is beyond
the visitorial and enforcement power of the DOLE to make such conclusion. According to
the petitioner, such
conclusion may be made only upon consideration of evidentiary matters and cannot be
determined solely through a labor inspection. 13 The petitioner also refutes respondents
alleged belated argument that the latter are its employees. 14
The petition is bereft of merit.
To begin with, the Court will not resolve or dwell on the petitioners argument on the
doubling of respondents underpayment of wages and regular holiday pay by the DOLE
for the simple reason that this is the first time that the petitioner raised such contention.
From its pleadings filed in the DOLE and all the way up to the CA, the petitioner never
questioned nor discussed such issue. It is only now before the Court that the petitioner
belatedly presented such argument. It is well-settled that points of law, theories, issues
and arguments not brought to the attention of the lower court, administrative agency or
quasi-judicial body need not be considered by a reviewing court, as they cannot be
raised for the first time at that late stage.15 To consider the alleged facts and arguments
raised belatedly would amount to trampling on the basic principles of fair play, justice
and due process.16
With regard to the contention that there is no evidence to support the finding that the
respondents rendered overtime work and that they worked on their rest day, the
resolution of this argument requires a review of the factual findings and the evidence
presented, which this Court will not do. This Court is not a trier of facts and this applies
with greater force in labor cases. 17 Hence, where the factual findings of the labor
tribunals or agencies conform to, and are affirmed by, the CA, the same are accorded
respect and finality, and are binding upon this Court. 18
Petitioner also questions the authority of the DOLE to make a finding of an employeremployee relationship concomitant to its visitorial and enforcement power. The Court
Page 351 of 497

notes at this juncture that the petitioner, again, did not raise this question in the
proceedings before the DOLE. At best, what the petitioner raised was the sufficiency of
evidence proving the existence of an employer-employee relationship and it was only in
its petition for certiorariwith the CA that the petitioner sought to have this matter
addressed. The CA should have refrained from resolving said matter as the petitioner
was deemed to have waived such argument and was estopped from raising the same. 19
At any rate, such argument lacks merit. The DOLE clearly acted within its authority when
it determined the existence of an employer-employee relationship between the petitioner
and respondents as it falls within the purview of its visitorial and enforcement power
under Article 128(b) of the Labor Code, which provides:
Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and
in cases where the relationship of employer-employee still exists, the Secretary of Labor
and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other
labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly
authorized representative shall issue writs of execution to the appropriate authority for
the enforcement of their orders, except in cases where the employer contests the
findings of the labor employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of inspection.
In Peoples Broadcasting (Bombo Radyo Phils., Inc.) v. Secretary of the Department of
Labor and Employment,20the Court stated that it can be assumed that the DOLE in the
exercise of its visitorial and enforcement power somehow has to make a determination of
the existence of an employer-employee relationship. Such determination, however, is
merely preliminary, incidental and collateral to the DOLEs primary function of enforcing
labor standards provisions. Such power was further explained recently by the Court in its
Resolution21dated March 6, 2012 issued in Peoples Broadcasting, viz:
The determination of the existence of an employer-employee relationship by the DOLE
must be respected. The expanded visitorial and enforcement power of the DOLE granted
by RA 7730 would be rendered nugatory if the alleged employer could, by the simple
expedient of disputing the employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at least a prima facie showing
of the absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the
DOLE that will weigh it, to see if the same does successfully refute the existence of an
employer-employee relationship.
xxxx

Page 352 of 497

x x x The power of the DOLE to determine the existence of an employer-employee

relationship need not necessarily result in an affirmative finding.1wphi1 The DOLE may
well make the determination that no employer-employee relationship exists, thus
divesting itself of jurisdiction over the case. It must not be precluded from being able to
reach its own conclusions, not by the parties, and certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power, subject to judicial
review, not review by the NLRC. 22
Also, the existence of an employer-employee relationship is ultimately a question of
fact.23 The determination made in this case by the DOLE, albeit provisional, and as
affirmed by the Secretary of DOLE and the CA is beyond the ambit of a petition for
review on certiorari.24
The Court now comes to the issue regarding the nature of the relationship between the
petitioner and respondents, and the consequent liability of the petitioner to the
respondents under the latters claim.
It was the consistent conclusion of the DOLE and the CA that Lancer was not an
independent contractor but was engaged in "labor-only contracting"; hence, the
petitioner was considered an indirect employer of respondents and liable to the latter for
their unpaid money claims.
At the time of the respondents employment in 1998, the applicable regulation was DOLE
Department Order No. 10, Series of 1997.25 Under said Department Order, labor-only
contracting was defined as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are
directly related to the principal business or operations of the employer in which workers
are habitually employed.
Labor-only contracting is prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly employed by
him.26

Page 353 of 497

According to the CA, the totality of the facts and surrounding circumstances of this case
point to such conclusion. The Court agrees.
The ratio of Lancers authorized capital stock of P 400,000.00 as against its subscribed
and paid-up capital stock of P 25,000.00 shows the inadequacy of its capital investment
necessary to maintain its day-to-day operations. And while the Court does not set an
absolute figure for what it considers substantial capital for an independent job
contractor, it measures the same against the type of work which the contractor is
obligated to perform for the principal.27 Moreover, the nature of respondents work was
directly related to the petitioners business. The marked disparity between the
petitioners actual capitalization (P 25,000.00) and the resources needed to maintain its
business, i.e., "to establish, operate and manage a personnel service company which will
conduct and undertake services for the use of offices, stores, commercial and industrial
services of all kinds," supports the finding that Lancer was, indeed, a labor-only
contractor. Aside from these is the undisputed fact that the petitioner failed to produce
any written service contract that might serve as proof of its alleged agreement with
Lancer.28
Finally, a finding that a contractor is a "labor-only" contractor is equivalent to declaring
that there is an employer-employee relationship between the principal and the
employees of the supposed contractor, and the "labor only" contractor is considered as a
mere agent of the principal, the real employer. 29 The former becomes solidarily liable for
all the rightful claims of the employees. 30 The petitioner therefore, being the principal
employer and Lancer, being the labor-only contractor, are solidarily liable for
respondents unpaid money claims.
WHEREFORE, the petition for review is DENIED.
SO ORDERED.
THIRD DIVISION
RURAL
BANK
OF
CORON
(PALAWAN), INC., EMPIRE COLD
STORAGE AND DEVELOPMENT
CORPORATION,
CITIZENS
DEVELOPMENT
INCOPRORATED, CARIDAD B.
GARCIA, SANDRA G. ESCAT,
LORNA GARCIA, and OLGA G.
ESCAT,
Petitioners,
- versus Page 354 of 497

G.R. No.

164888

Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

ANNALISA CORTES,

Promulgated:
Respondent.
Dec
ember 6, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO MORALES, J.:
In 1987, Virgilio Garcia, founder of petitioner corporations (the corporations),
hired the then still single Annalisa Cortes (respondent) as clerk of the Rural Bank of
Coron (Manila Office).

After Virgilio died, his son Victor took over the management of the corporations.
Anita Cortes (Anita), the wife of Victor Garcia, was also involved in the
management of the corporations. Respondent later married Anitas brother Eduardo
Cortes.
Anita soon assumed the position of Vice President of petitioner Citizens
Development Incorporated (CDI) and practically controlled the financial operations of
almost all of the other corporations in the course of which she allowed some of her
relatives and in-laws, including respondent, to hold several key sensitive positions
thereat.
Respondent later became the Financial Assistant, Personnel Officer and Corporate
Secretary of The Rural Bank of Coron, Personnel Officer of CDI, and also Personnel Officer
and Disbursing Officer of The Empire Cold Storage Development Corporation (ECSDC).
She simultaneously received salaries from these corporations.

Page 355 of 497

On examination of the financial books of the corporations by petitioner Sandra

Garcia Escat, a daughter of Virgilio
Garcia who was previously residing in Spain, she
found out
that respondent was involved in several anomalies, [1] drawing petitioners
to terminate respondents services on November 23, 1998 in petitioner corporations. [2]
By letter of November 25, 1998 [3] addressed to individual petitioners Caridad B.
Garcia (widow of Virgilio Garcia), Sandra G. Escat, and Olga G. Escat (another daughter
of Virgilio Garcia), respondents counsel conveyed respondents willingness to abide by
the decision to terminate her but reminded them that she was entitled to separation pay
equivalent to 11 months salary as well as to the other benefits provided by law in her
favor.
Respondents counsel thus demanded the payment of respondents unpaid salary
for the months of October and November 1998, separation pay equivalent to 12 months
salary,[4] 13th month pay and other benefits.
As the demand remained unheeded, respondent filed a complaint [5] for illegal
dismissal and non-payment of salaries and other benefits, docketed as NLRC-NCR Case
No. 00-05-05738-99.
Petitioners moved for the dismissal of the complaint on the ground of lack of
jurisdiction, contending that the case was an intra-corporate controversy involving the
removal of a corporate officer, respondent being the Corporate Secretary of the Rural
Bank of Coron, Inc., hence, cognizable by the Securities and Exchange Commission (SEC)
pursuant to Section 5 of PD 902-A.[6]
In resolving the issue of jurisdiction, the Labor Arbiter noted as follows:
It is to be noted that complainant, aside from her being Corporate
Secretary of Rural Bank of Coron, complainant was likewise appointed
as Financial Assistant & Personnel Officer of all respondents herein,
whose services w[ere] terminated on 23 November 1998, hence, the instant
complaint.
Verily, a Financial Assistant & Personnel Officer is not a
Corporate Officer of the [petitioners] corporation, thus, pursuant to
Article 217 of the Labor Code, as amended, the instant case falls within the
ambit of original and exclusive jurisdiction of this Office. [7] (Emphasis and
underscoring supplied).
Eventually, the Labor Arbiter found for respondent, computing the monetary
award due her as follows:
Backwages
13th Month Pay for 1998, 1999 & 2000
Separation Pay
Unpaid Salary

Page 356 of 497

P658,000.00
63,000.00
P721,000.00
315,000.00
25,900.00

Attorneys
fees

106,190.00
P1,168,090.00

Thus, the Labor Arbiter, by Decision of July 18, 2001, disposed:

WHEREFORE, in view of all the foregoing, respondents are hereby
ordered to jointly and severally pay complainant the total amount of ONE
MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND NINETY (P1,168,090.00)
PESOS as discussed above.[8]
On August 13, 2001, the tenth or last day of the period of appeal, [9] petitioners
filed a Notice of Appeal and Motion for Reduction of Bond [10] to which they attached
aMemorandum on Appeal.[11] In their Motion for Reduction of Bond, petitioners alleged
that the corporations were under financial distress and the Rural Bank of Coron was
under receivership. They thus prayed that the amount of bond be substantially reduced,
preferably to one half thereof or even lower. [12]

By Resolution of October 16, 2001[13], the National Labor Relations Commission

(NLRC), while noting that petitioners timely filed the appeal, held that the same was not
accompanied by an appeal bond, a mandatory requirement under Article 223 [14] of the
Labor Code and Section 6, Rule VI of the NLRC New Rules of Procedure. It also noted that
the Motion for Reduction of Bond was premised on self-serving allegations.
It
accordingly dismissed the appeal.
Petitioners Motion for Reconsideration [15] was denied by the NLRC by November
26, 2001 Resolution,[16] hence, they filed a Petition for Certiorari [17] before the Court of
Appeals.
By Decision dated May 26, 2004[18], the appellate court dismissed the petition for
lack of merit. Petitioners motion for reconsideration was also denied by Resolution
ofAugust 13, 2004.[19]

Hence, this petition,[20] petitioners faulting the appellate court for:

I
. . . FAIL[URE] TO RULE THAT THE NLRCS RULE OF PROCEDURE WHICH
PROVIDES FOR THE POSTING OF A BOND AS A CONDITION PRECEDENT FOR
PERFECTING AN APPEAL AS A CONDITION PRECEDENT FOR PERFECTING AN
APPEAL IS CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.
II

Page 357 of 497

. . . DISMISS[ING] PETITIONERS[] PETITION FOR [CERTIORARI] BASED ON

TECHNICALITY AND FAIL[URE] TO DECIDE THE SAME BASED ON ITS MERIT.

III
. . . DISMISSING PETITIONERS PETITION FOR CERTIORARI FROM THE DECISION
OF THE NLRC FOR NON-PERFECTION THEREOF.
IV
. . . DISMISSING PETITIONERS PETITION FOR [CERTIORARI] FROM THE
DECISION OF THE NLRC WITHOUT RESOLVING THE CASE BASED ON
ITS MERITS.
V
. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL PETITIONERS ARE NOT SOLIDARY
LIABLE TO PAY THE RESPONDENT FOR HER MONETARY CLAIM IN VIEW OF THE
ABSENCE OF ANY EVIDENCE SHOWING THAT THEY WERE MOTIVATED BY ILLWILL OR MALICE IN SEVERING HER EMPLOYMENT.
VI
. . . FAIL[URE] TO RESOLVE THE ISSUE OF JURISDICTION. [21]
While, indeed, respondent was the Corporate Secretary of the Rural Bank of Coron,
she was also its Financial Assistant and the Personnel Officer of the two other petitioner
corporations.[22]
Mainland Construction Co., Inc. v. Movilla [23] instructs that a corporation can
engage its corporate officers to perform services under a circumstance which would make
them employees.[24]
The Labor Arbiter has thus jurisdiction over respondents complaint.
On the first three assigned errors which bear on whether petitioners appeal
before the NLRC was perfected:
As before the Court of Appeals, petitioners cite Cosico, Jr. v. NLRC[25] and Taberrah
v. NLRC[26] in support of their contention that their appeal before the NLRC was
perfected. As correctly ruled by the Court of Appeals, however, the cited cases are not in
point.

Page 358 of 497

 The appellant in Taberrah filed a motion to fix appeal bond instead of

posting an appeal bond; and the Supreme Court relaxed the requirement
considering that the labor arbiters decisiondid not contain a computation of the
monetary award. In Cosico, the appeal bond posted was of insufficient
amount but the Supreme Court ruled that provisions of the Labor Code
on requiring a bond on appeal involving monetary awards must be given liberal
interpretation in line with the desired objective of resolving controversies on
their merits. Herein, no appeal bond, whether sufficient or not, was ever
filed by the petitioners.[27] (Italics in the original; emphasis and underscoring
supplied)
Petitioners additionally cite Star Angel Handicraft v. NLRC [28] to support their
position that there is a distinction between the filing of an appeal within the
reglementary period and its perfection. In the parallel case of Computer Innovations
Center v. National Labor Relations Commission,[29] this Court hesitated to reiterate the
doctrine in Star Angel in this wise:
Petitioners invoke the aforementioned holding in Star Angel that there is
a distinction between the filing of an appeal within the reglementary period and
its perfection, and that the appeal may be perfected after the said
reglementary period. Indeed, Star Angel held that the filing of a motion for
reduction of appeal bond necessarily stays the reglementary period for
appeal. However, in this case, the motion for reduction of appeal bond, which
was incorporated in the appeal memorandum, was filed only on the tenth or
final day of the reglementary period. Under such circumstance, the motion for
reduction of appeal bond can no longer be deemed to have stayed the
appeal, and the petitioner faces the risk, as had happened in this case,
of summary dismissal of the appeal for non-perfection.
Moreover, the reference in Star Angel to the distinction between the
period to file the appeal and to perfect the appeal has been pointedly made
only once by this Court in Gensoli v. NLRCthus, it has not acquired the sheen of
venerability reserved for repeatedly-cited cases. The distinction, if any, is not
particularly evident or material in the Labor Code; hence, the reluctance of the
Court to adopt such doctrine. Moreover, the present provision in the NLRC
Rules of Procedure, that the filing of a motion to reduce bond shall not stop
the running of the period to perfect appeal flatly contradicts the notion
expressed in Star Angel that there is a distinction between the filing
an appeal and perfecting an appeal.
Ultimately, the disposition of Star Angel was premised on the ruling that
a motion for reduction of the appeal bond necessarily stays the period for
perfecting the appeal, and that the employer cannot be expected to perfect the
appeal by posting the proper bond until such time the said motion for reduction
is resolved. The unduly stretched-out distinction between the period to
file an appeal and to perfect an appeal was not material to the
resolution of Star Angel, and this could be properly considered

Page 359 of 497

as obiter dictum.[30] (Italics in the original; emphasis and underscoring

supplied)
The appellate court did not thus err in dismissing the petition before it. And
contrary to petitioners assertion, the appellate court dismissed its petition not on a
mere technicality. For the non-posting of an appeal bond within the reglementary
period divests the NLRC of its jurisdiction to entertain the appeal. Thus, in the same
case ofComputer Innovations Center, this Court held:
Petitioners also characterize the appeal bond requirement as a technical
rule, and that the dismissal of an appeal on purely technical grounds is frowned
upon. However, Article 223, which prescribes the appeal bond
requirement, is a rule of jurisdiction and not of procedure. There is a
little leeway for condoning a liberal interpretation thereof, and certainly none
premised on the ground that its requirements are mere technicalities. It must
be emphasized that there is no inherent right to an appeal in a labor case, as it
arises solely from grant of statute, namely the Labor Code.
We have indeed held that the requirement for posting the surety
bond is not merely procedural but jurisdictional and cannot be trifled with.
Non-compliance with such legal requirements is fatal and has the effect of
rendering the judgment final and executory. The petitioners cannot be allowed
to seek refuge in a liberal application of rules for their act of negligence.
[31]
(Emphasis and underscoring supplied)

It bears emphasis that all that is required to perfect the appeal is the posting of a
bond to ensure that the award is eventually paid should the appeal be
dismissed. Petitioners should thus have posted a bond, even if it were only partial, but
they did not. No relaxation of the Rule may thus be considered. [32]
In the case at bar, petitioner did not post a full or partial appeal bond
within the prescribed period, thus, no appeal was perfected from the decision of
the Labor Arbiter. For this reason, the decision sought to be appealed to the
NLRC had become final and executory and therefore immutable. Clearly then,
the NLRC has no authority to entertain the appeal, much less to reverse the
decision of the Labor Arbiter. Any amendment or alteration made which
substantially affects the final and executory judgment is null and void for lack of
jurisdiction, including the entire proceeding held for that purpose. [33] (Emphasis
and underscoring supplied)
As the decision of the Labor Arbiter had become final and executory, a discussion
of the fourth and fifth assigned errors is no longer necessary.
WHEREFORE, the petition is DENIED.

Page 360 of 497

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-69870 November 29, 1988
NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION,
MINISTRY OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C.
CREDO, respondents.
G.R. No. 70295 November 29,1988
EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION
AND ARTURO L. PEREZ, respondents.
The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:
Consolidated special civil actions for certiorari seeking to review the decision * of the
Third Division, National Labor Relations Commission in Case No. 11-4944-83 dated 28
November 1984 and its resolution dated 16 January 1985 denying motions for
reconsideration of said decision.
Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a
domestic corporation which provides security guards as well as messengerial, janitorial
and other similar manpower services to the Philippine National Bank (PNB) and its
agencies. She was first employed with NASECO as a lady guard on 18 July 1975. Through
the years, she was promoted to Clerk Typist, then Personnel Clerk until she became Chief
of Property and Records, on 10 March 1980. 1

Page 361 of 497

Sometime before 7 November 1983, Credo was administratively charged by Sisinio S.

Lloren, Manager of Finance and Special Project and Evaluation Department of NASECO,
stemming from her non-compliance with Lloren's memorandum, dated 11 October 1983,
regarding certain entry procedures in the company's Statement of Billings Adjustment.
Said charges alleged that Credo "did not comply with Lloren's instructions to place some
corrections/additional remarks in the Statement of Billings Adjustment; and when [Credo]
was called by Lloren to his office to explain further the said instructions, [Credo] showed
resentment and behaved in a scandalous manner by shouting and uttering remarks of
disrespect in the presence of her co-employees." 2
On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General
Manager of NASECO, to explain her side before Perez and NASECO's Committee on
Personnel Affairs in connection with the administrative charges filed against her. After
said meeting, on the same date, Credo was placed on "Forced Leave" status for 1 5 days,
effective 8 November 1983. 3
Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a
complaint, docketed as Case No. 114944-83, with the Arbitration Branch, National
Capital Region, Ministry of Labor and Employment, Manila, against NASECO for placing
her on forced leave, without due process. 4
Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's
Committee on Personnel Affairs deliberated and evaluated a number of past acts of
misconduct or infractions attributed to her. 5 As a result of this deliberation, said
committee resolved:
1. That, respondent [Credo] committed the following offenses in the Code of
Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer and employee of client
company or officer of the Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course of official duties or use of
profane or insulting language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any instructions of a
superior officer.

Page 362 of 497

2. That, Management has already given due consideration to respondent's

[Credo] scandalous actuations for several times in the past. Records also
show that she was reprimanded for some offense and did not question it.
Management at this juncture, has already met its maximum tolerance point
so it has decided to put an end to respondent's [Credo] being an
undesirable employee. 6
The committee recommended Credo's termination, with forfeiture of benefits.

On 1 December 1983, Credo was called age to the office of Perez to be informed that she
was being charged with certain offenses. Notably, these offenses were those which
NASECO's Committee on Personnel Affairs already resolved, on 22 November 1983 to
have been committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo
was made to explain her side in connection with the charges filed against her; however,
due to her failure to do so, 8 she was handed a Notice of Termination, dated 24
November 1983, and made effective 1 December 1983. 9 Hence, on 6 December 1983,
Credo filed a supplemental complaint for illegal dismissal in Case No. 11-4944-83,
alleging absence of just or authorized cause for her dismissal and lack of opportunity to
be heard. 10
After both parties had submitted their respective position papers, affidavits and other
documentary evidence in support of their claims and defenses, on 9 May 1984, the labor
arbiter rendered a decision: 1) dismissing Credo's complaint, and 2) directing NASECO to
pay Credo separation pay equivalent to one half month's pay for every year of service. 11
Both parties appealed to respondent National Labor Relations Commission (NLRC) which,
on 28 November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to
her former position, or substantially equivalent position, with six (6) months' backwages
and without loss of seniority rights and other privileges appertaining thereto, and 2)
dismissing Credo's claim for attorney's fees, moral and exemplary damages. As a
consequence, both parties filed their respective motions for reconsideration, 12 which the
NLRC denied in a resolution of 16 January 1985. 13
Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as
grave abuse of discretion the dispositive portion of the 28 November 1984 decision
which ordered Credo's reinstatement with backwages. 14 Petitioners contend that in
arriving at said questioned order, the NLRC acted with grave abuse of discretion in
finding that: 1) petitioners violated the requirements mandated by law on termination, 2)
petitioners failed in the burden of proving that the termination of Credo was for a valid or
authorized cause, 3) the alleged infractions committed by Credo were not proven or,
even if proved, could be considered to have been condoned by petitioners, and 4) the
termination of Credo was not for a valid or authorized cause. 15
Page 363 of 497

On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of
discretion the dispositive portion of the 28 November 1984 decision which dismissed her
claim for attorney's fees, moral and exemplary damages and limited her right to
backwages to only six (6) months. 16
As guidelines for employers in the exercise of their power to dismiss employees for just
causes, the law provides that:
Section 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.
xxx xxx xxx
Section 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.
Section 6. Decision to dismiss. The employer shall immediately notify a
worker in writing of a decision to dismiss him stating clearly the reasons
therefor. 17
These guidelines mandate that the employer furnish an employee sought to be
dismissed two (2) written notices of dismissal before a termination of employment can
be legally effected. These are the notice which apprises the employee of the particular
acts or omissions for which his dismissal is sought and the subsequent notice which
informs the employee of the employer's decision to dismiss him.
Likewise, a reading of the guidelines in consonance with the express provisions of law on
protection to labor 18(which encompasses the right to security of tenure) and the broader
dictates of procedural due process necessarily mandate that notice of the employer's
decision to dismiss an employee, with reasons therefor, can only be issued after the
employer has afforded the employee concerned ample opportunity to be heard and to
defend himself.
In the case at bar, NASECO did not comply with these guidelines in effecting Credo's
dismissal. Although she was apprised and "given the chance to explain her side" of the
charges filed against her, this chance was given so perfunctorily, thus rendering illusory
Credo's right to security of tenure. That Credo was not given ample opportunity to be
heard and to defend herself is evident from the fact that the compliance with the
injunction to apprise her of the charges filed against her and to afford her a chance to

Page 364 of 497

prepare for her defense was dispensed in only a day. This is not effective compliance
with the legal requirements aforementioned.
The fact also that the Notice of Termination of Credo's employment (or the decision to
dismiss her) was dated 24 November 1983 and made effective 1 December 1983 shows
that NASECO was already bent on terminating her services when she was informed on 1
December 1983 of the charges against her, and that any hearing which NASECO thought
of affording her after 24 November 1983 would merely be pro forma or an exercise in
futility.
Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry
procedures in the company's Statement of Billings Adjustment did not warrant the severe
penalty of dismissal of the NLRC correctly held that:
... on the charge of gross discourtesy, the CPA found in its Report, dated 22
November 1983 that, "In the process of her testimony/explanations she
again exhibited a conduct unbecoming in front of NASECO Officers and
argued to Mr. S. S. Lloren in a sarcastic and discourteous manner,
notwithstanding, the fact that she was inside the office of the Acctg.
General Manager." Let it be noted, however, that the Report did not even
describe how the so called "conduct unbecoming" or "discourteous manner"
was done by complainant. Anent the "sarcastic" argument of complainant,
the purported transcript 19 of the meeting held on 7 November 1983 does
not indicate any sarcasm on the part of complainant. At the most,
complainant may have sounded insistent or emphatic about her work being
more complete than the work of Ms. de Castro, yet, the complaining officer
signed the work of Ms. de Castro and did not sign hers.
As to the charge of insubordination, it may be conceded, albeit unclear, that
complainant failed to place same corrections/additional remarks in the
Statement of Billings Adjustments as instructed. However, under the
circumstances obtaining, where complainant strongly felt that she was
being discriminated against by her superior in relation to other employees,
we are of the considered view and so hold, that a reprimand would have
sufficed for the infraction, but certainly not termination from services. 20
As this Court has ruled:
... where a penalty less punitive would suffice, whatever missteps may be
committed by labor ought not to be visited with a consequence so severe. It
is not only because of the law's concern for the working man. There is, in
addition, his family to consider. Unemployment brings untold hardships and
sorrows on those dependent on the wage-earner. 21

Page 365 of 497

Of course, in justifying Credo's termination of employment, NASECO claims as additional

lawful causes for dismissal Credo's previous and repeated acts of insubordination,
discourtesy and sarcasm towards her superior officers, alleged to have been committed
from 1980 to July 1983. 22
If such acts of misconduct were indeed committed by Credo, they are deemed to have
been condoned by NASECO. For instance, sometime in 1980, when Credo allegedly
"reacted in a scandalous manner and raised her voice" in a discussion with NASECO's
Acting head of the Personnel Administration 23 no disciplinary measure was taken or
meted against her. Nor was she even reprimanded when she allegedly talked 'in a
shouting or yelling manner" with the Acting Manager of NASECO's Building Maintenance
and Services Department in 1980 24 or when she allegedly "shouted" at NASECO's
Corporate Auditor "in front of his subordinates displaying arrogance and unruly behavior"
in 1980, or when she allegedly shouted at NASECO's Internal Control Consultant in
1981. 25 But then, in sharp contrast to NASECO's penchant for ignoring the aforesaid acts
of misconduct, when Credo committed frequent tardiness in August and September
1983, she was reprimanded. 26
Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily
proven, NASECO's condonation thereof is gleaned from the fact that on 4 October 1983,
Credo was given a salary adjustment for having performed in the job "at least
[satisfactorily]" 27 and she was then rated "Very Satisfactory" 28as regards job
performance, particularly in terms of quality of work, quantity of work, dependability,
cooperation, resourcefulness and attendance.
Considering that the acts or omissions for which Credo's employment was sought to be
legally terminated were insufficiently proved, as to justify dismissal, reinstatement is
proper. For "absent the reason which gave rise to [the employee's] separation from
employment, there is no intention on the part of the employer to dismiss the employee
concerned." 29 And, as a result of having been wrongfully dismissed, Credo is entitled to
three (3) years of backwages without deduction and qualification. 30
However, while Credo's dismissal was effected without procedural fairness, an award of
exemplary damages in her favor can only be justified if her dismissal was effected in a
wanton, fraudulent, oppressive or malevolent manner. 31 A judicious examination of the
record manifests no such conduct on the part of management. However, in view of the
attendant circumstances in the case, i.e., lack of due process in effecting her dismissal, it
is reasonable to award her moral damages. And, for having been compelled to litigate
because of the unlawful actuations of NASECO, a reasonable award for attorney's fees in
her favor is in order.
In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no
jurisdiction to order Credo's reinstatement. NASECO claims that, as a government
corporation (by virtue of its being a subsidiary of the National Investment and
Page 366 of 497

Development Corporation (NIDC), a subsidiary wholly owned by the Philippine National

Bank (PNB), which in turn is a government owned corporation), the terms and conditions
of employment of its employees are governed by the Civil Service Law, rules and
regulations. In support of this argument, NASECO cites National Housing Corporation vs.
JUCO, 33 where this Court held that "There should no longer be any question at this time
that employees of government-owned or controlled corporations are governed by the
civil service law and civil service rifles and regulations."
It would appear that, in the interest of justice, the holding in said case should not be
given retroactive effect, that is, to cases that arose before its promulgation on 17 January
1985. To do otherwise would be oppressive to Credo and other employees similarly
situated, because under the same 1973 Constitution ,but prior to the ruling in National
Housing Corporation vs. Juco, this Court had recognized the applicability of the Labor
Code to, and the authority of the NLRC to exercise jurisdiction over, disputes involving
terms and conditions of employment in government owned or controlled corporations,
among them, the National Service Corporation (NASECO).<re||an1w> 34
Furthermore, in the matter of coverage by the civil service of government-owned or
controlled corporations, the 1987 Constitution starkly varies from the 1973 Constitution,
upon which National Housing Corporation vs. Juco is based. Under the 1973 Constitution,
it was provided that:
The civil service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-owned or
controlled corporation. ... 35
On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled
corporations with original charter. 36(Emphasis supplied)
Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the
Court in the National Housing . Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a
circumvention or emasculation of Section 1, Article XII-B of the constitution.
It would be possible for a regular ministry of government to create a host of
subsidiary corporations under the Corporation Code funded by a willing
legislature. A government-owned corporation could create several
subsidiary corporations. These subsidiary corporations would enjoy the best
of two worlds. Their officials and employees would be privileged individuals,
free from the strict accountability required by the Civil Service Decree and
the regulations of the Commission on Audit. Their incomes would not be
Page 367 of 497

subject to the competitive restrains of the open market nor to the terms and
conditions of civil service employment. Conceivably, all government-owned
or controlled corporations could be created, no longer by special charters,
but through incorporations under the general law. The Constitutional
amendment including such corporations in the embrace of the civil service
would cease to have application. Certainly, such a situation cannot be
allowed to exist. 37
appear relegated to relative insignificance by the 1987 Constitutional provision that the
Civil Service embraces government-owned or controlled corporations with original
charter; and, therefore, by clear implication, the Civil Service does not include
government-owned or controlled corporations which are organized as subsidiaries of
government-owned or controlled corporations under the general corporation law.
The proceedings in the 1986 Constitutional Commission also shed light on the
Constitutional intent and meaning in the use of the phrase "with original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. I beg the indulgence of the Committee. I was
reading the wrong provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government-owned or controlled
corporations.
My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the
Commissioner please state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1, subparagraph
1, under the Civil Service Commission, says: "including
government-owned or controlled corporations.' Does that
include a corporation, like the Philippine Airlines which is
government-owned or controlled?
MR. FOZ. I would like to throw a question to the Commissioner.
Is the Philippine Airlines controlled by the government in the
sense that the majority of stocks are owned by the
government?

Page 368 of 497

MR. ROMULO. It is owned by the GSIS. So, this is what we

might call a tertiary corporation. The GSIS is owned by the
government. Would this be covered because the provision says
"including government-owned or controlled corporations."
MR. FOZ. The Philippine Airlines was established as a private
corporation. Later on, the government, through the GSIS,
acquired the controlling stocks. Is that not the correct
situation?
MR. ROMULO. That is true as Commissioner Ople is about to
explain. There was apparently a Supreme Court decision that
destroyed that distinction between a government-owned
corporation created under the Corporation Law and a
government-owned corporation created by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the case
of NHA vs. Juco to the effect that all government corporations
irrespective of the manner of creation, whether by special
charter or by the private Corporation Law, are deemed to be
covered by the civil service because of the wide-embracing
definition made in this section of the existing 1973
Constitution. But we recall the response to the question of
Commissioner Ople that our intendment in this provision is just
to give a general description of the civil service. We are not
here to make any declaration as to whether employees of
government-owned or controlled corporations are barred from
the operation of laws, such as the Labor Code of the
Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding Officer, since my
name has been mentioned by both sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is
recognized.
MR. OPLE. In connection with the coverage of the Civil Service
Law in Section 1 (1), may I volunteer some information that
may be helpful both to the interpellator and to the Committee.
Following the proclamation of martial law on September 21,
Page 369 of 497

1972, this issue of the coverage of the Labor Code of the

Philippines and of the Civil Service Law almost immediately
arose. I am, in particular, referring to the period following the
coming into force and effect of the Constitution of 1973, where
the Article on the Civil Service was supposed to take
immediate force and effect. In the case of LUZTEVECO, there
was a strike at the time. This was a government-controlled and
government-owned corporation. I think it was owned by the
PNOC with just the minuscule private shares left. So, the
Secretary of Justice at that time, Secretary Abad Santos, and
myself sat down, and the result of that meeting was an opinion
of the Secretary of Justice which 9 became binding
immediately on the government that government corporations
with original charters, such as the GSIS, were covered by the
Civil Service Law and corporations spun off from the GSIS,
which we called second generation corporations functioning as
private subsidiaries, were covered by the Labor Code. Samples
of such second generation corporations were the Philippine
Airlines, the Manila
Hotel and the Hyatt. And that demarcation worked very well. In fact, all of
these companies I have mentioned as examples, except for the Manila
Hotel, had collective bargaining agreements. In the Philippine Airlines, there
were, in fact, three collective bargaining agreements; one, for the ground
people or the PALIA one, for the flight attendants or the PASAC and one for
the pilots of the ALPAC How then could a corporation like that be covered by
the Civil Service law? But, as the Chairman of the Committee pointed out,
the Supreme Court decision in the case of NHA vs. Juco unrobed the whole
thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt
are now considered under that decision covered by the Civil Service Law. I
also recall that in the emergency meeting of the Cabinet convened for this
purpose at the initiative of the Chairman of the Reorganization Commission,
Armand Fabella, they agreed to allow the CBA's to lapse before applying the
full force and effect of the Supreme Court decision. So, we were in the
awkward situation when the new government took over. I can agree with
Commissioner Romulo when he said that this is a problem which I am not
exactly sure we should address in the deliberations on the Civil Service Law
or whether we should be content with what the Chairman said that Section
1 (1) of the Article on the Civil Service is just a general description of the
coverage of the Civil Service and no more.
Thank you, Mr. Presiding Officer.

Page 370 of 497

MR. ROMULO. Mr. Presiding Officer, for the moment, I would be

satisfied if the Committee puts on records that it is not their
intent by this provision and the phrase "including governmentowned or controlled corporations" to cover such companies as
the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact, when
this draft was made, my proposal was really to eliminate, to
drop from the provision, the phrase "including governmentowned or controlled corporations."
MR. ROMULO. Would the Committee indicate that is the intent
of this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the
Committee can make such a statement in the face of an
absolute exclusion of government-owned or controlled
corporations. However, this does not preclude the Civil Service
Law to prescribe different rules and procedures, including
emoluments for employees of proprietary corporations, taking
into consideration the nature of their operations. So, it is a
general coverage but it does not preclude a distinction of the
rules between the two types of enterprises.
MR. FOZ. In other words, it is something that should be left to
the legislature to decide. As I said before, this is just a general
description and we are not making any declaration
whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like a
definitive understanding of the coverage and the Gentleman
wants to exclude government-owned or controlled corporations
like Philippine Airlines, then the recourse is to offer an
amendment as to the coverage, if the Commissioner does not
accept the explanation that there could be a distinction of the
rules, including salaries and emoluments.
MR. ROMULO. So as not to delay the proceedings, I will reserve
my right to submit such an amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is
recognized.
Page 371 of 497

MR. ROMULO. On page 2, line 5, I suggest the following

amendment after "corporations": Add a comma (,) and the
phrase EXCEPT THOSE EXERCISING PROPRIETARY FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does the
Committee say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the session?
THE PRESIDING OFFICER (Mr. Trenas). The session is
suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed
amendment to now read as follows: "including government-owned or
controlled corporations WITH ORIGINAL CHARTERS." The purpose of this
amendment is to indicate that government corporations such as the GSIS
and SSS, which have original charters, fall within the ambit of the civil
service. However, corporations which are subsidiaries of these chartered
agencies such as the Philippine Airlines, Manila Hotel and Hyatt are
excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the
Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term
"original charters," what exactly do we mean?
MR. ROMULO. We mean that they were created by law, by an
act of Congress, or by special law.
MR. FOZ. And not under the general corporation law.

Page 372 of 497

MR. ROMULO. That is correct. Mr. Presiding Officer.

MR. FOZ. With that understanding and clarification, the
Committee accepts the amendment.
MR. NATIVIDAD. Mr. Presiding officer, so those created by the
general corporation law are out.
MR. ROMULO. That is correct:

38

On the premise that it is the 1987 Constitution that governs the instant case because it
is the Constitution in place at the time of decision thereof, the NLRC has jurisdiction to
accord relief to the parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of
the PNB, the NASECO is a government-owned or controlled corporation without original
charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring
opinion in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No.
8, pp. 2687, 2694; also published in 78 Phil. 221) on the effectivity of the principle of
social justice embodied in the 1935 Constitution, said:
Certainly, this principle of social justice in our Constitution as generously
conceived and so tersely phrased, was not included in the fundamental law
as a mere popular gesture. It was meant to (be) a vital, articulate,
compelling principle of public policy. It should be observed in the
interpretation not only of future legislation, but also of all laws already
existing on November 15, 1935. It was intended to change the spirit of our
laws, present and future. Thus, all the laws which on the great historic event
when the Commonwealth of the Philippines was born, were susceptible of
two interpretations strict or liberal, against or in favor of social justice, now
have to be construed broadly in order to promote and achieve social justice.
This may seem novel to our friends, the advocates of legalism but it is the
only way to give life and significance to the above-quoted principle of the
Constitution. If it was not designed to apply to these existing laws, then it
would be necessary to wait for generations until all our codes and all our
statutes shall have been completely charred by removing every provision
inimical to social justice, before the policy of social justice can become
really effective. That would be an absurd conclusion. It is more reasonable
to hold that this constitutional principle applies to all legislation in force on
November 15, 1935, and all laws thereafter passed.
WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED
with modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R.
No. 70295, are ordered to: 1) reinstate Eugenia C. Credo to her former position at the
Page 373 of 497

time of her termination, or if such reinstatement is not possible, to place her in a

substantially equivalent position, with three (3) years backwages, from 1 December
1983, without qualification or deduction, and without loss of seniority rights and other
privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for moral
damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible because of supervening events,
petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295 are
ordered to pay Eugenia C. Credo, in addition to her backwages and damages as above
described, separation pay equivalent to one-half month's salary for every year of service,
to be computed on her monthly salary at the time of her termination on 1 December
1983.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 61594 September 28, 1990
PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE
LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B. FARRALES
and MARIA MOONYEEN MAMASIG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Ledesma, Saludo & Associates for private respondents.

FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a
foreign corporation licensed to do business in the Philippines, executed in Manila two (2)
separate contracts of employment, one with private respondent Ethelynne B. Farrales
and the other with private respondent Ma. M.C. Mamasig. 1 The contracts, which became
effective on 9 January 1979, provided in pertinent portion as follows:
5. DURATION OF EMPLOYMENT AND PENALTY
Page 374 of 497

This agreement is for a period of three (3) years, but can be extended by
the mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA reserves the
right to terminate this agreement at any time by giving the EMPLOYEE
notice in writing in advance one month before the intended termination or
in lieu thereof, by paying the EMPLOYEE wages equivalent to one month's
salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by the laws of
Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction
to consider any matter arising out of or under this agreement.
Respondents then commenced training in Pakistan. After their training period, they
began discharging their job functions as flight attendants, with base station in Manila
and flying assignments to different parts of the Middle East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the
contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the
local branch of PIA, sent separate letters both dated 1 August 1980 to private
respondents Farrales and Mamasig advising both that their services as flight
stewardesses would be terminated "effective 1 September 1980, conformably to clause 6
(b) of the employment agreement [they had) executed with [PIA]." 2
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a
complaint, docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of
company benefits and bonuses, against PIA with the then Ministry of Labor and
Employment ("MOLE"). After several unfruitful attempts at conciliation, the MOLE hearing
officer Atty. Jose M. Pascual ordered the parties to submit their position papers and
evidence supporting their respective positions. The PIA submitted its position
paper, 3 but no evidence, and there claimed that both private respondents were habitual
absentees; that both were in the habit of bringing in from abroad sizeable quantities of
"personal effects"; and that PIA personnel at the Manila International Airport had been
discreetly warned by customs officials to advise private respondents to discontinue that
Page 375 of 497

practice. PIA further claimed that the services of both private respondents were
terminated pursuant to the provisions of the employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the
reinstatement of private respondents with full backwages or, in the alternative, the
payment to them of the amounts equivalent to their salaries for the remainder of the
fixed three-year period of their employment contracts; the payment to private
respondent Mamasig of an amount equivalent to the value of a round trip ticket ManilaUSA Manila; and payment of a bonus to each of the private respondents equivalent to
their one-month salary. 4 The Order stated that private respondents had attained the
status of regular employees after they had rendered more than a year of continued
service; that the stipulation limiting the period of the employment contract to three (3)
years was null and void as violative of the provisions of the Labor Code and its
implementing rules and regulations on regular and casual employment; and that the
dismissal, having been carried out without the requisite clearance from the MOLE, was
illegal and entitled private respondents to reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy
Minister, MOLE, adopted the findings of fact and conclusions of the Regional Director and
affirmed the latter's award save for the portion thereof giving PIA the option, in lieu of
reinstatement, "to pay each of the complainants [private respondents] their salaries
corresponding to the unexpired portion of the contract[s] [of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional
Director and the Order of the Deputy Minister as having been rendered without
jurisdiction; for having been rendered without support in the evidence of record since,
allegedly, no hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for
having been issued in disregard and in violation of petitioner's rights under the
employment contracts with private respondents.
1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction
over the subject matter of the complaint initiated by private respondents for illegal
dismissal, jurisdiction over the same being lodged in the Arbitration Branch of the
National Labor Relations Commission ("NLRC") It appears to us beyond dispute, however,
that both at the time the complaint was initiated in September 1980 and at the time the
Orders assailed were rendered on January 1981 (by Regional Director Francisco L.
Estrella) and August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the Regional
Director had jurisdiction over termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of
employees with at least one (1) year of service without prior clearance from the
Department of Labor and Employment:
Art. 278. Miscellaneous Provisions . . .
Page 376 of 497

(b) With or without a collective agreement, no employer may shut down his
establishment or dismiss or terminate the employment of employees with
at least one year of service during the last two (2) years, whether such
service is continuous or broken, without prior written authority issued in
accordance with such rules and regulations as the Secretary may
promulgate . . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code,
made clear that in case of a termination without the necessary clearance, the
Regional Director was authorized to order the reinstatement of the employee
concerned and the payment of backwages; necessarily, therefore, the Regional
Director must have been given jurisdiction over such termination cases:
Sec. 2. Shutdown or dismissal without clearance. Any shutdown or
dismissal without prior clearance shall be conclusively presumed to be
termination of employment without a just cause. The Regional Director
shall, in such case order the immediate reinstatement of the employee and
the payment of his wages from the time of the shutdown or dismissal until
the time of reinstatement. (emphasis supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976,
was similarly very explicit about the jurisdiction of the Regional Director over
termination of employment cases:
Under PD 850, termination cases with or without CBA are now placed
under the original jurisdiction of the Regional Director. Preventive
suspension cases, now made cognizable for the first time, are also placed
under the Regional Director. Before PD 850, termination cases where there
was a CBA were under the jurisdiction of the grievance machinery and
voluntary arbitration, while termination cases where there was no CBA were
under the jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its
implementing rules and regulations with respect to termination and
preventive suspension cases are:
1. The Regional Director is now required to rule on every application for
clearance, whether there is opposition or not, within ten days from receipt
thereof.
xxx xxx xxx
(Emphasis supplied)

Page 377 of 497

2. The second contention of petitioner PIA is that, even if the Regional Director had
jurisdiction, still his order was null and void because it had been issued in violation of
petitioner's right to procedural due process . 6 This claim, however, cannot be given
serious consideration. Petitioner was ordered by the Regional Director to submit not only
its position paper but also such evidence in its favor as it might have. Petitioner opted to
rely solely upon its position paper; we must assume it had no evidence to sustain its
assertions. Thus, even if no formal or oral hearing was conducted, petitioner had ample
opportunity to explain its side. Moreover, petitioner PIA was able to appeal his case to
the Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of due process must be rejected.
At the time the complaint was filed by private respondents on 21 September 1980 and at
the time the Regional Director issued his questioned order on 22 January 1981,
applicable regulation, as noted above, specified that a "dismissal without prior clearance
shall be conclusively presumed to be termination of employment without a cause", and
the Regional Director was required in such case to" order the immediate reinstatement of
the employee and the payment of his wages from the time of the shutdown or dismiss
until . . . reinstatement." In other words, under the then applicable rule, the Regional
Director did not even have to require submission of position papers by the parties in view
of the conclusive (juris et de jure) character of the presumption created by such
applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor and
Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing
Rules and Regulations, the termination of [an employee] which was without previous
clearance from the Ministry of Labor is conclusively presumed to be without [just] cause .
. . [a presumption which] cannot be overturned by any contrary proof however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of
employment with private respondents Farrales and Mamasig, arguing that its relationship
with them was governed by the provisions of its contract rather than by the general
provisions of the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible
by agreement between the parties; while paragraph 6 provided that, notwithstanding
any other provision in the Contract, PIA had the right to terminate the employment
agreement at any time by giving one-month's notice to the employee or, in lieu of such
notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA argues, since a
contract is the law between the parties. 10 The principle of party autonomy in contracts is
not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they may deem
convenient, "providedthey are not contrary to law, morals, good customs, public order or
public policy." Thus, counter-balancing the principle of autonomy of contracting parties is
the equally general rule that provisions of applicable law, especially provisions relating to
Page 378 of 497

matters affected with public policy, are deemed written into the contract. 11 Put a little
differently, the governing principle is that parties may not contract away applicable
provisions of law especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and employment is clearly such
an area and parties are not at liberty to insulate themselves and their relationships from
the impact of labor laws and regulations by simply contracting with each other. It is thus
necessary to appraise the contractual provisions invoked by petitioner PIA in terms of
their consistency with applicable Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held
that paragraph 5 of that employment contract was inconsistent with Articles 280 and
281 of the Labor Code as they existed at the time the contract of employment was
entered into, and hence refused to give effect to said paragraph 5. These Articles read as
follows:
Art. 280. Security of Tenure. In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and to his backwages computed from the time his
compensation was withheld from him up to the time his reinstatement.
Art. 281. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: provided, that, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered as regular employee with respect to the activity in
which he is employed and his employment shall continue while such
actually exists. (Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to
examine in detail the question of whether employment for a fixed term has been
outlawed under the above quoted provisions of the Labor Code. After an extensive
examination of the history and development of Articles 280 and 281, the Court reached
Page 379 of 497

the conclusion that a contract providing for employment with a fixed period was not
necessarily unlawful:
There can of course be no quarrel with the proposition 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. But where no
such intent to circumvent the law is shown, or stated otherwise, where the
reason for the law does not exist e.g. where it is indeed the employee
himself who insists upon a period or where the nature of the engagement is
such that, without being seasonal or for a specific project, a definite date of
termination is a sine qua non would an agreement fixing a period be
essentially evil or illicit, therefore anathema Would such an agreement
come within the scope of Article 280 which admittedly was enacted "to
prevent the circumvention of the right of the employee to be secured in . . .
(his) employment?"
As it is evident from even only the three examples already given that Article
280 of the Labor Code, under a narrow and literal interpretation, not only
fails to exhaust the gamut of employment contracts to which the lack of a
fixed period would be an anomaly, but would also appear to restrict,
without reasonable distinctions, the right of an employee to freely stipulate
with his employer the duration of his engagement, it logically follows that
such a literal interpretation should be eschewed or avoided. The law must
be given reasonable interpretation, to preclude absurdity in its application.
Outlawing the whole concept of term employment and subverting to boot
the principle of freedom of contract to remedy the evil of employers" using
it as a means to prevent their employees from obtaining security of tenure
is like cutting off the nose to spite the face or, more relevantly, curing a
headache by lopping off the head.
xxx xxx xxx
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. It should have no application to instances where a fixed period of
employment was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought to bear upon
Page 380 of 497

the employee and absent any other circumstances vitiating his consent, or
where it satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatever
being exercised by the former over the latter. Unless thus limited in its
purview, the law would be made to apply to purposes other than those
explicitly stated by its framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and unintended
consequences. (emphasis supplied)
It is apparent from Brent School that the critical consideration is the presence or
absence of a substantial indication that the period specified in an employment
agreement was designed to circumvent the security of tenure of regular
employees which is provided for in Articles 280 and 281 of the Labor Code. This
indication must ordinarily rest upon some aspect of the agreement other than the
mere specification of a fixed term of the ernployment agreement, or upon
evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment agreement between
petitioner PIA and private respondents, we consider that those provisions must be read
together and when so read, the fixed period of three (3) years specified in paragraph 5
will be seen to have been effectively neutralized by the provisions of paragraph 6 of that
agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year
period ostensibly granted by paragraph 5 by rendering such period in effect a facultative
one at the option of the employer PIA. For petitioner PIA claims to be authorized to
shorten that term, at any time and for any cause satisfactory to itself, to a one-month
period, or even less by simply paying the employee a month's salary. Because the net
effect of paragraphs 5 and 6 of the agreement here involved is to render the
employment of private respondents Farrales and Mamasig basically employment at the
pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to
prevent any security of tenure from accruing in favor of private respondents even during
the limited period of three (3) years, 13 and thus to escape completely the thrust of
Articles 280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which
specifies, firstly, the law of Pakistan as the applicable law of the agreement and,
secondly, lays the venue for settlement of any dispute arising out of or in connection
with the agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph
10 cannot be invoked to prevent the application of Philippine labor laws and regulations
to the subject matter of this case, i.e., the employer-employee relationship between
petitioner PIA and private respondents. We have already pointed out that the relationship
is much affected with public interest and that the otherwise applicable Philippine laws
and regulations cannot be rendered illusory by the parties agreeing upon some other law
to govern their relationship. Neither may petitioner invoke the second clause of
paragraph 10, specifying the Karachi courts as the sole venue for the settlement of
Page 381 of 497

dispute; between the contracting parties. Even a cursory scrutiny of the relevant
circumstances of this case will show the multiple and substantive contacts between
Philippine law and Philippine courts, on the one hand, and the relationship between the
parties, upon the other: the contract was not only executed in the Philippines, it was also
performed here, at least partially; private respondents are Philippine citizens and
respondents, while petitioner, although a foreign corporation, is licensed to do business
(and actually doing business) and hence resident in the Philippines; lastly, private
respondents were based in the Philippines in between their assigned flights to the Middle
East and Europe. All the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes between the
parties. Under these circumstances, paragraph 10 of the employment agreement cannot
be given effect so as to oust Philippine agencies and courts of the jurisdiction vested
upon them by Philippine law. Finally, and in any event, the petitioner PIA did not
undertake to plead and prove the contents of Pakistan law on the matter; it must
therefore be presumed that the applicable provisions of the law of Pakistan are the same
as the applicable provisions of Philippine law. 14
We conclude that private respondents Farrales and Mamasig were illegally dismissed and
that public respondent Deputy Minister, MOLE, had not committed any grave abuse of
discretion nor any act without or in excess of jurisdiction in ordering their reinstatement
with backwages. Private respondents are entitled to three (3) years backwages without
qualification or deduction. Should their reinstatement to their former or other
substantially equivalent positions not be feasible in view of the length of time which has
gone by since their services were unlawfully terminated, petitioner should be required to
pay separation pay to private respondents amounting to one (1) month's salary for every
year of service rendered by them, including the three (3) years service putatively
rendered.
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the
Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1)
private respondents are entitled to three (3) years backwages, without deduction or
qualification; and (2) should reinstatement of private respondents to their former
positions or to substantially equivalent positions not be feasible, then petitioner shall, in
lieu thereof, pay to private respondents separation pay amounting to one (1)-month's
salary for every year of service actually rendered by them and for the three (3) years
putative service by private respondents. The Temporary Restraining Order issued on 13
September 1982 is hereby LIFTED. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
[G.R. No. 113191. September 18, 1996]
Page 382 of 497

DEPARTMENT
OF
FOREIGN
AFFAIRS, petitioner,
vs. NATIONAL
LABOR
RELATIONS COMMISSION, HON. LABOR ARBITER NIEVES V. DE CASTRO
and JOSE C. MAGNAYI, respondents.
DECISION
VITUG, J.:
The questions raised in the petition for certiorari are a few coincidental matters
relative to the diplomatic immunity extended to the Asian Development Bank ("ADB").
On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-01-0690-93
for his alleged illegal dismissal by ADB and the latter's violation of the "labor-only"
contracting law. Two summonses were served, one sent directly to the ADB and the
other through the Department of Foreign Affairs ("DFA"), both with a copy of the
complaint. Forthwith, the ADB and the DFA notified respondent Labor Arbiter that the
ADB, as well as its President and Officers, were covered by an immunity from legal
process except for borrowings, guaranties or the sale of securities pursuant to Article
50(1) and Article 55 of the Agreement Establishing the Asian Development Bank (the
"Charter") in relation to Section 5 and Section 44 of the Agreement Between The Bank
And The Government Of The Philippines Regarding The Bank's Headquarters (the
"Headquarters Agreement").
The Labor Arbiter took cognizance of the complaint on the impression that the ADB
had waived its diplomatic immunity from suit. In time, the Labor Arbiter rendered his
decision, dated31 August 1993, that concluded:
"WHEREFORE, above premises considered, judgment is hereby rendered declaring the
complainant as a regular employee of respondent ADB, and the termination of his
services as illegal. Accordingly, respondent Bank is hereby ordered:
"1. To immediately reinstate the complainant to his former position effective September
16, 1993;
"2. To pay complainant full backwages from December 1, 1992 to September 15,
1993 in the amount of P42,750.00 (P4,500.00 x 9 months);
"3. And to pay complainants other benefits and without loss of seniority rights and other
privileges and benefits due a regular employee of Asian Development Bank from the
time he was terminated on December 31, 1992;
"4. To pay 10% attorney's fees of the total entitlements." [1]

Page 383 of 497

The ADB did not appeal the decision. Instead, on 03 November 1993, the DFA
referred the matter to the National Labor Relations Commission ("NLRC"); in its referral,
the DFA sought a "formal vacation of the void judgment." Replying to the letter, the
NLRC Chairman, wrote:
"The undersigned submits that the request for the 'investigation' of Labor Arbiter Nieves
de Castro, by the National Labor Relations Commission, has been erroneously premised
on Art. 218(c) of the Labor Code, as cited in the letter of Secretary Padilla, considering
that the provision deals with 'a question, matter or controversy within its (the
Commission) jurisdiction' obviously referring to a labor dispute within the ambit of Art.
217 (on jurisdiction of Labor Arbiters and the Commission over labor cases).
"The procedure, in the adjudication of labor cases, including raising of defenses, is
prescribed by law. The defense of immunity could have been raised before the Labor
Arbiter by a special appearancewhich, naturally, may not be considered as a waiver of
the very defense being raised. Any decision thereafter is subject to legal remedies,
including appeals to the appropriate division of the Commission and/or a petition for
certiorari with the Supreme Court, under Rule 65 of the Rules of Court. Except where an
appeal is seasonably and properly made, neither the Commission nor the undersigned
may review, or even question, the propriety of any decision by a Labor
Arbiter. Incidentally, the Commission sits en banc (all fifteen Commissioners) only to
promulgate rules of procedure or to formulate policies (Art. 213, Labor Code).
"On the other hand, while the undersigned exercises 'administrative supervision over the
Commission and its regional branches and all its personnel, including the Executive
Labor Arbiters and Labor Arbiters' (penultimate paragraph, Art. 213, Labor Code), he
does not have the competence to investigate or review any decision of a Labor
Arbiter. However, on the purely administrative aspect of the decision-making process,
he may cause that an investigation be made of any misconduct, malfeasance or
misfeasance, upon complaint properly made.
"If the Department of Foreign Affairs feels that the action of Labor Arbiter Nieves de
Castro constitutes misconduct, malfeasance or misfeasance, it is suggested that an
appropriate complaint be lodged with the Office of the Ombudsman.
"Thank you for your kind attention."[2]
Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's
resolution of 31 January 1994, respondents were required to comment. Petitioner was
later constrained to make an application for a restraining order and/or writ of preliminary
injunction following the issuance, on 16 March 1994, by the Labor Arbiter of a writ of
execution. In a resolution, dated07 April 1994, the Court issued the temporary
restraining order prayed for.

Page 384 of 497

The Office of the Solicitor General (OSG), in its comment of 26 May 1994, initially
assailed the claim of immunity by the ADB. Subsequently, however, it submitted a
Manifestation (dated 20 June 1994) stating, among other things, that "after a thorough
review of the case and the records," it became convinced that ADB, indeed, was correct
in invoking its immunity from suit under the Charter and the Headquarters Agreement.
The Court is of the same view.
Article 50(1) of the Charter provides:
The Bank shall enjoy immunity from every form of legal process, except in cases arising
out of or in connection with the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of securities. [3]
Under Article 55 thereof All Governors, Directors, alternates, officers and employees of the Bank, including
experts performing missions for the Bank:
(1)
shall be immune from legal process with respect of acts performed by them in
their official capacity, except when the Bank waives the immunity. [4]
Like provisions are found in the Headquarters Agreement. Thus, its Section 5 reads:
"The Bank shall enjoy immunity from every form of legal process, except in cases arising
out of, or in connection with, the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of securities. [5]
And, with respect to certain officials of the bank, Section 44 of the agreement states:
Governors, other representatives of Members, Directors, the President, Vice-President
and executive officers as may be agreed upon between the Government and the Bank
shall enjoy, during their stay in the Republic of the Philippines in connection with their
official duties with the Bank:
x x x

xxx

xxx

(b) Immunity from legal process of every kind in respect of words spoken or written
and all acts done by them in their official capacity. [6]
The above stipulations of both the Charter and Headquarters Agreement should be able,
nay well enough, to establish that, except in the specified cases of borrowing and
guarantee operations, as well as the purchase, sale and underwriting of securities, the
ADB enjoys immunity from legal process of every form. The Banks officers, on their
Page 385 of 497

part, enjoy immunity in respect of all acts performed by them in their official
capacity. The Charter and the Headquarters Agreement granting these immunities and
privileges are treaty covenants and commitments voluntarily assumed by the Philippine
government which must be respected.
In World Health Organization vs. Aquino,[7] we have declared:
It is a recognized principle of international law and under our system of separation of
powers that diplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government, and
where the plea of diplomatic immunity is recognized and affirmed by the executive
branch of the government x x x it is then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the principal law officer of the government, x x
x or other officer acting under his direction. Hence, in adherence to the settled principle
that courts may not so exercise their jurisdiction x x x as to embarrass the executive arm
of the government in conducting foreign relations, it is accepted doctrine that `in such
cases the judicial department of government follows the action of the political branch
and will not embarrass the latter by assuming an antagonistic jurisdiction.'" [8]
To the same effect is the decision in International Catholic Migration Commission vs.
Calleja,[9] which has similarly deemed the Memoranda of the Legal Adviser of the
Department of Foreign Affairs to be "a categorical recognition by the Executive Branch of
Government that ICMC x x x enjoy(s) immunities accorded to international organizations"
and which determination must be held "conclusive upon the Courts in order not to
embarrass a political department of Government. In the instant case, the filing of the
petition by the DFA, in behalf of ADB, is itself an affirmance of the government's own
recognition of ADB's immunity.
Being an international organization that has been extended a diplomatic status, the
ADB is independent of the municipal law. [10] In Southeast Asian Fisheries Development
Center vs. Acosta,[11] the Court has cited with approval the opinion [12] of the then Minister
of Justice; thus "One of the basic immunities of an international organization is immunity from local
jurisdiction, i.e., that it is immune from the legal writs and processes issued by the
tribunals of the country where it is found. (See Jenks, Id., pp. 37-44). The obvious
reason for this is that the subjection of such an organization to the authority of the local
courts would afford a convenient medium thru which the host government may interfere
in their operations or even influence or control its policies and decisions of the
organization; besides, such subjection to local jurisdiction would impair the capacity of
such body to discharge its responsibilities impartially on behalf of its member-states." [13]
Contrary to private respondent's assertion, the claim of immunity is not here being
raised for the first time; it has been invoked before the forum of origin through
Page 386 of 497

communications sent by petitioner and the ADB to the Labor Arbiter, as well as before
the NLRC following the rendition of the questioned judgment by the Labor Arbiter, but
evidently to no avail.
In its communication of 27 May 1993, the DFA, through the Office of Legal Affairs,
has advised the NLRC:
"Respectfully returned to the Honorable Domingo B. Mabazza, Labor Arbitration
Associate, National Labor Relations Commission, National Capital Judicial Region,
Arbitration Branch, Associated bank Bldg., T.M. Kalaw St., Ermita, Manila, the attached
Notice of Hearing addressed to the Asian Development Bank, in connection with the
aforestated case, for the reason stated in the Department's 1st Indorsement dated 23
March 1993, copy attached, which is self-explanatory.
"In view of the fact that the Asian Development Bank (ADB) invokes its immunity which
is sustained by the Department of Foreign Affairs, a continuous hearing of this case
erodes the credibility of the Philippine government before the international community,
let alone the negative implication of such a suit on the official relationship of the
Philippine government with the ADB.
"For the Secretary of Foreign Affairs
(Sgd.)
"SIME D. HIDALGO
Assistant Secretary"[14]
The Office of the President, likewise, has issued on 18 May 1993 a letter to the Secretary
of Labor, viz:
"Dear Secretary Confesor,
"I am writing to draw your attention to a case filed by a certain Jose C. Magnayi against
the Asian Development Bank and its President, Kimimasa Tarumizu, before the National
Labor Relations Commission, National Capital Region Arbitration Board (NLRC NCR Case
No. 00-01690-93).
"Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de Castro,
addressed a Notice of Resolution/Order to the Bank which brought it to the attention of
the Department of Foreign Affairs on the ground that the service of such notice was in
violation of the RP-ADB Headquarters Agreement which provided, inter-alia, for the
immunity of the Bank, its President and officers from every form of legal process, except
only, in cases of borrowings, guarantees or the sale of securities.
Page 387 of 497

"The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves V. de Castro of
this fact by letter dated March 22, copied to you.
"Despite this, the labor arbiter in question persisted to send summons, the latest dated
May 4, herewith attached, regarding the Magnayi case.
"The Supreme Court has long settled the matter of diplomatic immunities. In WHO vs.
Aquino, SCRA 48, it ruled that courts should respect diplomatic immunities of foreign
officials recognized by the Philippine government. Such decision by the Supreme Court
forms part of the law of the land.
"Perhaps you should point out to Labor Arbiter Nieves V. de Castro that ignorance of the
law is a ground for dismissal.
"Very truly yours,
(Sgd.)
JOSE B. ALEJANDRINO
Chairman, PCC-ADB"[15]
Private respondent argues that, by entering into service contracts with different
private companies, ADB has descended to the level of an ordinary party to a commercial
transaction giving rise to a waiver of its immunity from suit. In the case of Holy See vs.
Hon. Rosario, Jr.,[16] the Court has held:
There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without
its consent, be made a respondent in the Courts of another sovereign. According to the
newer or restrictive theory, the immunity of the sovereign is recognized only with regard
to public acts or acts jure imperii of a state, but not with regard to private act or
acts jure gestionis.
x x x

xxx

xxx

Certainly, the mere entering into a contract by a foreign state with a private party
cannot be the ultimate test. Such an act can only be the start of the inquiry. The logical
question is whether the foreign state is engaged in the activity in the regular course of
business. If the foreign state is not engaged regularly in a business or trade, the
particular act or transaction must then be tested by its nature. If the act is in pursuit of a
sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it
is not undertaken for gain or profit.[17]

Page 388 of 497

The service contracts referred to by private respondent have not been intended by the
ADB for profit or gain but are official acts over which a waiver of immunity would not
attach.
With regard to the issue of whether or not the DFA has the legal standing to file the
present petition, and whether or not petitioner has regarded the basic rule
that certiorari can be availed of only when there is no appeal nor plain, speedy and
adequate remedy in the ordinary course of law, we hold both in the affirmative.
The DFA's function includes, among its other mandates, the determination of persons
and institutions covered by diplomatic immunities, a determination which, when
challenged, entitles it to seek relief from the court so as not to seriously impair the
conduct of the country's foreign relations. The DFA must be allowed to plead its case
whenever necessary or advisable to enable it to help keep the credibility of the Philippine
government before the international community. When international agreements are
concluded, the parties thereto are deemed to have likewise accepted the responsibility
of seeing to it that their agreements are duly regarded. In our country, this task falls
principally on the DFA as being the highest executive department with the competence
and authority to so act in this aspect of the international arena. [18] In Holy See vs. Hon.
Rosario, Jr.,[19] this Court has explained the matter in good detail; viz:
"In Public International Law, when a state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the
state where it is sued to convey to the court that said defendant is entitled to immunity.
"In the United States, the procedure followed is the process of 'suggestion,' where the
foreign state or the international organization sued in an American court requests the
Secretary of State to make a determination as to whether it is entitled to immunity. If
the Secretary of State finds that the defendant is immune from suit, he, in turn, asks the
Attorney General to submit to the court a 'suggestion' that the defendant is entitled to
immunity. In England, a similar procedure is followed, only the Foreign Office issues a
certification to that effect instead of submitting a 'suggestion' (O'Connell, I International
Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and
Obligations, 50 Yale Law Journal 1088 [1941]).
"In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to
the courts varies. In International Catholic Migration Commission vs. Calleja, 190 SCRA
130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of
Labor and Employment, informing the latter that the respondent-employer could not be
sued because it enjoyed diplomatic immunity. In World Health Organization vs. Aquino,
48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to
that effect. In Baer vs. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of
Page 389 of 497

Foreign Affairs to request the Solicitor General to make, in behalf of the Commander of
the United States Naval Base at Olongapo City, Zambales, a 'suggestion' to respondent
Judge. The Solicitor General embodied the 'suggestion' in a manifestation and
memorandum as amicus curiae.
"In the case at bench, the Department of Foreign Affairs, through the Office of Legal
Affairs moved with this Court to be allowed to intervene on the side of petitioner. The
Court allowed the said Department to file its memorandum in support of petitioner's
claim of sovereign immunity.
"In some cases, the defense of sovereign immunity was submitted directly to the local
courts by the respondents through their private counsels (Raquiza vs. Bradford, 75 Phil.
50 [1945]; Miquiabas vs. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United
States of America vs. Guinto, 182 SCRA 644 [1990] and companion cases). In cases
where the foreign states bypass the Foreign Office, the courts can inquire into the facts
and make their own determination as to the nature of the acts and transactions
involved."[20]
Relative to the propriety of the extraordinary remedy of certiorari, the Court has,
under special circumstances, so allowed and entertained such a petition when (a) the
questioned order or decision is issued in excess of or without jurisdiction, [21] or (b) where
the order or decision is a patent nullity,[22] which, verily, are the circumstances that can
be said to obtain in the present case. When an adjudicator is devoid of jurisdiction on a
matter before him, his action that assumes otherwise would be a clear nullity.
WHEREFORE, the petition for certiorari is GRANTED, and the decision of the Labor
Arbiter, dated 31 August 1993 is VACATED for being NULL AND VOID. The temporary
restraining order issued by this Court on 07 April 1994 is hereby made permanent. No
costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. Nos. 109095-109107 February 23, 1995

ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO,
MARCELINO MATURAN, FRAEN BALIBAG, CARMELITO GAJOL, DEMOSTHENES
Page 390 of 497

MANTO, SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA, JOSENIANO

B. ESPINA, all represented by MARIANO R. ESPINA,petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION
(UNRFNRE) represented by its operations manager, DR. KYRIACOS LOUCA,
OSCAR N. ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT, Commissioners of
National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro
City and IRVING PETILLA, Labor Arbiter of Butuan City, respondents.

QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside
the Resolution dated January 25, 1993 of the National Labor Relations Commission
(NLRC), Fifth Division, Cagayan de Oro City.
We dismiss the petition.
I
Petitioners were dismissed from their employment with private respondent, the United
Nations Revolving Fund for Natural Resources Exploration (UNRFNRE), which is a special
fund and subsidiary organ of the United Nations. The UNRFNRE is involved in a joint
project of the Philippine Government and the United Nations for exploration work in
Dinagat Island.
Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-0300078-91 and SRAB 10-07-00159-91 for illegal dismissal and damages.
In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no
jurisdiction over its personality since it enjoyed diplomatic immunity pursuant to the
1946 Convention on the Privileges and Immunities of the United Nations. In support
thereof, private respondent attached a letter from the Department of Foreign Affairs
dated August 26, 1991, which acknowledged its immunity from suit. The letter confirmed
that private respondent, being a special fund administered by the United Nations, was
covered by the 1946 Convention on the Privileges and Immunities of the United Nations
of which the Philippine Government was an original signatory (Rollo, p. 21).
On November 25, 1991, respondent Labor Arbiter issued an order dismissing the
complaints on the ground that private respondent was protected by diplomatic immunity.
The dismissal was based on the letter of the Foreign Office dated September 10, 1991.

Page 391 of 497

Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the
NLRC, which affirmed the dismissal of the complaints in its Resolution dated January 25,
1993.
Petitioners filed the instant petition for certiorari without first seeking a reconsideration
of the NLRC resolution.
II
Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of
the NLRC are final and executory. Thus, they may only be questioned
through certiorari as a special civil action under Rule 65 of the Revised Rules of Court.
Ordinarily, certiorari as a special civil action will not lie unless a motion for
reconsideration is first filed before the respondent tribunal, to allow it an opportunity to
correct its assigned errors (Liberty Insurance Corporation v. Court of Appeals, 222 SCRA
37 [1993]).
In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the
instant petition. Moreover, the petition lacks any explanation for such omission, which
may merit its being considered as falling under the recognized exceptions to the
necessity of filing such motion.
Notwithstanding, we deem it wise to give due course to the petition because of the
implications of the issue in our international relations.
Petitioners argued that the acts of mining exploration and exploitation are outside the
official functions of an international agency protected by diplomatic immunity. Even
assuming that private respondent was entitled to diplomatic immunity, petitioners
insisted that private respondent waived it when it engaged in exploration work and
entered into a contract of employment with petitioners.
Petitioners, likewise, invoked the constitutional mandate that the State shall afford full
protection to labor and promote full employment and equality of employment
opportunities for all (1987 Constitution, Art. XIII, Sec. 3).
The Office of the Solicitor General is of the view that private respondent is covered by
the mantle of diplomatic immunity. Private respondent is a specialized agency of the
United Nations. Under Article 105 of the Charter of the United Nations:
1. The Organization shall enjoy in the territory of its Members such
privileges and immunities as are necessary for the fulfillment of its
purposes.

Page 392 of 497

2. Representatives of the Members of the United Nations and officials of the

Organization shall similarly enjoy such privileges and immunities as are
necessary for the independent exercise of their functions in connection with
the organization.
Corollary to the cited article is the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, to which the Philippines was a signatory (Vol.
1, Philippine Treaty Series, p. 621). We quote Sections 4 and 5 of Article III thereof:
Sec. 4. The specialized agencies, their property and assets, wherever
located and by whomsoever held shall enjoy immunity from every form of
legal process except insofar as in any particular case they have expressly
waived their immunity. It is, however, understood that no waiver of
immunity shall extend to any measure of execution (Emphasis supplied).
Sec. 5. The premises of the specialized agencies shall be inviolable. The
property and assets of the specialized agencies, wherever located and by
whomsoever held, shall be immune from search, requisition, confiscation,
expropriation and any other form of interference, whether by executive,
administrative, judicial or legislative action (Emphasis supplied).
As a matter of state policy as expressed in the Constitution, the Philippine Government
adopts the generally accepted principles of international law (1987 Constitution, Art. II,
Sec. 2). Being a member of the United Nations and a party to the Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations, the
Philippine Government adheres to the doctrine of immunity granted to the United
Nations and its specialized agencies. Both treaties have the force and effect of law.
In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule
that:
It is a recognized principle of international law and under our system of
separation of powers thatdiplomatic immunity is essentially a political
question and courts should refuse to look beyond a determination by the
executive branch of the government, and where the plea of diplomatic
immunity is recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts to accept
the claim of immunity upon appropriate suggestion by the principal law
officer of the government, the Solicitor General or other officer acting under
his direction. Hence, in adherence to the settled principle that courts may
not so exercise their jurisdiction by seizure and detention of property, as to
embarrass the executive arm of the government in conducting foreign
relations, it is accepted doctrine that "in such cases the judicial department
of (this) government follows the action of the political branch and will not
Page 393 of 497

embarrass the latter by assuming an antagonistic jurisdiction (Emphasis

supplied).
We recognize the growth of international organizations dedicated to specific universal
endeavors, such as health, agriculture, science and technology and environment. It is not
surprising that their existence has evolved into the concept of international immunities.
The reason behind the grant of privileges and immunities to international organizations,
its officials and functionaries is to secure them legal and practical independence in
fulfilling their duties (Jenks, International Immunities 17 [1961]).
Immunity is necessary to assure unimpeded performance of their functions. The purpose
is "to shield the affairs of international organizations, in accordance with international
practice, from political pressure or control by the host country to the prejudice of
member States of the organization, and to ensure the unhampered performance of their
functions" (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).
In the International Catholic Migration Commission case, we held that there is no conflict
between the constitutional duty of the State to protect the rights of workers and to
promote their welfare, and the grant of immunity to international organizations. Clauses
on jurisdictional immunity are now standard in the charters of the international
organizations to guarantee the smooth discharge of their functions.
The diplomatic immunity of private respondent was sufficiently established by the letter
of the Department of Foreign Affairs, recognizing and confirming the immunity of
UNRFNRE in accordance with the 1946 Convention on Privileges and Immunities of the
United Nations where the Philippine Government was a party. The issue whether an
international organization is entitled to diplomatic immunity is a "political question" and
such determination by the executive branch is conclusive on the courts and quasi-judicial
agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No. 101949, Dec. 1, 1994;
International Catholic Migration Commission v. Calleja, supra).
Our courts can only assume jurisdiction over private respondent if it expressly waived its
immunity, which is not so in the case at bench (Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations, Art. III, Sec. 4).
Private respondent is not engaged in a commercial venture in the Philippines. Its
presence here is by virtue of a joint project entered into by the Philippine Government
and the United Nations for mineral exploration in Dinagat Island. Its mission is not to
exploit our natural resources and gain pecuniarily thereby but to help improve the
quality of life of the people, including that of petitioners.
This is not to say that petitioner have no recourse. Section 31 of the Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations states that
"each specialized agency shall make a provision for appropriate modes of settlement of:
Page 394 of 497

(a) disputes arising out of contracts or other disputes of private character to which the
specialized agency is a party."
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 76607 February 26, 1990
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE
REEVES, petitioners,
vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court,
Angeles City, ROBERTO T. VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C.
DEL PILAR, respondents.
G.R. No. 79470 February 26, 1990
UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF, WILFREDO
BELSA, PETER ORASCION AND ROSE CARTALLA, petitioners,
vs.
HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch 7, Regional Trial
Court (BAGUIO CITY), La Trinidad, Benguet and FABIAN GENOVE, respondents.
G.R. No. 80018 February 26, 1990
UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F.
BOSTICK, petitioners,
vs.
HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional Trial Court, Branch
66, Capas, Tarlac, and LUIS BAUTISTA, respondents.
G.R. No. 80258 February 26, 1990
UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C. CARNS, AIC
ERNEST E. RIVENBURGH, AIC ROBIN BLEVINS, SGT. NOEL A. GONZALES, SGT.
THOMAS MITCHELL, SGT. WAYNE L. BENJAMIN, ET AL., petitioners,
vs.
Page 395 of 497

HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge, Branch 62

REGIONAL TRIAL COURT, Angeles City, and RICKY SANCHEZ, FREDDIE SANCHEZ
AKA FREDDIE RIVERA, EDWIN MARIANO, AKA JESSIE DOLORES SANGALANG, ET
AL., respondents.
Luna, Sison & Manas Law Office for petitioners.

CRUZ, J.:
These cases have been consolidated because they all involve the doctrine of
state immunity. The United States of America was not impleaded in the
complaints below but has moved to dismiss on the ground that they are in
effect suits against it to which it has not consented. It is now contesting the
denial of its motions by the respondent judges.
In G.R. No. 76607, the private respondents are suing several officers of the
U.S. Air Force stationed in Clark Air Base in connection with the bidding
conducted by them for contracts for barber services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area
Exchange, U.S. Air Force, solicited bids for such contracts through its
contracting officer, James F. Shaw. Among those who submitted their bids were
private respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C.
del Pilar. Valencia had been a concessionaire inside Clark for 34 years; del Pilar
for 12 years; and Tanglao for 50 years.
The bidding was won by Ramon Dizon, over the objection of the private
respondents, who claimed that he had made a bid for four facilities, including
the Civil Engineering Area, which was not included in the invitation to bid.
The private respondents complained to the Philippine Area Exchange (PHAX).
The latter, through its representatives, petitioners Yvonne Reeves and Frederic
M. Smouse explained that the Civil Engineering concession had not been
awarded to Dizon as a result of the February 24, 1986 solicitation. Dizon was
already operating this concession, then known as the NCO club concession,
and the expiration of the contract had been extended from June 30, 1986 to
August 31, 1986. They further explained that the solicitation of the CE
barbershop would be available only by the end of June and the private
respondents would be notified.
On June 30, 1986, the private respondents filed a complaint in the court below
to compel PHAX and the individual petitioners to cancel the award to
Page 396 of 497

defendant Dizon, to conduct a rebidding for the barbershop concessions and to

allow the private respondents by a writ of preliminary injunction to continue
operating the concessions pending litigation. 1
Upon the filing of the complaint, the respondent court issued an ex parte order
directing the individual petitioners to maintain the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and opposition to
the petition for preliminary injunction on the ground that the action was in
effect a suit against the United States of America, which had not waived its
non-suability. The individual defendants, as official employees of the U.S. Air
Force, were also immune from suit.
On the same date, July 22, 1986, the trial court denied the application for a
writ of preliminary injunction.
On October 10, 1988, the trial court denied the petitioners' motion to dismiss,
holding in part as follows:
From the pleadings thus far presented to this Court by the parties,
the Court's attention is called by the relationship between the
plaintiffs as well as the defendants, including the US Government,
in that prior to the bidding or solicitation in question, there was a
binding contract between the plaintiffs as well as the defendants,
including the US Government. By virtue of said contract of
concession it is the Court's understanding that neither the US
Government nor the herein principal defendants would become the
employer/s of the plaintiffs but that the latter are the employers
themselves of the barbers, etc. with the employer, the plaintiffs
herein, remitting the stipulated percentage of commissions to the
Philippine Area Exchange. The same circumstance would become in
effect when the Philippine Area Exchange opened for bidding or
solicitation the questioned barber shop concessions. To this extent,
therefore, indeed a commercial transaction has been entered, and
for purposes of the said solicitation, would necessarily be entered
between the plaintiffs as well as the defendants.
The Court, further, is of the view that Article XVIII of the RP-US
Bases Agreement does not cover such kind of services falling under
the concessionaireship, such as a barber shop concession. 2
On December 11, 1986, following the filing of the herein petition
for certiorari and prohibition with preliminary injunction, we issued a
temporary restraining order against further proceedings in the court below.
Page 397 of 497

In G.R. No. 79470, Fabian Genove filed a complaint for damages against
petitioners Anthony Lamachia, Wilfredo Belsa, Rose Cartalla and Peter
Orascion for his dismissal as cook in the U.S. Air Force Recreation Center at
the John Hay Air Station in Baguio City. It had been ascertained after
investigation, from the testimony of Belsa Cartalla and Orascion, that Genove
had poured urine into the soup stock used in cooking the vegetables served to
the club customers. Lamachia, as club manager, suspended him and thereafter
referred the case to a board of arbitrators conformably to the collective
bargaining agreement between the Center and its employees. The board
unanimously found him guilty and recommended his dismissal. This was
effected on March 5, 1986, by Col. David C. Kimball, Commander of the 3rd
Combat Support Group, PACAF Clark Air Force Base. Genove's reaction was to
file Ms complaint in the Regional Trial Court of Baguio City against the
individual petitioners. 4
On March 13, 1987, the defendants, joined by the United States of America,
moved to dismiss the complaint, alleging that Lamachia, as an officer of the
U.S. Air Force stationed at John Hay Air Station, was immune from suit for the
acts done by him in his official capacity. They argued that the suit was in effect
against the United States, which had not given its consent to be sued.
This motion was denied by the respondent judge on June 4, 1987, in an order
which read in part:
It is the understanding of the Court, based on the allegations of the
complaint which have been hypothetically admitted by
defendants upon the filing of their motion to dismiss that
although defendants acted initially in their official capacities, their
going beyond what their functions called for brought them out of
the protective mantle of whatever immunities they may have had
in the beginning. Thus, the allegation that the acts complained of
were illegal, done. with extreme bad faith and with pre-conceived
sinister plan to harass and finally dismiss the plaintiff, gains
significance. 5
The petitioners then came to this Court seeking certiorari and prohibition with
preliminary injunction.
In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp
O' Donnell, an extension of Clark Air Base, was arrested following a buy-bust
operation conducted by the individual petitioners herein, namely, Tomi J. King,
Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air Force and special
agents of the Air Force Office of Special Investigators (AFOSI). On the basis of
the sworn statements made by them, an information for violation of R.A. 6425,
Page 398 of 497

otherwise known as the Dangerous Drugs Act, was filed against Bautista in the
Regional Trial Court of Tarlac. The above-named officers testified against him
at his trial. As a result of the filing of the charge, Bautista was dismissed from
his employment. He then filed a complaint for damages against the individual
petitioners herein claiming that it was because of their acts that he was
removed. 6
During the period for filing of the answer, Mariano Y. Navarro a special counsel
assigned to the International Law Division, Office of the Staff Judge Advocate
of Clark Air Base, entered a special appearance for the defendants and moved
for an extension within which to file an "answer and/or other pleadings." His
reason was that the Attorney General of the United States had not yet
designated counsel to represent the defendants, who were being sued for
their official acts. Within the extended period, the defendants, without the
assistance of counsel or authority from the U.S. Department of Justice, filed
their answer. They alleged therein as affirmative defenses that they had only
done their duty in the enforcement of the laws of the Philippines inside the
American bases pursuant to the RP-US Military Bases Agreement.
On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained
to represent the defendants, filed with leave of court a motion to withdraw the
answer and dismiss the complaint. The ground invoked was that the
defendants were acting in their official capacity when they did the acts
complained of and that the complaint against them was in effect a suit against
the United States without its consent.
The motion was denied by the respondent judge in his order dated September
11, 1987, which held that the claimed immunity under the Military Bases
Agreement covered only criminal and not civil cases. Moreover, the defendants
had come under the jurisdiction of the court when they submitted their
answer. 7
Following the filing of the herein petition for certiorari and prohibition with
preliminary injunction, we issued on October 14, 1987, a temporary restraining
order. 8
In G.R. No. 80258, a complaint for damages was filed by the private
respondents against the herein petitioners (except the United States of
America), for injuries allegedly sustained by the plaintiffs as a result of the
acts of the defendants. 9 There is a conflict of factual allegations here.
According to the plaintiffs, the defendants beat them up, handcuffed them and
unleashed dogs on them which bit them in several parts of their bodies and
caused extensive injuries to them. The defendants deny this and claim the
plaintiffs were arrested for theft and were bitten by the dogs because they
Page 399 of 497

were struggling and resisting arrest, The defendants stress that the dogs were
called off and the plaintiffs were immediately taken to the medical center for
treatment of their wounds.
In a motion to dismiss the complaint, the United States of America and the
individually named defendants argued that the suit was in effect a suit against
the United States, which had not given its consent to be sued. The defendants
were also immune from suit under the RP-US Bases Treaty for acts done by
them in the performance of their official functions.
The motion to dismiss was denied by the trial court in its order dated August
10, 1987, reading in part as follows:
The defendants certainly cannot correctly argue that they are
immune from suit. The allegations, of the complaint which is
sought to be dismissed, had to be hypothetically admitted and
whatever ground the defendants may have, had to be ventilated
during the trial of the case on the merits. The complaint alleged
criminal acts against the individually-named defendants and from
the nature of said acts it could not be said that they are Acts of
State, for which immunity should be invoked. If the Filipinos
themselves are duty bound to respect, obey and submit
themselves to the laws of the country, with more reason, the
members of the United States Armed Forces who are being treated
as guests of this country should respect, obey and submit
themselves to its laws. 10
and so was the motion for reconsideration. The defendants submitted their
answer as required but subsequently filed their petition for certiorari and
prohibition with preliminary injunction with this Court. We issued a temporary
restraining order on October 27, 1987. 11
II
The rule that a state may not be sued without its consent, now expressed in
Article XVI, Section 3, of the 1987 Constitution, is one of the generally
accepted principles of international law that we have adopted as part of the
law of our land under Article II, Section 2. This latter provision merely
reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and
also intended to manifest our resolve to abide by the rules of the international
community.
Even without such affirmation, we would still be bound by the generally
accepted principles of international law under the doctrine of incorporation.
Page 400 of 497

Under this doctrine, as accepted by the majority of states, such principles are
deemed incorporated in the law of every civilized state as a condition and
consequence of its membership in the society of nations. Upon its admission to
such society, the state is automatically obligated to comply with these
principles in its relations with other states.
As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that "there can be no legal right against
the authority which makes the law on which the right depends." 12 There are
other practical reasons for the enforcement of the doctrine. In the case of the
foreign state sought to be impleaded in the local jurisdiction, the added
inhibition is expressed in the maxim par in parem, non habet imperium. All
states are sovereign equals and cannot assert jurisdiction over one another. A
contrary disposition would, in the language of a celebrated case, "unduly vex
the peace of nations." 13
While the doctrine appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state
for acts allegedly performed by them in the discharge of their duties. The rule
is that if the judgment against such officials will require the state itself to
perform an affirmative act to satisfy the same, such as the appropriation of
the amount needed to pay the damages awarded against them, the suit must
be regarded as against the state itself although it has not been formally
impleaded. 14 In such a situation, the state may move to dismiss the complaint
on the ground that it has been filed without its consent.
The doctrine is sometimes derisively called "the royal prerogative of
dishonesty" because of the privilege it grants the state to defeat any
legitimate claim against it by simply invoking its non-suability. That is hardly
fair, at least in democratic societies, for the state is not an unfeeling tyrant
unmoved by the valid claims of its citizens. In fact, the doctrine is not absolute
and does not say the state may not be sued under any circumstance. On the
contrary, the rule says that the state may not be sued without its consent,
which clearly imports that it may be sued if it consents.
The consent of the state to be sued may be manifested expressly or impliedly.
Express consent may be embodied in a general law or a special law. Consent is
implied when the state enters into a contract or it itself commences litigation.
The general law waiving the immunity of the state from suit is found in Act No.
3083, under which the Philippine government "consents and submits to be
sued upon any moneyed claim involving liability arising from contract, express
or implied, which could serve as a basis of civil action between private
parties." In Merritt v. Government of the Philippine Islands, 15 a special law was
Page 401 of 497

passed to enable a person to sue the government for an alleged tort. When the
government enters into a contract, it is deemed to have descended to the level
of the other contracting party and divested of its sovereign immunity from suit
with its implied consent.16 Waiver is also implied when the government files a
complaint, thus opening itself to a counterclaim. 17
The above rules are subject to qualification. Express consent is effected only
by the will of the legislature through the medium of a duly enacted
statute. 18 We have held that not all contracts entered into by the government
will operate as a waiver of its non-suability; distinction must be made between
its sovereign and proprietary acts. 19 As for the filing of a complaint by the
government, suability will result only where the government is claiming
affirmative relief from the defendant. 20
In the case of the United States of America, the customary rule of international
law on state immunity is expressed with more specificity in the RP-US Bases
Treaty. Article III thereof provides as follows:
It is mutually agreed that the United States shall have the rights,
power and authority within the bases which are necessary for the
establishment, use, operation and defense thereof or appropriate
for the control thereof and all the rights, power and authority
within the limits of the territorial waters and air space adjacent to,
or in the vicinity of, the bases which are necessary to provide
access to them or appropriate for their control.
The petitioners also rely heavily on Baer v. Tizon, 21 along with several other
decisions, to support their position that they are not suable in the cases
below, the United States not having waived its sovereign immunity from suit.
It is emphasized that in Baer, the Court held:
The invocation of the doctrine of immunity from suit of a foreign
state without its consent is appropriate. More specifically, insofar
as alien armed forces is concerned, the starting point is Raquiza v.
Bradford, a 1945 decision. In dismissing a habeas corpus petition
for the release of petitioners confined by American army
authorities, Justice Hilado speaking for the Court, cited Coleman v.
Tennessee, where it was explicitly declared: 'It is well settled that a
foreign army, permitted to march through a friendly country or to
be stationed in it, by permission of its government or sovereign, is
exempt from the civil and criminal jurisdiction of the place.' Two
years later, in Tubb and Tedrow v. Griess, this Court relied on the
ruling in Raquiza v. Bradford and cited in support thereof excerpts
from the works of the following authoritative writers: Vattel,
Page 402 of 497

Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair

and Lauterpacht. Accuracy demands the clarification that after the
conclusion of the Philippine-American Military Bases Agreement,
the treaty provisions should control on such matter, the
assumption being that there was a manifestation of the submission
to jurisdiction on the part of the foreign power whenever
appropriate. More to the point is Syquia v. Almeda Lopez, where
plaintiffs as lessors sued the Commanding General of the United
States Army in the Philippines, seeking the restoration to them of
the apartment buildings they owned leased to the United States
armed forces stationed in the Manila area. A motion to dismiss on
the ground of non-suability was filed and upheld by respondent
Judge. The matter was taken to this Court in a mandamus
proceeding. It failed. It was the ruling that respondent Judge acted
correctly considering that the 4 action must be considered as one
against the U.S. Government. The opinion of Justice Montemayor
continued: 'It is clear that the courts of the Philippines including
the Municipal Court of Manila have no jurisdiction over the present
case for unlawful detainer. The question of lack of jurisdiction was
raised and interposed at the very beginning of the action. The U.S.
Government has not given its consent to the filing of this suit
which is essentially against her, though not in name. Moreover, this
is not only a case of a citizen filing a suit against his own
Government without the latter's consent but it is of a citizen firing
an action against a foreign government without said government's
consent, which renders more obvious the lack of jurisdiction of the
courts of his country. The principles of law behind this rule are so
elementary and of such general acceptance that we deem it
unnecessary to cite authorities in support thereof then
came Marvel Building Corporation v. Philippine War Damage
Commission, where respondent, a United States Agency
established to compensate damages suffered by the Philippines
during World War II was held as falling within the above doctrine as
the suit against it would eventually be a charge against or financial
liability of the United States Government because ... , the
Commission has no funds of its own for the purpose of paying
money judgments.' The Syquia ruling was again explicitly relied
upon in Marquez Lim v. Nelson, involving a complaint for the
recovery of a motor launch, plus damages, the special defense
interposed being 'that the vessel belonged to the United States
Government, that the defendants merely acted as agents of said
Government, and that the United States Government is therefore
the real party in interest.' So it was in Philippine Alien Property
Administration v. Castelo, where it was held that a suit against
Page 403 of 497

Alien Property Custodian and the Attorney General of the United

States involving vested property under the Trading with the Enemy
Act is in substance a suit against the United States. To the same
effect is Parreno v. McGranery, as the following excerpt from the
opinion of justice Tuazon clearly shows: 'It is a widely accepted
principle of international law, which is made a part of the law of
the land (Article II, Section 3 of the Constitution), that a foreign
state may not be brought to suit before the courts of another state
or its own courts without its consent.' Finally, there is Johnson v.
Turner, an appeal by the defendant, then Commanding General,
Philippine Command (Air Force, with office at Clark Field) from a
decision ordering the return to plaintiff of the confiscated military
payment certificates known as scrip money. In reversing the lower
court decision, this Tribunal, through Justice Montemayor, relied
on Syquia v. Almeda Lopez, explaining why it could not be
sustained.
It bears stressing at this point that the above observations do not confer on
the United States of America a blanket immunity for all acts done by it or its
agents in the Philippines. Neither may the other petitioners claim that they are
also insulated from suit in this country merely because they have acted as
agents of the United States in the discharge of their official functions.
There is no question that the United States of America, like any other state,
will be deemed to have impliedly waived its non-suability if it has entered into
a contract in its proprietary or private capacity. It is only when the contract
involves its sovereign or governmental capacity that no such waiver may be
implied. This was our ruling in United States of America v. Ruiz, 22 where the
transaction in question dealt with the improvement of the wharves in the
naval installation at Subic Bay. As this was a clearly governmental function, we
held that the contract did not operate to divest the United States of its
sovereign immunity from suit. In the words of Justice Vicente Abad Santos:
The traditional rule of immunity exempts a State from being sued
in the courts of another State without its consent or waiver. This
rule is a necessary consequence of the principles of independence
and equality of States. However, the rules of International Law are
not petrified; they are constantly developing and evolving. And
because the activities of states have multiplied, it has been
necessary to distinguish them between sovereign and
governmental acts (jure imperii) and private, commercial and
proprietary acts (jure gestionis). The result is that State immunity
now extends only to acts jure imperii The restrictive application of

Page 404 of 497

State immunity is now the rule in the United States, the United
kingdom and other states in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when
the proceedings arise out of commercial transactions of the foreign
sovereign, its commercial activities or economic affairs. Stated
differently, a State may be said to have descended to the level of
an individual and can thus be deemed to have tacitly given its
consent to be sued only when it enters into business contracts. It
does not apply where the contract relates to the exercise of its
sovereign functions. In this case the projects are an integral part of
the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the
government of the highest order; they are not utilized for nor
dedicated to commercial or business purposes.
The other petitioners in the cases before us all aver they have acted in the
discharge of their official functions as officers or agents of the United States.
However, this is a matter of evidence. The charges against them may not be
summarily dismissed on their mere assertion that their acts are imputable to
the United States of America, which has not given its consent to be sued. In
fact, the defendants are sought to be held answerable for personal torts in
which the United States itself is not involved. If found liable, they and they
alone must satisfy the judgment.
In Festejo v. Fernando, 23 a bureau director, acting without any authority
whatsoever, appropriated private land and converted it into public irrigation
ditches. Sued for the value of the lots invalidly taken by him, he moved to
dismiss the complaint on the ground that the suit was in effect against the
Philippine government, which had not given its consent to be sued. This Court
sustained the denial of the motion and held that the doctrine of state
immunity was not applicable. The director was being sued in his private
capacity for a personal tort.
With these considerations in mind, we now proceed to resolve the cases at
hand.
III
It is clear from a study of the records of G.R. No. 80018 that the individuallynamed petitioners therein were acting in the exercise of their official functions
when they conducted the buy-bust operation against the complainant and
Page 405 of 497

thereafter testified against him at his trial. The said petitioners were in fact
connected with the Air Force Office of Special Investigators and were charged
precisely with the function of preventing the distribution, possession and use
of prohibited drugs and prosecuting those guilty of such acts. It cannot for a
moment be imagined that they were acting in their private or unofficial
capacity when they apprehended and later testified against the complainant. It
follows that for discharging their duties as agents of the United States, they
cannot be directly impleaded for acts imputable to their principal, which has
not given its consent to be sued. As we observed in Sanders v. Veridiano: 24
Given the official character of the above-described letters, we have
to conclude that the petitioners were, legally speaking, being sued
as officers of the United States government. As they have acted on
behalf of that government, and within the scope of their authority,
it is that government, and not the petitioners personally, that is
responsible for their acts.
The private respondent invokes Article 2180 of the Civil Code which holds the
government liable if it acts through a special agent. The argument, it would
seem, is premised on the ground that since the officers are designated "special
agents," the United States government should be liable for their torts.
There seems to be a failure to distinguish between suability and liability and a
misconception that the two terms are synonymous. Suability depends on the
consent of the state to be sued, liability on the applicable law and the
established facts. The circumstance that a state is suable does not necessarily
mean that it is liable; on the other hand, it can never be held liable if it does
not first consent to be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive its sovereign
immunity, it is only giving the plaintiff the chance to prove, if it can, that the
defendant is liable.
The said article establishes a rule of liability, not suability. The government
may be held liable under this rule only if it first allows itself to be sued
through any of the accepted forms of consent.
Moreover, the agent performing his regular functions is not a special agent
even if he is so denominated, as in the case at bar. No less important, the said
provision appears to regulate only the relations of the local state with its
inhabitants and, hence, applies only to the Philippine government and not to
foreign governments impleaded in our courts.
We reject the conclusion of the trial court that the answer filed by the special
counsel of the Office of the Sheriff Judge Advocate of Clark Air Base was a
Page 406 of 497

submission by the United States government to its jurisdiction. As we noted

in Republic v. Purisima, 25 express waiver of immunity cannot be made by a
mere counsel of the government but must be effected through a duly-enacted
statute. Neither does such answer come under the implied forms of consent as
earlier discussed.
But even as we are certain that the individual petitioners in G.R. No. 80018
were acting in the discharge of their official functions, we hesitate to make the
same conclusion in G.R. No. 80258. The contradictory factual allegations in this
case deserve in our view a closer study of what actually happened to the
plaintiffs. The record is too meager to indicate if the defendants were really
discharging their official duties or had actually exceeded their authority when
the incident in question occurred. Lacking this information, this Court cannot
directly decide this case. The needed inquiry must first be made by the lower
court so it may assess and resolve the conflicting claims of the parties on the
basis of the evidence that has yet to be presented at the trial. Only after it
shall have determined in what capacity the petitioners were acting at the time
of the incident in question will this Court determine, if still necessary, if the
doctrine of state immunity is applicable.
In G.R. No. 79470, private respondent Genove was employed as a cook in the
Main Club located at the U.S. Air Force Recreation Center, also known as the
Open Mess Complex, at John Hay Air Station. As manager of this complex,
petitioner Lamachia is responsible for eleven diversified activities generating
an annual income of $2 million. Under his executive management are three
service restaurants, a cafeteria, a bakery, a Class VI store, a coffee and pantry
shop, a main cashier cage, an administrative office, and a decentralized
warehouse which maintains a stock level of $200,000.00 per month in resale
items. He supervises 167 employees, one of whom was Genove, with whom the
United States government has concluded a collective bargaining agreement.
From these circumstances, the Court can assume that the restaurant services
offered at the John Hay Air Station partake of the nature of a business
enterprise undertaken by the United States government in its proprietary
capacity. Such services are not extended to the American servicemen for free
as a perquisite of membership in the Armed Forces of the United States.
Neither does it appear that they are exclusively offered to these servicemen;
on the contrary, it is well known that they are available to the general public
as well, including the tourists in Baguio City, many of whom make it a point to
visit John Hay for this reason. All persons availing themselves of this facility
pay for the privilege like all other customers as in ordinary restaurants.
Although the prices are concededly reasonable and relatively low, such
services are undoubtedly operated for profit, as a commercial and not a
governmental activity.
Page 407 of 497

The consequence of this finding is that the petitioners cannot invoke the
doctrine of state immunity to justify the dismissal of the damage suit against
them by Genove. Such defense will not prosper even if it be established that
they were acting as agents of the United States when they investigated and
later dismissed Genove. For that matter, not even the United States
government itself can claim such immunity. The reason is that by entering into
the employment contract with Genove in the discharge of its proprietary
functions, it impliedly divested itself of its sovereign immunity from suit.
But these considerations notwithstanding, we hold that the complaint against
the petitioners in the court below must still be dismissed. While suable, the
petitioners are nevertheless not liable. It is obvious that the claim for damages
cannot be allowed on the strength of the evidence before us, which we have
carefully examined.
The dismissal of the private respondent was decided upon only after a
thorough investigation where it was established beyond doubt that he had
polluted the soup stock with urine. The investigation, in fact, did not stop
there. Despite the definitive finding of Genove's guilt, the case was still
referred to the board of arbitrators provided for in the collective bargaining
agreement. This board unanimously affirmed the findings of the investigators
and recommended Genove's dismissal. There was nothing arbitrary about the
proceedings. The petitioners acted quite properly in terminating the private
respondent's employment for his unbelievably nauseating act. It is surprising
that he should still have the temerity to file his complaint for damages after
committing his utterly disgusting offense.
Concerning G.R. No. 76607, we also find that the barbershops subject of the
concessions granted by the United States government are commercial
enterprises operated by private person's. They are not agencies of the United
States Armed Forces nor are their facilities demandable as a matter of right by
the American servicemen. These establishments provide for the grooming
needs of their customers and offer not only the basic haircut and shave (as
required in most military organizations) but such other amenities as shampoo,
massage, manicure and other similar indulgences. And all for a fee.
Interestingly, one of the concessionaires, private respondent Valencia, was
even sent abroad to improve his tonsorial business, presumably for the benefit
of his customers. No less significantly, if not more so, all the barbershop
concessionaires are under the terms of their contracts, required to remit to
the United States government fixed commissions in consideration of the
exclusive concessions granted to them in their respective areas.
This being the case, the petitioners cannot plead any immunity from the
complaint filed by the private respondents in the court below. The contracts in
Page 408 of 497

question being decidedly commercial, the conclusion reached in the United

States of America v. Ruiz case cannot be applied here.
The Court would have directly resolved the claims against the defendants as
we have done in G.R. No. 79470, except for the paucity of the record in the
case at hand. The evidence of the alleged irregularity in the grant of the
barbershop concessions is not before us. This means that, as in G.R. No.
80258, the respondent court will have to receive that evidence first, so it can
later determine on the basis thereof if the plaintiffs are entitled to the relief
they seek. Accordingly, this case must also be remanded to the court below for
further proceedings.
IV
There are a number of other cases now pending before us which also involve
the question of the immunity of the United States from the jurisdiction of the
Philippines. This is cause for regret, indeed, as they mar the traditional
friendship between two countries long allied in the cause of democracy. It is
hoped that the so-called "irritants" in their relations will be resolved in a spirit
of mutual accommodation and respect, without the inconvenience and asperity
of litigation and always with justice to both parties.
WHEREFORE, after considering all the above premises, the Court hereby
renders judgment as follows:
1. In G.R. No. 76607, the petition is DISMISSED and the respondent
judge is directed to proceed with the hearing and decision of Civil
Case No. 4772. The temporary restraining order dated December
11, 1986, is LIFTED.
2. In G.R. No. 79470, the petition is GRANTED and Civil Case No.
829-R(298) is DISMISSED.
3. In G.R. No. 80018, the petition is GRANTED and Civil Case No.
115-C-87 is DISMISSED. The temporary restraining order dated
October 14, 1987, is made permanent.
4. In G.R. No. 80258, the petition is DISMISSED and the respondent
court is directed to proceed with the hearing and decision of Civil
Case No. 4996. The temporary restraining order dated October 27,
1987, is LIFTED.
All without any pronouncement as to costs.

Page 409 of 497

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 124382

August 16, 1999

PASTOR DIONISIO V. AUSTRIA, petitioner,

vs.
HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY,
CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY
ADVENTISTS, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR
L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT,
ISACHAR GARSULA, ELISEO DOBLE, PORFIRIO BALACY, DAVID RODRIGO,
LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE
BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA, respondents.
KAPUNAN, J.:
Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the
Resolution1 of public respondent National Labor Relations Commission (the "NLRC"),
rendered on 23 January 1996, in NLRC Case No. V-0120-93, entitled "Pastor Dionisio V.
Austria vs. Central Philippine Union Mission Corporation of Seventh Day Adventists, et
al.," which dismissed the case for illegal dismissal filed by the petitioner against private
respondents for lack of jurisdiction.1wphi1.nt
Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day
Adventists (hereinafter referred to as the "SDA") is a religious corporation duly organized
and existing under Philippine law and is represented in this case by the other private
respondents, officers of the SDA. Petitioner, on the other hand, was a Pastor of the SDA
until 31 October 1991, when his services were terminated.
The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for
twenty eight (28) years from 1963 to 1991.2 He began his work with the SDA on 15 July
1963 as a literature evangelist, selling literature of the SDA over the island of Negros.
From then on, petitioner worked his way up the ladder and got promoted several times.
In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan
Mission of the SDA. In July, 1972, he was elevated to the position of Pastor in the West
Visayan Mission covering the island of Panay, and the provinces of Romblon and
Guimaras. Petitioner held the same position up to 1988. Finally, in 1989, petitioner was
promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay,
Page 410 of 497

Balintawak and Toboso, Negros Occidental, with twelve (12) churches under his
jurisdiction. In January, 1991, petitioner was transferred to Bacolod City. He held the
position of district pastor until his services were terminated on 31 October 1991.
On various occasions from August up to October, 1991, petitioner received several
communications3 from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking
him to admit accountability and responsibility for the church tithes and offerings
collected by his wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10,
and to remit the same to the Negros Mission.
In his written explanation dated 11 October 1991, 4 petitioner reasoned out that he
should not be made accountable for the unremitted collections since it was private
respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who authorized his wife to
collect the tithes and offerings since he was very sick to do the collecting at that time.
Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of
Pastor Buhat, the president of the Negros Mission. During said call, petitioner tried to
persuade Pastor Buhat to convene the Executive Committee for the purpose of settling
the dispute between him and the private respondent, Pastor David Rodrigo. The dispute
between Pastor Rodrigo and petitioner arose from an incident in which petitioner assisted
his friend, Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for the
repair of the latter's motor vehicle which he failed to pay to Diamada. 5 Due to the
assistance of petitioner in collecting Pastor Rodrigo's debt, the latter harbored ill-feelings
against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a
complaint against him with the Negros Mission, he immediately proceeded to the office
of Pastor Buhat on the date abovementioned and asked the latter to convene the
Executive Committee. Pastor Buhat denied the request of petitioner since some
committee members were out of town and there was no quorum. Thereafter, the two
exchanged heated arguments. Petitioner then left the office of Pastor Buhat. While on his
way out, petitioner overheard Pastor Buhat saying, "Pastor daw inisog na ina iya (Pador
you are talking tough)."6 Irked by such remark, petitioner returned to the office of Pastor
Buhat, and tried to overturn the latter's table, though unsuccessfully, since it was heavy.
Thereafter, petitioner banged the attach case of Pastor Buhat on the table, scattered
the books in his office, and threw the phone. 7 Fortunately, private respondents Pastors
Yonilo Leopoldo and Claudio Montao were around and they pacified both Pastor Buhat
and petitioner.
On 17 October 1991, petitioner received a letter 8 inviting him and his wife to attend the
Executive Committee meeting at the Negros Mission Conference Room on 21 October
1991, at nine in the morning. To be discussed in the meeting were the non-remittance of
church collection and the events that transpired on 16 October 1991. A fact-finding
committee was created to investigate petitioner. For two (2) days, from October 21 and
22, the fact-finding committee conducted an investigation of petitioner. Sensing that the
result of the investigation might be one-sided, petitioner immediately wrote Pastor
Page 411 of 497

Rueben Moralde, president of the SDA and chairman of the fact-finding committee,
requesting that certain members of the fact-finding committee be excluded in the
investigation and resolution of the case.9 Out of the six (6) members requested to inhibit
themselves from the investigation and decision-making, only two (2) were actually
excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991,
petitioner received a letter of dismissal 10 citing misappropriation of denominational
funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties,
and commission of an offense against the person of employer's duly authorized
representative, as grounds for the termination of his services.
Reacting against the adverse decision of the SDA, petitioner filed a complaint 11 on 14
November 1991, before the Labor Arbiter for illegal dismissal against the SDA and its
officers and prayed for reinstatement with backwages and benefits, moral and exemplary
damages and other labor law benefits.
On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of
petitioner, the dispositive portion of which reads thus:
WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION
MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its
officers, respondents herein, are hereby ordered to immediately reinstate
complainant Pastor Dionisio Austria to his former position as Pastor of Brgy.
Taculing, Progreso and Banago, Bacolod City, without loss of seniority and other
rights and backwages in the amount of ONE HUNDRED FIFTEEN THOUSAND EIGHT
HUNDRED THIRTY PESOS (P115,830.00) without deductions and qualificatioons.
Respondent CPUMCSDA is further ordered to pay complainant the following:
A. 13th month pay P 21,060.00
B. Allowance P 4,770.83
C. Service Incentive
Leave Pay P 3,461.85
D. Moral Damages P 50,000.00
E. Exemplary
Damages P 25,000.00
F. Attorney's Fee P 22,012.27

Page 412 of 497

SO ORDERED.12
The SDA, through its officers, appealed the decision of the Labor Arbiter to the National
Labor Labor Relations Commission, Fourth Division, Cebu City. In a decision, dated 26
August 1994, the NLRC vacated the findings of the Labor Arbiter. The decretal portion of
the NLRC decision states:
WHEREFORE, the Decision appealed from is hereby VACATED and a new one
ENTERED dismissing this case for want of merit.
SO ORDERED.13
Petitioner filed a motion for reconsideration of the above-named decision. On 18 July
1995, the NLRC issued a Resolution reversing its original decision. The dispositive portion
of the resolution reads:
WHEREFORE, premises considered, Our decision dated August 26, 1994 is
VACATED and the decision of the Labor Arbiter dated February 15, 1993 is
REINSTATED.
SO ORDERED.14
In view of the reversal of the original decision of the NLRC, the SDA filed a motion for
reconsideration of the above resolution. Notable in the motion for reconsideration filed
by private respondents is their invocation, for the first time on appeal, that the Labor
Arbiter has no jurisdiction over the complaint filed by petitioner due to the constitutional
provision on the separation of church and state since the case allegedly involved an
ecclesiastical affair to which the State cannot interfere.
The NLRC, without ruling on the merits of the case, reversed itself once again, sustained
the argument posed by private respondents and, accordingly, dismissed the complaint of
petitioner. The dispositive portion of the NLRC resolution dated 23 January 1996, subject
of the present petition, is as follows:
WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is
hereby granted. Accordingly, this case is hereby DISMISSED for lack of jurisdiction.
SO ORDERED.15
Hence, the recourse to this Court by petitioner.
After the filing of the petition, the Court ordered the Office of the Solicitor General (the
"OSG") to file its comment on behalf of public respondent NLRC. Interestingly, the OSG
filed a manifestation and motion in lieu of comment 16 setting forth its stand that it
Page 413 of 497

cannot sustain the resolution of the NLRC. In its manifestation, the OSG submits that the
termination of petitioner from his employment may be questioned before the NLRC as
the same is secular in nature, not ecclesiastical. After the submission of memoranda of
all the parties, the case was submitted for decision.
The issues to be resolved in this petition are:
1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the
complaint filed by petitioner against the SDA;
2) Whether or not the termination of the services of petitioner is an ecclesiastical
affair, and, as such, involves the separation of church and state; and
3) Whether or not such termination is valid.
The first two issues shall be resolved jointly, since they are related.
Private respondents contend that by virtue of the doctrine of separation of church and
state, the Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint filed
by petitioner. Since the matter at bar allegedly involves the discipline of a religious
minister, it is to be considered a purely ecclesiastical affair to which the State has no
right to interfere.
The contention of private respondents deserves scant consideration. The principle of
separation of church and state finds no application in this case.
The rationale of the principle of the separation of church and state is summed up in the
familiar saying, "Strong fences make good-neighbors." 17 The idea advocated by this
principle is to delineate the boundaries between the two institutions and thus avoid
encroachments by one against the other because of a misunderstanding of the limits of
their respective exclusive jurisdictions. 18 The demarcation line calls on the entities to
"render therefore unto Ceasar the things that are Ceasar's and unto God the things that
are God's."19 While the state is prohibited from interfering in purely ecclesiastical affairs,
the Church is likewise barred from meddling in purely secular matters. 20
The case at bar does not concern an ecclesiastical or purely religious affair as to bar the
State from taking cognizance of the same. An ecclesiastical affair is "one that concerns
doctrine, creed, or form of worship of the church, or the adoption and enforcement within
a religious association of needful laws and regulations for the government of the
membership, and the power of excluding from such associations those deemed unworthy
of membership.21 Based on this definition, an ecclesiastical affair involves the
relationship between the church and its members and relate to matters of faith, religious
doctrines, worship and governance of the congregation. To be concrete, examples of this
so-called ecclesiastical affairs to which the State cannot meddle are proceedings for
Page 414 of 497

excommunication, ordinations of religious ministers, administration of sacraments and

other activities with attached religious significance. The case at bar does not even
remotely concern any of the abovecited examples. While the matter at hand relates to
the church and its religious minister it does not ipso facto give the case a religious
significance. Simply stated, what is involved here is the relationship of the church as an
employer and the minister as an employee. It is purely secular and has no relation
whatsoever with the practice of faith, worship or doctrines of the church. In this case,
petitioner was not ex-communicated or expelled from the membership of the SDA but
was terminated from employment. Indeed, the matter of terminating an employee, which
is purely secular in nature, is different from the ecclesiastical act of expelling a member
from the religious congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for petitioner's
dismissal, namely: misappropriation of denominational funds, willful breach of trust,
serious misconduct, gross and habitual neglect of duties and commission of an offense
against the person of his employer's duly authorized representative, are all based on
Article 282 of the Labor Code which enumerates the just causes for termination of
employment.22 By this alone, it is palpable that the reason for petitioner's dismissal from
the service is not religious in nature. Coupled with this is the act of the SDA in furnishing
NLRC with a copy of petitioner's letter of termination. As aptly stated by the OSG, this
again is an eloquent admission by private respondents that NLRC has jurisdiction over
the case. Aside from these, SDA admitted in a certification 23 issued by its officer, Mr.
Ibesate, that petitioner has been its employee for twenty-eight (28) years. SDA even
registered petitioner with the Social Security System (SSS) as its employee. As a matter
of fact, the worker's records of petitioner have been submitted by private respondents as
part of their exhibits. From all of these it is clear that when the SDA terminated the
services of petitioner, it was merely exercising its management prerogative to fire an
employee which it believes to be unfit for the job. As such, the State, through the Labor
Arbiter and the NLRC, has the right to take cognizance of the case and to determine
whether the SDA, as employer, rightfully exercised its management prerogative to
dismiss an employee. This is in consonance with the mandate of the Constitution to
afford full protection to labor.
Under the Labor Code, the provision which governs the dismissal of employees, is
comprehensive enough to include religious corporations, such as the SDA, in its
coverage. Article 278 of the Labor Code on post-employment states that "the provisions
of this Title shall apply to all establishments or undertakings, whether for profit or not."
Obviously, the cited article does not make any exception in favor of a religious
corporation. This is made more evident by the fact that the Rules Implementing the
Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment
and Retirement, categorically includes religious institutions in the coverage of the law, to
wit:

Page 415 of 497

Sec. 1. Coverage. This Rule shall apply to all establishments and undertakings,
whether operated for profit or not, including educational, medical, charitable and
religious institutions and organizations, in cases of regular employment with the
exception of the Government and its political subdivisions including governmentowned or controlled corporations.24
With this clear mandate, the SDA cannot hide behind the mantle of protection of the
doctrine of separation of church and state to avoid its responsibilities as an employer
under the Labor Code.
Finally, as correctly pointed out by petitioner, private respondents are estopped from
raising the issue of lack of jurisdiction for the first time on appeal. It is already too late in
the day for private respondents to question the jurisdiction of the NLRC and the Labor
Arbiter since the SDA had fully participated in the trials and hearings of the case from
start to finish. The Court has already ruled that the active participation of a party against
whom the action war brought, coupled with his failure to object to the jurisdiction of the
court or quasi-judicial body where the action is pending, is tantamount to an invocation
of that jurisdiction and a willingness to abide by the resolution of the case and will bar
said party from later on impugning the court or body's jurisdiction. 25 Thus, the active
participation of private respondents in the proceedings before the Labor Arbiter and the
NLRC mooted the question on jurisdiction.
The jurisdictional question now settled, we shall now proceed to determine whether the
dismissal of petitioner was valid.
At the outset, we note that as a general rule, findings of fact of administrative bodies like
the NLRC are binding upon this Court. A review of such findings is justified, however, in
instances when the findings of the NLRC differ from those of the labor arbiter, as in this
case.26 When the findings of NLRC do not agree with those of the Labor Arbiter, this Court
must of necessity review the records to determine which findings should be preferred as
more comfortable to the evidentiary facts. 27
We turn now to the crux of the matter. In termination cases, the settled rule is that the
burden of proving that the termination was for a valid or authorized cause rests on the
employer.28 Thus, private respondents must not merely rely on the weaknesses of
petitioner's evidence but must stand on the merits of their own defense.
The issue being the legality of petitioner's dismissal, the same must be measured
against the requisites for a valid dismissal, namely: (a) the employee must be afforded
due process, i.e., he must be given an opportunity to be heard and to defend himself,
and; (b) the dismissal must be for a valid cause as provided in Article 282 of the Labor
Code.29 Without the concurrence of this twin requirements, the termination would, in the
eyes of the law, be illegal.30

Page 416 of 497

Before the services of an employee can be validly terminated, Article 277 (b) of the
Labor Code and Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code
further require the employer to furnish the employee with two (2) written notices, to wit:
(a) a written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain
his side; and, (b) a written notice of termination served on the employee indicating that
upon due consideration of all the circumstances, grounds have been established to
justify his termination.
The first notice, which may be considered as the proper charge, serves to apprise the
employee of the particular acts or omissions for which his dismissal is sought. 31 The
second notice on the other hand seeks to inform the employee of the employer's
decision to dismiss him.32 This decision, however, must come only after the employee is
given a reasonable period from receipt of the first notice within which to answer the
charge and ample opportunity to be heard and defend himself with the assistance of a
representative, if he so desires. 33 This is in consonance with the express provision of the
law on the protection to labor and the broader dictates of procedural due process. 34 Noncompliance therewith is fatal because these requirements are conditions sine
quanon before dismissal may be validly effected.35
Private respondent failed to substantially comply with the above requirements. With
regard to the first notice, the letter,36 dated 17 October 1991, which notified petitioner
and his wife to attend the meeting on 21 October 1991, cannot be construed as the
written charge required by law. A perusal of the said letter reveals that it never
categorically stated the particular acts or omissions on which petitioner's impending
termination was grounded. In fact, the letter never even mentioned that petitioner would
be subject to investigation. The letter merely mentioned that petitioner and his wife were
invited to a meeting wherein what would be discussed were the alleged unremitted
church tithes and the events that transpired on 16 October 1991. Thus, petitioner was
surprised to find out that the alleged meeting turned out to be an investigation. From the
tenor of the letter, it cannot be presumed that petitioner was actually on the verge of
dismissal. The alleged grounds for the dismissal of petitioner from the service were only
revealed to him when the actual letter of dismissal was finally issued. For this reason, it
cannot be said that petitioner was given enough opportunity to properly prepare for his
defense. While admittedly, private respondents complied with the second requirement,
the notice of termination, this does not cure the initial defect of lack of the proper written
charge required by law.
In the letter of termination,37 dated 29 October 1991, private respondents enumerated
the following as grounds for the dismissal of petitioner, namely: misappropriation of
denominational funds, willful breach of trust, serious misconduct, gross and habitual
neglect of duties, and commission of an offense against the person of employer's duly
authorized representative. Breach of trust and misappropriation of denominational funds
refer to the alleged failure of petitioner to remit to the treasurer of the Negros Mission
Page 417 of 497

tithes, collections and offerings amounting to P15,078.10 which were collected by his
wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other hand,
serious misconduct and commission of an offense against the person of the employer's
duly authorized representative pertain to the 16 October 1991 incident wherein
petitioner allegedly committed an act of violence in the office of Pastor Gideon Buhat.
The final ground invoked by private respondents is gross and habitual neglect of duties
allegedly committed by petitioner.
We cannot sustain the validity of dismissal based on the ground of breach of trust.
Private respondents allege that they have lost their confidence in petitioner for his
failure, despite demands, to remit the tithes and offerings amounting to P15,078.10,
which were collected in his district. A careful study of the voluminous records of the case
reveals that there is simply no basis for the alleged loss of confidence and breach of
trust. Settled is the rule that under Article 282 (c) of the Labor Code, the breach of trust
must be willful. A breach is willful if it is done intentionally, knowingly and purposely,
without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently.38 It must rest on substantial grounds and not on the
employer's arbitrariness, whims, caprices or suspicion; otherwise the employee would
eternally remain at the mercy of the employer.39 It should be genuine and not
simulated.40 This ground has never been intended to afford an occasion for abuse,
because of its subjective nature. The records show that there were only six (6) instances
when petitioner personally collected and received from the church treasurers the tithes,
collections, and donations for the church.41 The stenographic notes on the testimony of
Naomi Geniebla, the Negros Mission Church Auditor and a witness for private
respondents, show that Pastor Austria was able to remit all his collections to the
treasurer of the Negros Mission.42
Though private respondents were able to establish that petitioner collected and received
tithes and donations several times, they were notable to establish that petitioner failed
to remit the same to the Negros Mission, and that he pocketed the amount and used it
for his personal purpose. In fact, as admitted by their own witness, Naomi Geniebla,
petitioner remitted the amounts which he collected to the Negros Mission for which
corresponding receipts were issued to him. Thus, the allegations of private respondents
that petitioner breached their trust have no leg to stand on.
In a vain attempt to support their claim of breach of trust, private respondents try to pin
on petitioner the alleged non-remittance of the tithes collected by his wife. This
argument deserves little consideration. First of all, as proven by convincing and
substantial evidence consisting of the testimonies of the witnesses for private
respondents who are church treasurers, it was Mrs. Thelma Austria who actually
collected the tithes and donations from them, and, who failed to remit the same to the
treasurer of the Negros Mission. The testimony of these church treasurers were
corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence,
in the absence of conspiracy and collusion, which private respondents failed to
Page 418 of 497

demonstrate, between petitioner and his wife, petitioner cannot be made accountable
for the alleged infraction committed by his wife. After all, they still have separate and
distinct personalities. For this reason, the Labor Arbiter found it difficult to see the basis
for the alleged loss of confidence and breach of trust. The Court does not find any cogent
reason, therefore, to digress from the findings of the Labor Arbiter which is fully
supported by the evidence on record.
With respect to the grounds of serious misconduct and commission of an offense against
the person of the employer's duly authorized representative, we find the same
unmeritorious and, as such, do not warrant petitioner's dismissal from the service.
Misconduct has been defined as improper or wrong conduct. It is the transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty, willful
in character, and implies wrongful intent and not mere error in judgment. 43 For
misconduct to be considered serious it must be of such grave and aggravated character
and not merely trivial or unimportant.44 Based on this standard, we believe that the act
of petitioner in banging the attach case on the table, throwing the telephone and
scattering the books in the office of Pastor Buhat, although improper, cannot be
considered as grave enough to be considered as serious misconduct. After all, as
correctly observed by the Labor Arbiter, though petitioner committed damage to
property, he did not physically assault Pastor Buhat or any other pastor present during
the incident of 16 October 1991. In fact, the alleged offense committed upon the person
of the employer's representatives was never really established or proven by private
respondents. Hence, there is no basis for the allegation that petitioner's act constituted
serious misconduct or that the same was an offense against the person of the
employer's duly authorized representative. As such, the cited actuation of petitioner
does not justify the ultimate penalty of dismissal from employment. While the
Constitution does condone wrongdoing by the employee, it nevertheless urges a
moderation of the sanctions that may be applied to him in light of the many
disadvantages that weigh heavily on him like an albatross on his neck. 45 Where a penalty
less punitive would suffice, whatever missteps may have been committed by the worker
ought not be visited with a consequence so severe such as dismissal from
employment.46 For the foregoing reasons, we believe that the minor infraction committed
by petitioner does not merit the ultimate penalty of dismissal.
The final ground alleged by private respondents in terminating petitioner, gross and
habitual neglect of duties, does not require an exhaustive discussion. Suffice it to say
that all private respondents had were allegations but not proof. Aside from merely citing
the said ground, private respondents failed to prove culpability on the part of petitioner.
In fact, the evidence on record shows otherwise. Petitioner's rise from the ranks disclose
that he was actually a hard-worker. Private respondents' evidence, 47 which consisted of
petitioner's Worker's Reports, revealed how petitioner travelled to different churches to
attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in return,
he was rewarded with a dismissal from the service for a non-existent cause.
Page 419 of 497

In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was
terminated from service without just or lawful cause. Having been illegally dismissed,
petitioner is entitled to reinstatement to his former position without loss of seniority
right48 and the payment of full backwages without any deduction corresponding to the
period from his illegal dismissal up to actual reinstatement. 46
WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public
respondent National Labor Relations Commission, rendered on 23 January 1996, is
NULLIFIED and SET ASIDE. The Decision of the Labor Arbiter, dated 15 February 1993, is
REINSTATED and hereby AFFIRMED.1wphi1.nt
SO ORDERED.
Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

ESTATE
OF
NELSON
R.
DULAY,
represented by his wife MERRIDY JANE
P. DULAY,
Petitioner,

G.R. No. 172642

Present:

PERALTA, J., Acting Chairperson,*

- versus

ABAD,
VILLARAMA, JR.,**
MENDOZA, and
PERLAS-BERNABE, JJ.

ABOITIZ JEBSEN MARITIME, INC. and

GENERAL CHARTERERS, INC.,

Promulgated:

Respondents.
June 13, 2012

Page 420 of 497

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

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Decision [1] and Resolution[2] dated July 11,
2005 and April 18, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 76489.

The factual and procedural antecedents of the case, as summarized by the CA, are
as follows:
Nelson R. Dulay (Nelson, for brevity) was employed by [herein
respondent] General Charterers Inc. (GCI), a subsidiary of co-petitioner
[herein co-respondent] Aboitiz Jebsen Maritime Inc. since 1986. He initially
worked as an ordinary seaman and later as bosun on a contractual basis.
From September 3, 1999 up to July 19, 2000, Nelson was detailed in
petitioners vessel, the MV Kickapoo Belle.

On August 13, 2000, or 25 days after the completion of his

employment contract, Nelson died due to acute renal failure secondary to
septicemia. At the time of his death, Nelson was a bona fide member of
the Associated Marine Officers and Seamans Union of the Philippines
(AMOSUP), GCIs collective bargaining agent. Nelsons widow, Merridy
Jane, thereafter claimed for death benefits through the grievance
procedure of the Collective Bargaining Agreement (CBA) between AMOSUP
and GCI. However, on January 29, 2001, the grievance procedure was
declared deadlocked as petitioners refused to grant the benefits sought
by the widow.

Page 421 of 497

On March 5, 2001, Merridy Jane filed a complaint with the NLRC SubRegional Arbitration Board in General Santos City against GCI for death
and medical benefits and damages.

On March 8, 2001, Joven Mar, Nelsons brother, received P20,000.00

from [respondents] pursuant to article 20(A)2 of the CBA and signed a
Certification acknowledging receipt of the amount and releasing
AMOSUP from further liability. Merridy Jane contended that she is entitled
to the aggregate sum of Ninety Thousand Dollars ($90,000.00) pursuant
to [A]rticle 20 (A)1 of the CBA x x x

xxxx

Merridy Jane averred that the P20,000.00 already received by Joven

Mar should be considered advance payment of the total claim of
US$90,000.[00].

[Herein respondents], on the other hand, asserted that the NLRC had
no jurisdiction over the action on account of the absence of employeremployee relationship between GCI and Nelson at the time of the latters
death. Nelson also had no claims against petitioners for sick leave
allowance/medical benefit by reason of the completion of his contract with
GCI. They further alleged that private respondent is not entitled to death
benefits because petitioners are only liable for such in case of death of
the seafarer during the term of his contract pursuant to the POEA
contract and the cause of his death is not work-related. Petitioners
admitted liability only with respect to article 20(A)2 [of the CBA]. x x x

xxxx

However, as petitioners stressed, the same was already discharged.

Page 422 of 497

The Labor Arbiter ruled in favor of private respondent. It took

cognizance of the case by virtue of Article 217 (a), paragraph 6 of the
Labor Code and the existence of a reasonable causal connection between
the employer-employee relationship and the claim asserted. It ordered the
petitioner to pay P4,621,300.00, the equivalent of US$90,000.00
less P20,000.00, at the time of judgment x x x

xxxx

The Labor Arbiter also ruled that the proximate cause of Nelsons
death was not work-related.

On appeal, [the NLRC] affirmed the Labor Arbiters decision as to the

grant of death benefits under the CBA but reversed the latters ruling as
to the proximate cause of Nelsons death.[3]

Herein respondents then filed a special civil action for certiorari with the CA
contending that the NLRC committed grave abuse of discretion in affirming the
jurisdiction of the NLRC over the case; in ruling that a different provision of the CBA
covers the death claim; in reversing the findings of the Labor Arbiter that the cause of
death is not work-related; and, in setting aside the release and quitclaim executed by
the attorney-in-fact and not considering the P20,000.00 already received by Merridy Jane
through her attorney-in-fact.

On July 11, 2005, the CA promulgated its assailed Decision, the dispositive portion
of which reads as follows:

Page 423 of 497

WHEREFORE, in view of the foregoing, the petition is hereby

GRANTED and the case is REFERRED to the National Conciliation and
Mediation Board for the designation of the Voluntary Arbitrator or the
constitution of a panel of Voluntary Arbitrators for the appropriate resolution
of the issue on the matter of the applicable CBA provision.

SO ORDERED.[4]

The CA ruled that while the suit filed by Merridy Jane is a money claim, the same
basically involves the interpretation and application of the provisions in the subject CBA.
As such, jurisdiction belongs to the voluntary arbitrator and not the labor arbiter.

Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution
of April 18, 2006.

Hence, the instant petition raising the sole issue of whether or not the CA
committed error in ruling that the Labor Arbiter has no jurisdiction over the case.

Petitioner contends that Section 10 of Republic Act (R.A.) 8042, otherwise known
as the Migrant Workers and Overseas Filipinos Act of 1995, vests jurisdiction on the
appropriate branches of the NLRC to entertain disputes regarding the interpretation of a
collective bargaining agreement involving migrant or overseas Filipino workers. Petitioner
argues that the abovementioned Section amended Article 217 (c) of the Labor Code
which, in turn, confers jurisdiction upon voluntary arbitrators over interpretation or
implementation of collective bargaining agreements and interpretation or enforcement
of company personnel policies.

Page 424 of 497

The pertinent provisions of Section 10 of R.A. 8042 provide as follows:

SEC. 10. Money Claims. - Notwithstanding any provision of law to the

contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.

Article 217(c) of the Labor Code, on the other hand, states that:

xxxx

(c) Cases arising from the interpretation or implementation of

collective bargaining agreements and those arising from the interpretation
or enforcement of company personnel policies shall be disposed by the
Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements.
On their part, respondents insist that in the present case, Article 217, paragraph (c)
as well as Article 261 of the Labor Code remain to be the governing provisions of law
with respect to unresolved grievances arising from the interpretation and
implementation of collective bargaining agreements. Under these provisions of law,
jurisdiction remains with voluntary arbitrators.

Article 261 of the Labor Code reads, thus:

ARTICLE 261. Jurisdiction of Voluntary Arbitrators or panel

of Voluntary Arbitrators. The Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have original and exclusive jurisdiction to hear and decide
all unresolved grievances arising from the interpretation or implementation
of the Collective Bargaining Agreement and those arising from the
Page 425 of 497

interpretation or enforcement of company personnel policies referred to in

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

The Commission, its Regional Offices and the Regional

Directors of the Department of Labor and Employment shall not entertain
disputes, grievances or matters under the exclusive and original jurisdiction
of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall
immediately dispose and refer the same to the Grievance Machinery or
Voluntary Arbitration provided in the Collective Bargaining Agreement.

The petition is without merit.

It is true that R.A. 8042 is a special law governing overseas Filipino workers.
However, a careful reading of this special law would readily show that there is no specific
provision thereunder which provides for jurisdiction over disputes or unresolved
grievances regarding the interpretation or implementation of a CBA. Section 10 of R.A.
8042, which is cited by petitioner, simply speaks, in general, of claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual, moral, exemplary and other
forms of damages. On the other hand, Articles 217(c) and 261 of the Labor Code are
very specific in stating that voluntary arbitrators have jurisdiction over cases arising from
the interpretation or implementation of collective bargaining agreements. Stated
differently, the instant case involves a situation where the special statute (R.A. 8042)
refers to a subject in general, which the general statute (Labor Code) treats in particular.
[5]
In the present case, the basic issue raised by Merridy Jane in her complaint filed with
the NLRC is: which provision of the subject CBA applies insofar as death benefits due to
the heirs of Nelson are concerned. The Court agrees with the CA in holding that this
issue clearly involves the interpretation or implementation of the said CBA. Thus, the
specific or special provisions of the Labor Code govern.
Page 426 of 497

In any case, the Court agrees with petitioner's contention that the CBA is the law or
contract between the parties. Article 13.1 of the CBA entered into by and between
respondent GCI and AMOSUP, the union to which petitioner belongs, provides as follows:

The Company and the Union agree that in case of dispute or

conflict in the interpretation or application of any of the provisions
of this Agreement, or enforcement of Company policies, the same
shall be settled through negotiation, conciliation or voluntary
arbitration. The Company and the Union further agree that they will use
their best endeavor to ensure that any dispute will be discussed, resolved
and settled amicably by the parties hereof within ninety (90) days from the
date of filing of the dispute or conflict and in case of failure to settle thereof
any of the parties retain their freedom to take appropriate action.
[6]
(Emphasis supplied)

From the foregoing, it is clear that the parties, in the first place, really intended to
bring to conciliation or voluntary arbitration any dispute or conflict in the interpretation
or application of the provisions of their CBA. It is settled that when the parties have
validly agreed on a procedure for resolving grievances and to submit a dispute to
voluntary arbitration then that procedure should be strictly observed. [7]

It may not be amiss to point out that the abovequoted provisions of the CBA are in
consonance with Rule VII, Section 7 of the present Omnibus Rules and Regulations
Implementing the Migrant Workers and Overseas Filipinos Act of 1995, as amended by
Republic Act No. 10022, which states that [f]or OFWs with collective bargaining
agreements, the case shall be submitted for voluntary arbitration in accordance with
Articles 261 and 262 of the Labor Code. The Court notes that the said Omnibus Rules
and Regulations were promulgated by the Department of Labor and Employment (DOLE)
and the Department of Foreign Affairs (DFA) and that these departments were mandated
to consult with the Senate Committee on Labor and Employment and the House of
Representatives Committee on Overseas Workers Affairs.

Page 427 of 497

In the same manner, Section 29 of the prevailing Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels,
promulgated by the Philippine Overseas Employment Administration (POEA), provides as
follows:

Section 29. Dispute Settlement Procedures. In cases of

claims and disputes arising from this employment, the parties
covered by a collective bargaining agreement shall submit the
claim or dispute to the original and exclusive jurisdiction of the
voluntary arbitrator or panel of arbitrators. If the parties are not
covered by a collective bargaining agreement, the parties may at their
option submit the claim or dispute to either the original and exclusive
jurisdiction of the National Labor Relations Commission (NLRC), pursuant to
Republic Act (RA) 8042, otherwise known as the Migrant Workers and
Overseas Filipinos Act of 1995 or to the original and exclusive jurisdiction of
the voluntary arbitrator or panel of arbitrators. If there is no provision as to
the voluntary arbitrators to be appointed by the parties, the same shall be
appointed from the accredited voluntary arbitrators of the National
Conciliation and Mediation Board of the Department of Labor and
Employment.

The Philippine Overseas Employment Administration (POEA)

shall exercise original and exclusive jurisdiction to hear and decide
disciplinary action on cases, which are administrative in character, involving
or arising out of violations of recruitment laws, rules and regulations
involving employers, principals, contracting partners and Filipino seafarers.
(Emphasis supplied)

It is clear from the above that the interpretation of the DOLE, in consultation with
their counterparts in the respective committees of the Senate and the House of
Representatives, as well as the DFA and the POEA is that with respect to disputes
involving claims of Filipino seafarers wherein the parties are covered by a collective
bargaining agreement, the dispute or claim should be submitted to the jurisdiction of a
voluntary arbitrator or panel of arbitrators. It is only in the absence of a collective
Page 428 of 497

bargaining agreement that parties may opt to submit the dispute to either the NLRC or to
voluntary arbitration. It is elementary that rules and regulations issued by
administrative bodies to interpret the law which they are entrusted to enforce, have the
force of law, and are entitled to great respect. [8] Such rules and regulations partake of the
nature of a statute and are just as binding as if they have been written in the statute
itself.[9] In the instant case, the Court finds no cogent reason to depart from this rule.

The above interpretation of the DOLE, DFA and POEA is also in consonance with the
policy of the state to promote voluntary arbitration as a mode of settling labor disputes.
[10]

No less than the Philippine Constitution provides, under the third paragraph,
Section 3, Article XIII, thereof that [t]he State shall promote the principle of shared
responsibility between workers and employers and the preferential use of voluntary
modes in settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.

Consistent with this constitutional provision, Article 211 of the Labor Code provides
the declared policy of the State [t]o promote and emphasize the primacy of free
collective bargaining and negotiations, including voluntary arbitration, mediation and
conciliation, as modes of settling labor or industrial disputes.

On the basis of the foregoing, the Court finds no error in the ruling of the CA that
the voluntary arbitrator has jurisdiction over the instant case.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 76489 dated July 11, 2005 and April 18, 2006, respectively,
are AFFIRMED.

SO ORDERED.

Page 429 of 497

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 121948

October 8, 2001

PERPETUAL HELP CREDIT COOPERATIVE, INC., petitioner,

vs.
BENEDICTO FABURADA, SISINITA VILLAR, IMELDA TAMAYO, HAROLD CATIPAY,
and the NATIONAL LABOR RELATIONS COMMISSION, Fourth Division, Cebu
City, respondents.
SANDOVAL-GUTIERREZ, J.:
On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold
Catipay, private respondents, filed a complaint against the Perpetual Help Credit
Cooperative, Inc. (PHCCI), petitioner, with the Arbitration Branch, Department of Labor
and Employment (DOLE), Dumaguete City, for illegal dismissal, premium pay on holidays
and rest days, separation pay, wage differential, moral damages, and attorney's fees.
Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that
there is no employer-employee relationship between them as private respondents are all
members and co-owners of the cooperative. Furthermore, private respondents have not
exhausted the remedies provided in the cooperative by-laws.
On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that
Article 121 of R.A. No. 6939, otherwise known as the Cooperative Development Authority
Law which took effect on March 26, 1990, requires conciliation or mediation within the
cooperative before a resort to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that
the case is impressed with employer-employee relationship and that the law on
cooperatives is subservient to the Labor Code.
On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring
complainants illegally dismissed, thus respondent is directed to pay Complainants
backwages computed from the time they were illegally dismissed up to the actual
reinstatement but subject to the three year backwages rule, separation pay for
one month for every year of service since reinstatement is evidently not feasible
Page 430 of 497

anymore, to pay complainants 13th month pay, wage differentials and Ten Percent
(10%) attorney's fees from the aggregate monetary award. However, complainant
Benedicto Faburada shall only be awarded what are due him in proportion to the
nine and a half months that he had served the respondent, he being a part-time
employee. All other claims are hereby dismissed for lack of merit.
The computation of the foregoing awards is hereto attached and forms an integral
part of this decision."
On appeal,1 the NLRC affirmed the Labor Arbiter's decision.
Hence, this petition by the PHCCI.
The issue for our resolution is whether or not respondent judge committed grave abuse
of discretion in ruling that there is an employer-employee relationship between the
parties and that private respondents were illegally dismissed.
Petitioner PHCCI contends that private respondents are its members and are working for
it as volunteers. Not being regular employees, they cannot sue petitioner.
In determining the existence of an employer-employee relationship, the following
elements are considered: (1 ) the selection and engagement of the worker or the power
to hire; (2) the power to dismiss; (3) the payment of wages by whatever means; and (4)
the power to control the worker's conduct, with the latter assuming primacy in the
overall consideration. No particular form of proof is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence may show the
relationship.2
The above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca,
Jr., its Manager, hired private respondents to work for it. They worked regularly on
regular working hours, were assigned specific duties, were paid regular wages and made
to accomplish daily time records just like any other regular employee. They worked
under the supervision of the cooperative manager. But unfortunately, they were
dismissed.
That an employer-employee exists between the parties is shown by the averments of
private respondents in their respective affidavits, carefully considered by respondent
NLRC in affirming the Labor Arbiter's decision, thus:
Benedicto Faburada Regular part-time Computer programmer/ operator. Worked
with the Cooperative since June 1, 1988 up to December 29, 1989. Work schedule:
Tuesdays and Thursdays, from 1:00 p.m. to 5:30 p.m. and every Saturday from
8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3) hours during
Sundays. Monthly salary: P1,000.00 from June to December 1988; P1,350.00 Page 431 of 497

from January to June 1989; and P1,500.00 from July to December 1989. Duties:
Among others, Enter data into the computer; compute interests on savings
deposits, effect mortuary deductions and dividends on fixed deposits; maintain the
masterlist of the cooperative members; perform various forms for mimeographing;
and perform such other duties as may be assigned from time to time.
Sisinita Vilar Clerk. Worked with the Cooperative since December 1, 1987 up to
December 29, 1989.Work schedule: Regular working hours. Monthly salary:
P500.00 from December 1, 1987 to December 31, 1988; P1,000.00 from
January 1, 1989 to June 30, 1989; and P1,150.00 from July 1, 1989 to December
31, 1989. Duties: Among others, Prepare summary of salary advances, journal
vouchers, daily summary of disbursements to respective classifications; schedule
loans; prepare checks and cash vouchers for regular and emergency loans;
reconcile bank statements to the daily summary of disbursements; post the
monthly balance of fixed and savings deposits in preparation for the computation
of interests, dividends, mortuary and patronage funds; disburse checks during
regular and emergency loans; and perform such other bookkeeping and
accounting duties as may be assigned to her from time to time.
Imelda C. Tamayo Clerk. Worked with the Cooperative since October 19, 1987
up to December 29, 1989. Work schedule: Monday to Friday - 8:00 to 11:30 a.m
and 2:00 to 5:30 p.m.; every Saturday 8:00 to 11:30 a.m and 1:00 to 4:00 p.m;
and for one Sunday each month - for at least three (3) hours. Monthly salary:
P60.00 from October to November 1987; P250.00 for December 1987; P500.00
from January to December 1988; P950 from January to June 1989; and
P1,000.00 from July to December 1989.Duties: Among others, pick up balances for
the computation of interests on savings deposit, mortuary, dividends and
patronage funds; prepare cash vouchers; check petty cash vouchers; take charge
of the preparation of new passbooks and ledgers for new applicants; fill up
members logbook of regular depositors, junior depositors and special accounts;
take charge of loan releases every Monday morning; assist in the posting and
preparation of deposit slips; receive deposits from members; and perform such
other bookkeeping and accounting duties as may be assigned her from time to
time.
Harold D. Catipay Clerk. Worked with the Cooperative since March 3 to
December 29, 1989. Work schedule: Monday to Friday 8:00 to 11:30 a.m. and
2:00 to 5:30 p.m.; Saturday 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m.; and one
Sunday each month for at least three (3) hours. Monthly salary: P900.00 from
March to June 1989; P1,050.00 - from July to December 1989. Duties: Among
others, Bookkeeping, accounting and collecting duties, such as, post daily
collections from the two (2) collectors in the market; reconcile passbooks and
ledgers of members in the market; and assist the other clerks in their duties.

Page 432 of 497

All of them were given a memorandum of termination on January 2, 1990,

effective December 29, 1989.
We are not prepared to disregard the findings of both the Labor Arbiter and respondent
NLRC, the same being supported by substantial evidence, that quantum of evidence
required in quasi judicial proceedings, like this one.
Necessarily, this leads us to the issue of whether or not private respondents are regular
employees. Article 280 of the Labor Code provides for three kinds of employees: (1)
regular employees or those who have been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer; (2) project
employees or those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season; and (3) casual
employees or those who are neither regular nor project employees. 3 The employees who
are deemed regular are: (a) those who have been engaged to perform activities which
are usually necessary or desirable in the usual trade or business of the employer; and (b)
those casual employees who have rendered at least one (1 ) year of service, whether
such service is continuous or broken, with respect to the activity in which they are
employed.4 Undeniably, private respondents were rendering services necessary to the
day-to-day operations of petitioner PHCCI. This fact alone qualified them as regular
employees.
All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year:
Benedicto Faburada, for one and a half (1 1/2) years; Sisinita Vilar, for two (2) years; and
Imelda C. Tamayo, for two (2) years and two (2) months. That Benedicto Faburada
worked only on a part-time basis, does not mean that he is not a regular employee.
One's regularity of employment is not determined by the number of hours one works but
by the nature and by the length of time one has been in that particular job. 5 Petitioner's
contention that private respondents are mere volunteer workers, not regular employees,
must necessarily fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of
Labor and Employment (173 SCRA 697, 703 (1989) is misplaced. The issue in this case is
whether or not the employees-members of a cooperative can organize themselves for
purposes of collective bargaining, not whether or not the members can be employees.
Petitioner missed the point
As regular employees or workers, private respondents are entitled to security of tenure.
Thus, their services may be terminated only for a valid cause, with observance of due
process.
The valid causes are categorized into two groups: the just causes under Articles 282 of
the Labor Code and the authorized causes under Articles 283 and 284 of the same Code.
The just causes are: (1) serious misconduct or willful disobedience of lawful orders in
Page 433 of 497

connection with the employee's work; (2) gross or habitual neglect of duties; (3) fraud or
willful breach of trust; (4) commission of a crime or an offense against the person of the
employer or his immediate family member or representative; and, analogous cases. The
authorized causes are: (1) the installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of operations of the
establishment or undertaking, unless the closing is for the purpose of circumventing the
provisions of law. Article 284 provides that an employer would be authorized to
terminate the services of an employee found to be suffering from any disease if the
employee's continued employment is prohibited by law or is prejudicial to his health or to
the health of his fellow employees6
Private respondents were dismissed not for any of the above causes. They were
dismissed because petitioner considered them to be mere voluntary workers, being its
members, and as such work at its pleasure. Petitioner thus vehemently insists that their
dismissal is not against the law.
Procedural due process requires that the employer serve the employees to be dismissed
two (2) written notices before the termination of their employment is effected: (a) the
first, to apprise them of the particular acts or omissions for which their dismissal is
sought and (b) the second, to inform them of the decision of the employer that they are
being dismissed.7 In this case, only one notice was served upon private respondents by
petitioner. It was in the form of a Memorandum signed by the Manager of the
Cooperative dated January 2, 1990 terminating their services effective December 29,
1989. Clearly, petitioner failed to comply with the twin requisites of a valid notice.
We hold that private respondents have been illegally dismissed.
Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the
complaint of private respondents considering that they failed to submit their dispute to
the grievance machinery as required by P.D. 175 (strengthening the Cooperative
Movement) 8 and its implementing rules and regulations under LOI 23. Likewise, the
Cooperative Development Authority did not issue a Certificate of Non-Resolution
pursuant to Section 8 of R.A. 6939 or the Cooperative Development Authority Law.
As aptly stated by the Solicitor General in his comment, P.D. 175 does not provide for a
grievance machinery where a dispute or claim may first be submitted. LOI 23 refers to
instructions to the Secretary of Public Works and Communications to implement
immediately the recommendation of the Postmaster General for the dismissal of some
employees of the Bureau of Post. Obviously, this LOI has no relevance to the instant
case.
Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the
procedure how cooperative disputes are to be resolved, thus:

Page 434 of 497

ART. 121. Settlement of Disputes. Disputes among members, officers, directors,

and committee members, and intra-cooperative disputes shall, as far as
practicable, be settled amicably in accordance with the conciliation or mediation
mechanisms embodied in the by-laws of the cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled in
a court of competent jurisdiction."
Complementing this Article is Section8 of R.A. No. 6939 (Cooperative Development
Authority Law) which reads:
SEC. 8 Mediation and Conciliation. Upon request of either or both parties, the
Authority shall mediate and conciliate disputes within a cooperative or between
cooperatives: Provided, That if no mediation or conciliation succeeds within three
(3) months from request thereof, a certificate of non-resolution shall be issued by
the Commission prior to the filing of appropriate action before the proper courts.
The above provisions apply to members, officers and directors of the cooperative
involved in disputes within a cooperative or between cooperatives.
There is no evidence that private respondents are members of petitioner PHCCI and even
if they are, the dispute is about payment of wages, overtime pay, rest day and
termination of employment. Under Art. 217 of the Labor Code, these disputes are within
the original and exclusive jurisdiction of the Labor Arbiter.
As illegally dismissed employees, private respondents are therefore entitled to
reinstatement without loss of seniority rights and other privileges and to full backwages,
inclusive of allowances, plus other benefits or their monetary equivalent computed from
the time their compensation was withheld from them up to the time of their actual
reinstatement.9 Since they were dismissed after March 21, 1989, the effectivity date of
R.A. 671510 they are granted full backwages, meaning, without deducting from their
backwages the earnings derived by them elsewhere during the period of their illegal
dismissal.11 If reinstatement is no longer feasible, as when the relationship between
petitioner and private respondents has become strained, payment of their separation
pay in lieu of reinstatement is in order.12
WHEREFORE, the petition is hereby DENIED. The decision of respondent NLRC is
AFFIRMED, with modification in the sense that the backwages due private respondents
shall be paid in full, computed from the time they were illegally dismissed up to the time
of the finality of this Decision.13
SO ORDERED.

Page 435 of 497

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 81490 August 31, 1988
HAGONOY WATER DISTRICT represented by its General Manager CELESTINO S.
VENGCO, petitioner,
vs.
THE HON. NATIONAL LABOR RELATIONS COMMISSION, EXECUTIVE LABOR
ARBITER VLADIMIR P.L. SAMPANG, DEPUTY SHERIFF JOSE A. CRUZ and DANTE
VILLANUEVA, respondents.
Mario S. Jugco for petitioner.
Renato C. Guevara for private respondent Villanueva.

FELICIANO, J.:
The present petition for certiorari seeks to annul and set aside: a) the decision of the
Labor Arbiter dated 17 March 1987 in NLRC Case No. RAB-III-8-2354-85, entitled "Dante
Villanueva versus LWA-Hagonoy Waterworks District/Miguel Santos;" and b) the
Resolution of the National Labor Relations Commission dated 20 August 1987 affirming
the mentioned decision.
Private respondent Dante Villanueva was employed as service foreman by petitioner
Hagonoy Water District ("Hagonoy") from 3 January 1977 until 16 May 1985, when he
was indefinitely suspended and thereafter dismissed on 12 July 1985 for abandonment of
work and conflict of interest.
On 14 August 1985, private respondent filed a complaint for illegal dismissal, illegal
suspension and underpayment of wages and emergency cost of living allowance against
petitioner Hagonoy with the then Ministry of Labor and Employment, Regional Arbitration
Branch III, San Fernando, Pampanga.
Petitioner immediately moved for outright dismissal of the complaint on the ground of
lack of jurisdiction. Being a government entity, petitioner claimed, its personnel are
governed by the provisions of the Civil Service Law, not by the Labor Code, and protests
concerning the lawfulness of dismissals from the service fall within the jurisdiction of the
Civil Service Commission, not the Ministry of Labor and Employment. Petitioner cited
Page 436 of 497

Resolution No. 1540 of the Social Security Commission cancelling petitioner's compulsory
coverage from the system effective 16 May 1979 "considering the rulings that local
water districts are instrumentalities owned and controlled by the government and that
their officers and employees are government employees." In opposing the motion,
private respondent Villanueva contended that local water districts, like petitioner
Hagonoy, though quasi-public corporations, are in the nature of private corporations
since they perform proprietary functions for the government.
The Labor Arbiter proceeded to hear and try the case and, on 17 March 1986, rendered a
Decision in favor of the private respondent and against petitioner Hagonoy. The
dispositive part of the decision read:
WHEREFORE, premises considered, respondents are hereby ordered to
reinstate petitioner immediately to his former position as Service Foreman,
without loss of seniority rights and privileges, with full backwages, including
all benefits provided by law, from the date he was terminated up to his
actual date of reinstatement.
In addition, respondents are hereby ordered to pay the petitioner the
amount of P4,927.50 representing the underpayments of wages from July
1983 to May 16, 1985.
SO ORDERED.
On appeal, the National Labor Relations Commission affirmed the decision of the Labor
Arbiter in a Resolution dated 20 August 1987.
The petitioner moved for reconsideration, insisting that public respondents had no
jurisdiction over the case. Meanwhile, a Writ of Execution was issued by the Labor Arbiter
on 16 November 1987. The writ was enforced by garnishing petitioner Hagonoy's
deposits with the Planters Development Bank of Hagonoy.
Petitioner then filed a Motion to Quash the Writ of Execution with Application for Writ of
Preliminary Injunction arguing that the writ was prematurely issued as its motion for
reconsideration had not yet been resolved. By Resolution dated 10 December 1987,
public respondent Commission denied the application for a preliminary injunction. The
motion to quash was similarly denied by the Commission which directed petitioner to
reinstate immediately private respondent and to pay him the amount of P63,577.75 out
of petitioner's garnished deposits.
Hence, the instant petition.
The only question here in whether or not local water districts are government owned or
controlled corporations whose employees are subject to the provisions of the Civil
Page 437 of 497

Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of
private respondent Villanueva by relying on Section 25 of Presidential Decree No. 198,
known as the "Provincial Water Utilities Act of 1973" which went into effect on 25 May
1973, and which provides as follows:
Exemption from Civil Service. The district and its employees, being
engaged in a proprietary function, are hereby exempt from the provisions of
the Civil Service Law. Collective Bargaining shall be available only to
personnel below supervisory levels: Provided, however, That the total of all
salaries, wages, emoluments, benefits or other compensation paid to all
employees in any month shall not exceed fifty percent (50%) of average net
monthly revenue, said net revenue representing income from water sales
and sewerage service charges, lease pro-rata share of debt service and
expenses for fuel or energy for pumping during the preceding fiscal year.
The Labor Arbiter however failed to take into account the provisions of Presidential
Decree No. 1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away
Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as
Section 25 in the following manner:
Section 26 of the same decree [P.D. 198] is hereby amended to read as
Section 25 as follows:
Section 25. Authorization. The district may exercise all the powers which
are expressly granted by this Title or which are necessarily implied from or
incidental to the powers and purposes herein stated. For the purpose of
carrying out the objectives of this Act, a district is hereby granted the power
of eminent domain, the exercise thereof shall, however, be subject to
review by the Administration.
Thus, Section 25 of P.D. 198 exempting the employees of water districts from the
application of the Civil Service Law was removed from the statute books.
This is not the first time that officials of the Department of Labor and Employment have
taken the position that the Labor Arbiter here adopted. In Baguio Water District vs.
Cresenciano B. Trajano, etc. et al., 1 the petitioner Water District sought review of a
decision of the Bureau of Labor Relations which affirmed that of a Med-Arbiter calling for
a certification election among the regular rank-and-file employees of the Baguio Water
District (BWD). In granting the petition, the Court said:
The Baguio Water District was formed pursuant to Title II-Local Water
District Law of P.D. No. 198, as amended, The BWD is by Sec. 6 of that
decree 'a quasi-public corporation performing public service and supplying
public wants.
Page 438 of 497

A part of the public respondent's decision rendered in September, 1983,

reads in part:
We find the appeal [of the BWD] to be devoid of merit. The records show
that the operation and administration of BWD is governed and regulated by
special laws, that is, Presidential Decrees Nos. 198 and 1479 which created
local water districts throughout the country. Section 25 of Presidential
Decree (PD) 198 clearly provides that the district and its employees shall be
exempt from the provisions of the Civil Service Law and that its personnel
below supervisory level shall have the right to collectively bargain. Contrary
to appellant's claim, said provision has not been amended much more
abrogated expressly or impliedly by PD 1479 which does not make mention
of any matter on Civil Service Law or collective bargaining. (Rollo, p. 590.)
We grant the petition for the following reasons:
1. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Sec.
26 of P.D. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No.
1479. The amendatory decree took effect on June 11, 1978.
xxx xxx xxx
3. The BWD is a corporation created pursuant to a special law P.D. No.
198, as amended. As such its officers and employees are part of the Civil
Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 686.)
The broader question of whether employees of government owned or controlled
corporations are governed by the Civil Service Law and Civil Service Rules and
Regulations was addressed by this Court in 1985 in National Housing Corporation vs.
Juco. 2 After a review of constitutional, statutory and case law on the matter, the Court,
through Mr. Justice Gutierrez, held:
There should no longer be any question at this time that employees of
government-owned or controlled corporations are governed by the civil
service law and civil service rules and regulations.
Section 1. Article XII-B of the [1973] Constitution specifically provides:
The Civil Service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-owned or
controlled corporation. ...
The 1935 Constitution had a similar provision in its Section 1, Article XII
which stated:
Page 439 of 497

A Civil Service embracing all branches and subdivisions of the Government

shall be provided by law.
The inclusion of "government-owned or controlled corporations" within the
embrace of the civil service shows a deliberate effort of the framers to plug
an earlier loophole which allowed government-owned or controlled
corporations to avoid the full consequences of the all encompassing
coverage of the, civil service system. The same explicit intent is shown by
the addition of "agency" and "instrumentality" to branches and subdivisions
of the Government. All offices and firms of the government are covered.
The amendments introduced in 1973 are not Idle exercises or meaningless
gestures. They carry the strong message that civil service coverage is broad
and all-embracing insofar as employment in the government in any of its
governmental. or corporate arms is concerned.
xxx xxx xxx
Section I of Article XII-B, [1973] Constitution uses the word "every" to
modify the phrase "government-owned or controlled corporation."
"Every" means each one of a group, without exception. It means all possible
and all, taken one by one. Of course, our decision in this case refers to a
corporation created as a government-owned or controlled entity. It does not
cover cases involving private firms taken over by the government in
foreclosure or similar proceedings. We reserve judgment on these latter
cases when the appropriate controversy is brought to this Court. 3
In Juco, the Court spelled out the law on the issue at bar as such law existed under the
1973 Constitution and the Provisional Constitution of 1984, 4 until just before the
effectivity of the 1987 Constitution. Public respondent Commission, in confirming the
Labor Arbiter's assumption of jurisdiction over this case, apparently relied upon Article IX
(B), Section 2 (1) of the 1987 Constitution, which provides that:
[T]he Civil Service embraces ... government owned or controlled
corporations with original charters.(Emphasis supplied)
The NLRC took the position that although petitioner Hagonoy is a government owned or
controlled corporation, it had no original charter having been created simply by
resolution of a local legislative council. The NLRC concluded that therefore petitioner
Hagonoy fell outside the scope of the civil service.
At the time the dispute in the case at bar arose, and at the time the Labor Arbiter
rendered his decision (i.e., 17 March 1986), there is no question that the applicable law
Page 440 of 497

was that spelled out in National Housing Corporation vs. Juco (supra) and Baguio Water
District vs. Cresenciano B. Trajano (supra) and that under such applicable law, the Labor
Arbiter had no jurisdiction to render the decision that he in fact rendered. By the time the
public respondent Commission rendered its decision of 20 August 1987 which is here
assailed, the 1987 Constitution had already come into effect. 5 There is, nonetheless, no
necessity for this Court at the present time and in the present case to pass upon the
question of the effect of the provisions of Article DC (B), Section 2 (1) of the 1987
Constitution upon the pre-existing statutory and case law. For whatever that effect might
be, and we will deal with that when an appropriate case comes before the Court we
believe and so hold that the 1987 Constitution did not operate retrospectively so as to
confer jurisdiction upon the Labor Arbiter to render a decision which, under the law
applicable at the time of the rendition of such decision, was clearly outside the scope of
competence of the Labor Arbiter. Thus, the respondent Commission had nothing before it
which it could pass upon in the exercise of its appellate jurisdiction. For it is self-evident
that a decision rendered by the Labor Arbiter without jurisdiction over the case is a
complete nullity, vesting no rights and imposing no liabilities.
ACCORDINGLY, the Petition for certiorari is GRANTED. The decision of the Labor Arbiter
dated 17 March 1986, and public respondent Commission's Resolution dated 20 August
1987 and all other Resolutions and Orders issued by the Commission in this case
subsequent thereto, are hereby SET ASIDE. This decision is, however, without prejudice
to the right of private respondent Villanueva to refile, if he so wishes, this complaint in an
appropriate forum. No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 128024 May 9, 2000
BEBIANO M. BAEZ, petitioner,
vs.
HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC., respondents.

GONZAGA-REYES, J.:
The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking
jurisdiction over an action for damages filed by an employer against its dismissed
employee, are assailed in this petition for certiorari under Rule 65 of the Rules of Court
for having been issued in grave abuse of discretion.
Page 441 of 497

Petitioner was the sales operations manager of private respondent in its branch in Iligan
City. In 1993, private respondent "indefinitely suspended" petitioner and the latter filed a
complaint for illegal dismissal with the National Labor Relations Commission ("NLRC") in
Iligan City. In a decision dated July 7, 1994, Labor Arbiter Nicodemus G. Palangan found
petitioner to have been illegally dismissed and ordered the payment of separation pay in
lieu of reinstatement, and of backwages and attorney's fees. The decision was appealed
to the NLRC, which dismissed the same for having been filed out of time. 2 Elevated by
petition for certiorari before this Court, the case was dismissed on technical grounds 3;
however, the Court also pointed out that even if all the procedural requirements for the
filing of the petition were met, it would still be dismissed for failure to show grave abuse
of discretion on the part of the NLRC.
On November 13, 1995, private respondent filed a complaint for damages before the
Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which
prayed for the payment of the following:
a. P709,217.97 plus 12% interest as loss of profit and/or
unearned income of three years;
b. P119,700.00 plus 12% interest as estimated cost of
supplies, facilities, properties, space, etc. for three years;
c. P5,000.00 as initial expenses of litigation; and
d. P25,000.00 as attorney's fees.

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He
interposed in the court below that the action for damages, having arisen from an
employer-employee relationship, was squarely under the exclusive original jurisdiction of
the NLRC under Article 217(a), paragraph 4 of the Labor Code and is barred by reason of
the final judgment in the labor case. He accused private respondent of splitting causes of
action, stating that the latter could very well have included the instant claim for
damages in its counterclaim before the Labor Arbiter. He also pointed out that the civil
action of private respondent is an act of forum-shopping and was merely resorted to
after a failure to obtain a favorable decision with the NLRC.
Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order,
which summarized the basis for private respondent's action for damages in this manner:
Paragraph 5 of the complaint alleged that the defendant violated the
plaintiff's policy re: His business in his branch at Iligan City wherein
defendant was the Sales Operations Manager, and paragraph 7 of the same
complaint briefly narrated the modus operandi of defendant, quoted herein:
Defendant canvassed customers personally or through salesmen of plaintiff
which were hired or recruited by him. If said customer decided to buy items
from plaintiff on installment basis, defendant, without the knowledge of said
customer and plaintiff, would buy the items on cash basis at ex-factory
price, a privilege not given to customers, and thereafter required the
customer to sign promissory notes and other documents using the name
Page 442 of 497

and property of plaintiff, purporting that said customer purchased the items
from plaintiff on installment basis. Thereafter, defendant collected the
installment payments either personally or through Venus Lozano, a Group
Sales Manager of plaintiff but also utilized by him as secretary in his own
business for collecting and receiving of installments, purportedly for the
plaintiff but in reality on his own account or business. The collection and
receipt of payments were made inside the Iligan City branch using plaintiff's
facilities, property and manpower. That accordingly plaintiff's sales
decreased and reduced to a considerable extent the profits which it would
have earned. 5
In declaring itself as having jurisdiction over the subject matter of the instant
controversy, respondent court stated:
A perusal of the complaint which is for damages does not ask for any relief
under the Labor Code of the Philippines. It seeks to recover damages as
redress for defendant's breach of his contractual obligation to plaintiff who
was damaged and prejudiced. The Court believes such cause of action is
within the realm of civil law, and jurisdiction over the controversy belongs to
the regular courts.
While seemingly the cause of action arose from employer-employee
relations, the employer's claim for damages is grounded on the nefarious
activities of defendant causing damage and prejudice to plaintiff as alleged
in paragraph 7 of the complaint. The Court believes that there was a breach
of a contractual obligation, which is intrinsically a civil dispute. The
averments in the complaint removed the controversy from the coverage of
the Labor Code of the Philippines and brought it within the purview of civil
law. (Singapore Airlines, Ltd. Vs. Pao, 122 SCRA 671.) . . . 6
Petitioner's motion for reconsideration of the above Order was denied for lack of merit on
October 16, 1996. Hence, this petition.
Acting on petitioner's prayer, the Second Division of this Court issued a Temporary
Restraining Order ("TRO") on March 5, 1997, enjoining respondents from further
proceeding with Civil Case No. 95-554 until further orders from the Court.
By way of assignment of errors, the petition reiterates the grounds raised in the Motion
to Dismiss dated January 30, 1996, namely, lack of jurisdiction over the subject matter of
the action, res judicata, splitting of causes of action, and forum-shopping. The
determining issue, however, is the issue of jurisdiction.
Art. 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the
filing of this case, reads:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as
otherwise provided under this Code the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for decision without
Page 443 of 497

extension, even in the absence of stenographic notes, the following cases

involving all workers, whether agricultural or non-agricultural:
xxx xxx xxx
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
xxx xxx xxx
The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.")
No. 6715, which took effect on March 21, 1989, and which put to rest the earlier
confusion as to who between Labor Arbiters and regular courts had jurisdiction over
claims for damages as between employers and employees.
It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of
workers, including claims for damages, was originally lodged with the Labor Arbiters and
the NLRC by Article 217 of the Labor Code. 7 On May 1, 1979, however, Presidential
Decree ("P.D.") No. 1367 amended said Article 217 to the effect that "Regional Directors
shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of
damages." 8This limitation in jurisdiction, however, lasted only briefly since on May 1,
1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code
almost to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of
Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for
all forms of damages "arising from the employer-employee relations"
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees, 9 we hold that by the designating
clause "arising from the employer-employee relations" Article 217 should apply with
equal force to the claim of an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is necessarily connected with the
fact of termination, and should be entered as a counterclaim in the illegal dismissal case.
Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded
by the Labor Code), jurisprudence was settled that where the plaintiff's cause of action
for damages arose out of, or was necessarily intertwined with, an alleged unfair labor
practice committed by the union, the jurisdiction is exclusively with the (now defunct)
Court of Industrial Relations, and the assumption of jurisdiction of regular courts over the
same is a nullity. 10 To allow otherwise would be "to sanction split jurisdiction, which is
prejudicial to the orderly administration of justice." 11 Thus, even after the enactment of
the Labor Code, where the damages separately claimed by the employer were allegedly
incurred as a consequence of strike or picketing of the union, such complaint for
damages is deeply rooted from the labor dispute between the parties, and should be
dismissed by ordinary courts for lack of jurisdiction. As held by this Court in National
Federation of Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that
on policy grounds, and equally so in the interest of greater promptness in
the disposition of labor matters, a court is spared the often onerous task of
Page 444 of 497

determining what essentially is a factual matter, namely, the damages that

may be incurred by either labor or management as a result of disputes or
controversies arising from employer-employee relations.
There is no mistaking the fact that in the case before us, private respondent's claim
against petitioner for actual damages arose from a prior employer-employee relationship.
In the first place, private respondent would not have taken issue with petitioner's "doing
business of his own" had the latter not been concurrently its employee. Thus, the
damages alleged in the complaint below are: first, those amounting to lost profits and
earnings due to petitioner's abandonment or neglect of his duties as sales manager,
having been otherwise preoccupied by his unauthorized installment sale scheme; and
second, those equivalent to the value of private respondent's property and supplies
which petitioner used in conducting his "business ".
Second, and more importantly, to allow respondent court to proceed with the instant
action for damages would be to open anew the factual issue of whether petitioner's
installment sale scheme resulted in business losses and the dissipation of private
respondent's property. This issue has been duly raised and ruled upon in the illegal
dismissal case, where private respondent brought up as a defense the same allegations
now embodied in his complaint, and presented evidence in support thereof. The Labor
Arbiter, however, found to the contrary that no business losses may be attributed to
petitioner as in fact, it was by reason of petitioner's installment plan that the sales of the
Iligan branch of private respondent (where petitioner was employed) reached its highest
record level to the extent that petitioner was awarded the 1989 Field Sales Achievement
Award in recognition of his exceptional sales performance, and that the installment
scheme was in fact with the knowledge of the management of the Iligan branch of
private respondent. 12 In other words, the issue of actual damages has been settled in
the labor case, which is now final and executory.
Still on the prospect of re-opening factual issues already resolved by the labor court, it
may help to refer to that period from 1979 to 1980 when jurisdiction over employmentpredicated actions for damages vacillated from labor tribunals to regular courts, and
back to labor tribunals. In Ebon vs. de Guzman, 113 SCRA 52, 1 this Court discussed:
The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction
to award moral and other forms of damages in labor cases could have
assumed that the Labor Arbiters' position-paper procedure of ascertaining
the facts in dispute might not be an adequate tool for arriving at a just and
accurate assessment of damages, as distinguished from backwages and
separation pay, and that the trial procedure in the Court of First Instance
would be a more effective means of determining such damages. . . .
Evidently, the lawmaking authority had second thoughts about depriving
the Labor Arbiters and the NLRC of the jurisdiction to award damages in
labor cases because that setup would mean duplicity of suits, splitting the
cause of action and possible conflicting findings and conclusions by two
tribunals on one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which substantially
reenacted Article 217 in its original form) nullified Presidential Decree No.
Page 445 of 497

1367 and restored to the Labor Arbiter and the NLRC their jurisdiction to
award all kinds of damages in cases arising from employer-employee
relations. . . . (Emphasis supplied).
Clearly, respondent court's taking jurisdiction over the instant case would bring about
precisely the harm that the lawmakers sought to avoid in amending the Labor Code to
restore jurisdiction over claims for damages of this nature to the NLRC.
This is, of course, to distinguish from cases of actions for damages where the employeremployee relationship is merely incidental and the cause of action proceeds from a
different source of obligation. Thus, the jurisdiction of regular courts was upheld where
the damages, claimed for were based on tort 14, malicious prosecution 15, or breach of
contract, as when the claimant seeks to recover a debt from a former employee 16 or
seeks liquidated damages in enforcement of a prior employment contract. 17
Neither can we uphold the reasoning of respondent court that because the resolution of
the issues presented by the complaint does not entail application of the Labor Code or
other labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as
amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over
claims for damages arising from employer-employee relations in other words, the
Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but
also damages governed by the Civil Code. 18
Thus, it is obvious that private respondent's remedy is not in the filing of this separate
action for damages, but in properly perfecting an appeal from the Labor Arbiter's
decision. Having lost the right to appeal on grounds of untimeliness, the decision in the
labor case stands as a final judgment on the merits, and the instant action for damages
cannot take the place of such lost appeal.
Respondent court clearly having no jurisdiction over private respondent's complaint for
damages, we will no longer pass upon petitioner's other assignments of error.
WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554 before
Branch 39 of the Regional Trial Court of Misamis Oriental is hereby DISMISSED. No
pronouncement as to costs.
SO ORDERED.
THIRD DIVISION

Page 446 of 497

PATRICIA
ANGELITA
TERESITA

HALAGUEA,
MA.
L.
PULIDO,
MA.
P.
SANTIAGO,

MARIANNE

V.

G.R. No. 172013

Present:

KATINDIG,

BERNADETTE A. CABALQUINTO,
LORNA B. TUGAS, MARY CHRISTINE
A.
VILLARETE,
CYNTHIA
A.
STEHMEIER, ROSE ANNA G. VICTA,
NOEMI R. CRESENCIO, and other
flight attendants of PHILIPPINE
AIRLINES,
Petitioners,

YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

- versus -

PHILIPPINE
INCORPORATED,

AIRLINES
Respondent.

Promulgated:
October 2, 2009
x--------------------------------------------------x

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision [1] and the Resolution[2] of the Court of
Appeals (CA) in CA-G.R. SP. No. 86813.
Page 447 of 497

Petitioners were employed as female flight attendants of respondent Philippine

Airlines (PAL) on different dates prior to November 22, 1996. They are members of the
Flight Attendants and Stewards Association of the Philippines (FASAP), a labor
organization certified as the sole and exclusive certified as the sole and exclusive
bargaining representative of the flight attendants, flight stewards and pursers of
respondent.

On July 11, 2001, respondent and FASAP entered into a Collective Bargaining
Agreement[3] incorporating the terms and conditions of their agreement for the years
2000 to 2005, hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For
1996:

November

the

Cabin

Attendants

hired

before

22

xxxx

3.

Compulsory Retirement

Subject to the grooming standards provisions of this

Agreement,
compulsory retirement shall be fifty-five (55) for
females and sixty
(60) for males. x x x.

In a letter dated July 22, 2003, [4] petitioners and several female cabin crews
manifested that the aforementioned CBA provision on compulsory retirement is
discriminatory, and demanded for an equal treatment with their male counterparts. This
demand was reiterated in a letter[5] by petitioners' counsel addressed to respondent
demanding the removal of gender discrimination provisions in the coming renegotiations of the PAL-FASAP CBA.

On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005
CBA proposals[6] and manifested their willingness to commence the collective bargaining
negotiations between the management and the association, at the soonest possible
time.

Page 448 of 497

On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with
Prayer for the Issuance of Temporary Restraining Order and Writ of Preliminary
Injunction[7] with the Regional Trial Court (RTC) of Makati City, Branch 147, docketed as
Civil Case No. 04-886, against respondent for the invalidity of Section 144, Part A of the
PAL-FASAP CBA. The RTC set a hearing on petitioners' application for a TRO and,
thereafter, required the parties to submit their respective memoranda.

On August 9, 2004, the RTC issued an Order [8] upholding its jurisdiction over the
present case. The RTC reasoned that:

In the instant case, the thrust of the Petition is Sec. 144 of the
subject CBA which is allegedly discriminatory as it discriminates against
female flight attendants, in violation of the Constitution, the Labor Code,
and the CEDAW. The allegations in the Petition do not make out a labor
dispute arising from employer-employee relationship as none is shown to
exist. This case is not directed specifically against respondent arising from
any act of the latter, nor does it involve a claim against the respondent.
Rather, this case seeks a declaration of the nullity of the questioned
provision of the CBA, which is within the Court's competence, with the
allegations in the Petition constituting the bases for such relief sought.

The RTC issued a TRO on August 10, 2004, [9] enjoining the respondent for
implementing Section 144, Part A of the PAL-FASAP CBA.

The respondent filed an omnibus motion [10] seeking reconsideration of the order
overruling its objection to the jurisdiction of the RTC the lifting of the TRO. It further
prayed that the (1) petitioners' application for the issuance of a writ of preliminary
injunction be denied; and (2) the petition be dismissed or the proceedings in this case be
suspended.

On September 27, 2004, the RTC issued an Order [11] directing the issuance of a writ
of preliminary injunction enjoining the respondent or any of its agents and
representatives from further implementing Sec. 144, Part A of the PAL-FASAP CBA
pending the resolution of the case.

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and

Prohibition with Prayer for a Temporary Restraining Order and Writ of Preliminary
Injunction[12] with the Court of Appeals (CA) praying that the order of the RTC, which

Page 449 of 497

denied its objection to its jurisdiction, be annuled and set aside for having been issued
without and/or with grave abuse of discretion amounting to lack of jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting the respondent's
petition, and ruled that:

WHEREFORE, the respondent court is by us declared to have NO

JURISDICTION OVER THE CASE BELOW and, consequently, all the
proceedings, orders and processes it has so far issued therein are ANNULED
and SET ASIDE. Respondent court is ordered to DISMISS its Civil Case No.
04-886.

SO ORDERED.

Petitioner filed a motion for reconsideration, [13] which was denied by the CA in its
Resolution dated March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A

LABOR DISPUTE OR GRIEVANCE IS CONTRARY TO LAW AND
JURISPRUDENCE.

The main issue in this case is whether the RTC has jurisdiction over the petitioners'
action challenging the legality or constitutionality of the provisions on the compulsory
retirement age contained in the CBA between respondent PAL and FASAP.

Petitioners submit that the RTC has jurisdiction in all civil actions in which the
subject of the litigation is incapable of pecuniary estimation and in all cases not within
the exclusive jurisdiction of any court, tribunal, person or body exercising judicial or
quasi-judicial functions. The RTC has the power to adjudicate all controversies except
those expressly witheld from the plenary powers of the court. Accordingly, it has the
power to decide issues of constitutionality or legality of the provisions of Section 144,
Part A of the PAL-FASAP CBA. As the issue involved is constitutional in character, the
labor arbiter or the National Labor Relations Commission (NLRC) has no jurisdiction over
Page 450 of 497

the case and, thus, the petitioners pray that judgment be rendered on the merits
declaring Section 144, Part A of the PAL-FASAP CBA null and void.

Respondent, on the other hand, alleges that the labor tribunals have jurisdiction
over the present case, as the controversy partakes of a labor dispute. The dispute
concerns the terms and conditions of petitioners' employment in PAL, specifically their
retirement age. The RTC has no jurisdiction over the subject matter of petitioners'
petition for declaratory relief because the Voluntary Arbitrator or panel of Voluntary
Arbitrators have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the CBA. Regular courts
have no power to set and fix the terms and conditions of employment. Finally,
respondent alleged that petitioners' prayer before this Court to resolve their petition for
declaratory relief on the merits is procedurally improper and baseless.

The petition is meritorious.

Jurisdiction of the court is determined on the basis of the material allegations of

the complaint and the character of the relief prayed for irrespective of whether plaintiff is
entitled to such relief.[14]

In the case at bar, the allegations in the petition for declaratory relief plainly show
that petitioners' cause of action is the annulment of Section 144, Part A of the PAL-FASAP
CBA. The pertinent portion of the petition recites:

CAUSE OF ACTION

24. Petitioners have the constitutional right to fundamental equality with

men under Section 14, Article II, 1987 of the Constitution and, within the
specific context of this case, with the male cabin attendants of Philippine
Airlines.

26. Petitioners have the statutory right to equal work and employment
opportunities with men under Article 3, Presidential Decree No. 442, The
Page 451 of 497

Labor Code and, within the specific context of this case, with the male
cabin attendants of Philippine Airlines.

27. It is unlawful, even criminal, for an employer to discriminate against

women employees with respect to terms and conditions of employment
solely on account of their sex under Article 135 of the Labor Code as
amended by Republic Act No. 6725 or the Act Strengthening Prohibition on
Discrimination Against Women.

28. This discrimination against Petitioners is likewise against the

Convention on the Elimination of All Forms of Discrimination Against
Women (hereafter, CEDAW), a multilateral convention that the Philippines
ratified in 1981. The Government and its agents, including our courts, not
only must condemn all forms of discrimination against women, but must
also implement measures towards its elimination.

29. This case is a matter of public interest not only because of Philippine
Airlines' violation of the Constitution and existing laws, but also because it
highlights the fact that twenty-three years after the Philippine Senate
ratified the CEDAW, discrimination against women continues.
31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory
retirement from service is invidiously discriminatory against and manifestly
prejudicial to Petitioners because, they are compelled to retire at a lower
age (fifty-five (55) relative to their male counterparts (sixty (60).

33. There is no reasonable, much less lawful, basis for Philippine Airlines to
distinguish, differentiate or classify cabin attendants on the basis of sex
and thereby arbitrarily set a lower compulsory retirement age of 55 for
Petitioners for the sole reason that they are women.

Page 452 of 497

37. For being patently unconstitutional and unlawful, Section 114, Part A of
the PAL-FASAP 2000-2005 CBA must be declared invalid and stricken down
to the extent that it discriminates against petitioner.

38. Accordingly, consistent with the constitutional and statutory guarantee

of equality between men and women, Petitioners should be adjudged and
declared entitled, like their male counterparts, to work until they are sixty
(60) years old.

PRAYER

WHEREFORE, it is most respectfully prayed that the Honorable Court:

c. after trial on the merits:

(I)

declare Section 114, Part A of the PAL-FASAP 2000-2005

CBA INVALID, NULL and VOID to the extent that it
discriminates against Petitioners; x x x x

From the petitioners' allegations and relief prayed for in its petition, it is clear that
the issue raised is whether Section 144, Part A of the PAL-FASAP CBA is unlawful and
unconstitutional. Here, the petitioners' primary relief in Civil Case No. 04-886 is the
annulment of Section 144, Part A of the PAL-FASAP CBA, which allegedly discriminates
against them for being female flight attendants. The subject of litigation is incapable of
pecuniary estimation, exclusively cognizable by the RTC, pursuant to Section 19 (1) of
Batas Pambansa Blg. 129, as amended. [15] Being an ordinary civil action, the same is
beyond the jurisdiction of labor tribunals.

Page 453 of 497

The said issue cannot be resolved solely by applying the Labor Code. Rather, it
requires the application of the Constitution, labor statutes, law on contracts and the
Convention on the Elimination of All Forms of Discrimination Against Women, [16] and the
power to apply and interpret the constitution and CEDAW is within the jurisdiction of trial
courts, a court of general jurisdiction. In Georg Grotjahn GMBH & Co. v. Isnani,[17] this
Court held that not every dispute between an employer and employee involves matters
that only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or
quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of
the Labor Code is limited to disputes arising from an employer-employee relationship
which can only be resolved by reference to the Labor Code, other labor statutes, or their
collective bargaining agreement.

Not every controversy or money claim by an employee against the employer or

vice-versa is within the exclusive jurisdiction of the labor arbiter. Actions between
employees and employer where the employer-employee relationship is merely incidental
and the cause of action precedes from a different source of obligation is within the
exclusive jurisdiction of the regular court. [18] Here, the employer-employee relationship
between the parties is merely incidental and the cause of action ultimately arose from
different sources of obligation, i.e., the Constitution and CEDAW.

Thus, where the principal relief sought is to be resolved not by reference to the
Labor Code or other labor relations statute or a collective bargaining agreement but by
the general civil law, the jurisdiction over the dispute belongs to the regular courts of
justice and not to the labor arbiter and the NLRC. In such situations, resolution of the
dispute requires expertise, not in labor management relations nor in wage structures and
other terms and conditions of employment, but rather in the application of the general
civil law. Clearly, such claims fall outside the area of competence or expertise ordinarily
ascribed to labor arbiters and the NLRC and the rationale for granting jurisdiction over
such claims to these agencies disappears. [19]

If We divest the regular courts of jurisdiction over the case, then which tribunal or
forum shall determine the constitutionality or legality of the assailed CBA provision?

This Court holds that the grievance machinery and voluntary arbitrators do not
have the power to determine and settle the issues at hand. They have no jurisdiction and
competence to decide constitutional issues relative to the questioned compulsory
retirement age. Their exercise of jurisdiction is futile, as it is like vesting power to
someone who cannot wield it.

Page 454 of 497

In Gonzales v. Climax Mining Ltd.,[20] this Court affirmed the jurisdiction of courts
over questions on constitutionality of contracts, as the same involves the exercise of
judicial power. The Court said:

Whether the case involves void or voidable contracts is still a judicial

question. It may, in some instances, involve questions of fact especially
with regard to the determination of the circumstances of the execution of
the contracts. But the resolution of the validity or voidness of the contracts
remains a legal or judicial question as it requires the exercise of judicial
function. It requires the ascertainment of what laws are applicable to the
dispute, the interpretation and application of those laws, and the rendering
of a judgment based thereon. Clearly, the dispute is not a mining conflict.
It is essentially judicial. The complaint was not merely for the
determination of rights under the mining contracts since the very validity of
those contracts is put in issue.

In Saura v. Saura, Jr.,[21] this Court emphasized the primacy of the regular court's
judicial power enshrined in the Constitution that is true that the trend is towards vesting
administrative bodies like the SEC with the power to adjudicate matters coming under
their particular specialization, to insure a more knowledgeable solution of the problems
submitted to them. This would also relieve the regular courts of a substantial number of
cases that would otherwise swell their already clogged dockets. But as expedient as
this policy may be, it should not deprive the courts of justice of their power to
decide ordinary cases in accordance with the general laws that do not require
any particularexpertise or training to interpret and apply. Otherwise, the
creeping take-over by the administrative agencies of the judicial power vested
in the courts would render the judiciary virtually impotent in the discharge of
the duties assigned to it by the Constitution.

To be sure, in Rivera v. Espiritu,[22] after Philippine Airlines (PAL) and PAL Employees
Association (PALEA) entered into an agreement, which includes the provision to suspend
the PAL-PALEA CBA for 10 years, several employees questioned its validity via a petition
for certiorari directly to the Supreme Court. They said that the suspension was
unconstitutional and contrary to public policy. Petitioners submit that the suspension was
inordinately long, way beyond the maximum statutory life of 5 years for a CBA provided
for in Article 253-A of the Labor Code. By agreeing to a 10-year suspension, PALEA, in
effect, abdicated the workers' constitutional right to bargain for another CBA at the
mandated time.

Page 455 of 497

In that case, this Court denied the petition for certiorari, ruling that there is
available to petitioners a plain, speedy, and adequate remedy in the ordinary course of
law. The Court said that while the petition was denominated as one for certiorari and
prohibition, its object was actually the nullification of the PAL-PALEA agreement. As such,
petitioners' proper remedy is an ordinary civil action for annulment of contract, an action
which properly falls under the jurisdiction of the regional trial courts.

The change in the terms and conditions of employment, should Section 144 of the
CBA be held invalid, is but a necessary and unavoidable consequence of the principal
relief sought, i.e., nullification of the alleged discriminatory provision in the CBA. Thus, it
does not necessarily follow that a resolution of controversy that would bring about a
change in the terms and conditions of employment is a labor dispute, cognizable by
labor tribunals. It is unfair to preclude petitioners from invoking the trial court's
jurisdiction merely because it may eventually result into a change of the terms and
conditions of employment. Along that line, the trial court is not asked to set and fix the
terms and conditions of employment, but is called upon to determine whether CBA is
consistent with the laws.

Although the CBA provides for a procedure for the adjustment of grievances, such
referral to the grievance machinery and thereafter to voluntary arbitration would be
inappropriate to the petitioners, because the union and the management have
unanimously agreed to the terms of the CBA and their interest is unified.

In Pantranco North Express, Inc., v. NLRC,[23] this Court held that:

x x x Hence, only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have
come to an agreement regarding the dismissal of private respondents. No
grievance between them exists which could be brought to a grievance
machinery. The problem or dispute in the present case is between the
union and the company on the one hand and some union and non-union
members who were dismissed, on the other hand. The dispute has to be
settled before an impartial body. The grievance machinery with members
designated by the union and the company cannot be expected to be
impartial against the dismissed employees. Due process demands that the
Page 456 of 497

dismissed workers grievances be ventilated before an impartial body. x x

x.
Applying the same rationale to the case at bar, it cannot be said that the
"dispute" is between the union and petitioner company because both have
previously agreed upon the provision on "compulsory retirement" as
embodied in the CBA. Also, it was only private respondent on his own who
questioned the compulsory retirement. x x x.
In the same vein, the dispute in the case at bar is not between FASAP and
respondent PAL, who have both previously agreed upon the provision on the compulsory
retirement of female flight attendants as embodied in the CBA. The dispute is between
respondent PAL and several female flight attendants who questioned the provision on
compulsory retirement of female flight attendants. Thus, applying the principle in the
aforementioned case cited, referral to the grievance machinery and voluntary arbitration
would not serve the interest of the petitioners.

Besides, a referral of the case to the grievance machinery and to the voluntary
arbitrator under the CBA would be futile because respondent already implemented
Section 114, Part A of PAL-FASAP CBA when several of its female flight attendants
reached the compulsory retirement age of 55.

Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its
association's bargaining proposal for the remaining period of 2004-2005 of the PALFASAP CBA, which includes the renegotiation of the subject Section 144. However,
FASAP's attempt to change the questioned provision was shallow and superficial, to say
the least, because it exerted no further efforts to pursue its proposal. When petitioners in
their individual capacities questioned the legality of the compulsory retirement in the
CBA before the trial court, there was no showing that FASAP, as their representative,
endeavored to adjust, settle or negotiate with PAL for the removal of the difference in
compulsory age retirement between its female and male flight attendants, particularly
those employed before November 22, 1996. Without FASAP's active participation on
behalf of its female flight attendants, the utilization of the grievance machinery or
voluntary arbitration would be pointless.

The trial court in this case is not asked to interpret Section 144, Part A of the PALFASAP CBA. Interpretation, as defined in Black's Law Dictionary, is the art of or process of
discovering and ascertaining the meaning of a statute, will, contract, or other written
Page 457 of 497

document.[24] The provision regarding the compulsory retirement of flight attendants is

not ambiguous and does not require interpretation. Neither is there any question
regarding the implementation of the subject CBA provision, because the manner of
implementing the same is clear in itself. The only controversy lies in its intrinsic validity.

Although it is a rule that a contract freely entered between the parties should be
respected, since a contract is the law between the parties, said rule is not absolute.

In Pakistan International Airlines Corporation v. Ople, [25] this Court held that:

The principle of party autonomy in contracts is not, however, an absolute

principle. The rule in Article 1306, of our Civil Code is that the contracting
parties may establish such stipulations as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order
or public policy. Thus, counter-balancing the principle of autonomy of
contracting parties is the equally general rule that provisions of applicable
law, especially provisions relating to matters affected with public policy, are
deemed written into the contract. Put a little differently, the governing
principle is that parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed
with public interest. The law relating to labor and employment is clearly
such an area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply
contracting with each other.

Moreover, the relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to the common
good.x x x [26] The supremacy of the law over contracts is explained by the fact that labor
contracts are not ordinary contracts; these are imbued with public interest and therefore
are subject to the police power of the state. [27] It should not be taken to mean that
retirement provisions agreed upon in the CBA are absolutely beyond the ambit of judicial
review and nullification. A CBA, as a labor contract, is not merely contractual in nature
but impressed with public interest. If the retirement provisions in the CBA run contrary to
law, public morals, or public policy, such provisions may very well be voided. [28]

Finally, the issue in the petition for certiorari brought before the CA by the
respondent was the alleged exercise of grave abuse of discretion of the RTC in taking
cognizance of the case for declaratory relief. When the CA annuled and set aside the
RTC's order, petitioners sought relief before this Court through the instant petition for
review under Rule 45. A perusal of the petition before Us, petitioners pray for the
Page 458 of 497

declaration of the alleged discriminatory provision in the CBA against its female flight
attendants.

This Court is not persuaded. The rule is settled that pure questions of fact may not
be the proper subject of an appeal by certiorari under Rule 45 of the Revised Rules of
Court. This mode of appeal is generally limited only to questions of law which must be
distinctly set forth in the petition. The Supreme Court is not a trier of facts.[29]

The question as to whether said Section 114, Part A of the PAL-FASAP CBA is
discriminatory or not is a question of fact. This would require the presentation and
reception of evidence by the parties in order for the trial court to ascertain the facts of
the case and whether said provision violates the Constitution, statutes and treaties. A
full-blown trial is necessary, which jurisdiction to hear the same is properly lodged with
the the RTC. Therefore, a remand of this case to the RTC for the proper determination of
the merits of the petition for declaratory relief is just and proper.

WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of

the Court of Appeals, dated August 31, 2005 and March 7, 2006, respectively, in CA-G.R.
SP. No. 86813 are REVERSED and SET ASIDE. The Regional Trial Court of Makati City,
Branch 147 is DIRECTED to continue the proceedings in Civil Case No. 04-886 with
deliberate dispatch.

SO ORDERED.
THIRD DIVISION

MA. ISABEL T. SANTOS, represented by

ANTONIO P. SANTOS,
Petitioner,

G.R. No. 166377

Present:

YNARES-SANTIAGO, J.,

Page 459 of 497

Chairperson,
- versus -

AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

SERVIER PHILIPPINES, INC. and

NATIONAL LABOR RELATIONS
COMMISSION,

Promulgated:

Respondents.
November 28, 2008

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

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking to set aside the Court of Appeals (CA) Decision, [1] dated August 12,
2004 and its Resolution[2] dated December 17, 2004, in CA-G.R. SP No. 75706.

The facts, as culled from the records, are as follows:

Petitioner Ma. Isabel T. Santos was the Human Resource Manager of respondent
Servier Philippines, Inc. since 1991 until her termination from service in 1999. On March
26 and 27, 1998, petitioner attended a meeting [3] of all human resource managers of
respondent, held in Paris, France. Since the last day of the meeting coincided with the
Page 460 of 497

graduation of petitioners only child, she arranged for a European vacation with her
family right after the meeting. She, thus, filed a vacation leave effective March 30,
1998.[4]

On March 29, 1998, petitioner, together with her husband Antonio P. Santos, her
son, and some friends, had dinner at Leon des Bruxelles, a Paris restaurant known for
mussels[5] as their specialty. While having dinner, petitioner complained of stomach pain,
then vomited. Eventually, she was brought to the hospital known as Centre Chirurgical
de LQuest where she fell into coma for 21 days; and later stayed at the Intensive Care
Unit (ICU) for 52 days. The hospital found that the probable cause of her sudden attack
was alimentary allergy, as she had recently ingested a meal of mussels which resulted
in a concomitant uticarial eruption.[6]

During the time that petitioner was confined at the hospital, her husband and son
stayed with her in Paris. Petitioners hospitalization expenses, as well as those of her
husband and son, were paid by respondent. [7]

In June 1998, petitioners attending physicians gave a prognosis of the formers

condition; and, with the consent of her family, allowed her to go back to
the Philippines for the continuation of her medical treatment. She was then confined at
the St. Lukes Medical Center for rehabilitation.[8] During the period of petitioners
rehabilitation, respondent continued to pay the formers salaries; and to assist her in
paying her hospital bills.

In a letter dated May 14, 1999, respondent informed the petitioner that the former
had requested the latters physician to conduct a thorough physical and psychological
evaluation of her condition, to determine her fitness to resume her work at the
company. Petitioners physician concluded that the former had not fully recovered
mentally and physically. Hence, respondent was constrained to terminate petitioners
services effective August 31, 1999.[9]

As a consequence of petitioners termination from employment, respondent

offered a retirement package which consists of:

Retirement Plan Benefits:

P 1,063,841.76

Insurance Pension at P20,000.00/month

for 60 months from company-sponsored
group life policy:
Page 461 of 497

P 1,200,000.00

Educational assistance:
Medical and Health Care:

P
P

465,000.00
200,000.00[10]

Of
the
promised
retirement
benefits
amounting
to P1,063,841.76,
only P701,454.89 was released to petitioners husband, the balance [11] thereof was
withheld allegedly for taxation purposes. Respondent also failed to give the other
benefits listed above.[12]

Petitioner, represented by her husband, instituted the instant case for unpaid
salaries; unpaid separation pay; unpaid balance of retirement package plus interest;
insurance pension for permanent disability; educational assistance for her son; medical
assistance; reimbursement of medical and rehabilitation expenses; moral, exemplary,
and actual damages, plus attorneys fees. The case was docketed as NLRC-NCR (SOUTH)
Case No. 30-06-02520-01.

On September 28, 2001, Labor Arbiter Aliman D. Mangandog rendered a

Decision[13] dismissing petitioners complaint. The Labor Arbiter stressed that respondent
had been generous in giving financial assistance to the petitioner. [14] He likewise noted
that there was a retirement plan for the benefit of the employees. In denying
petitioners claim for separation pay, the Labor Arbiter ratiocinated that the same had
already been integrated in the retirement plan established by respondent. Thus,
petitioner could no longer collect separation pay over and above her retirement benefits.
[15]
The arbiter refused to rule on the legality of the deductions made by respondent from
petitioners total retirement benefits for taxation purposes, as the issue was beyond the
jurisdiction of the NLRC.[16] On the matter of educational assistance, the Labor Arbiter
found that the same may be granted only upon the submission of a certificate of
enrollment.[17] Lastly, as to petitioners claim for damages and attorneys fees, the Labor
Arbiter denied the same as the formers dismissal was not tainted with bad faith. [18]

On appeal to the National Labor Relations Commission (NLRC), the tribunal set
aside the Labor Arbiters decision, ruling that:

WHEREFORE, premises considered, Complainants appeal is partly

GRANTED. The Labor Arbiters decision in the above-entitled case is hereby
SET ASIDE. Respondent is ordered to pay Complainants portion of her
separation pay covering the following: 1) P200,000.00 for medical and
health care from September 1999 to April 2001; and 2) P35,000.00 per year
for her sons high school (second year to fourth year) education
and P45,000.00 per semester for the latters four-year college education,
upon presentation of any applicable certificate of enrollment.
Page 462 of 497

SO ORDERED.[19]

The NLRC emphasized that petitioner was not retired from the service pursuant to law,
collective bargaining agreement (CBA) or other employment contract; rather, she was
dismissed from employment due to a disease/disability under Article 284 [20] of the Labor
Code.[21] In view of her non-entitlement to retirement benefits, the amounts received by
petitioner should then be treated as her separation pay. [22] Though not legally obliged to
give the other benefits, i.e., educational assistance, respondent volunteered to grant
them, for humanitarian consideration. The NLRC therefore ordered the payment of the
other benefits promised by the respondent.[23] Lastly, it sustained the denial of
petitioners claim for damages for the latters failure to substantiate the same. [24]

Unsatisfied, petitioner elevated the matter to the Court of Appeals which

affirmed the NLRC decision.[25]

Hence, the instant petition.

At the outset, the Court notes that initially, petitioner raised the issue of whether
she was entitled to separation pay, retirement benefits, and damages. In support of her
claim for separation pay, she cited Article 284 of the Labor Code, as amended. However,
in coming to this Court via a petition for review on certiorari, she abandoned her original
position and alleged that she was, in fact, not dismissed from employment based on the
above provision. She argued that her situation could not be characterized as a disease;
rather, she became disabled. In short, in her petition before us, she now changes her
theory by saying that she is not entitled to separation pay but to retirement pay
pursuant to Section 4,[26] Article V of the Retirement Plan, on disability retirement. She,
thus, prayed for the full payment of her retirement benefits by giving back to her the
amount deducted for taxation purposes.

In our Resolution[27] dated November 23, 2005 requiring the parties to submit their
respective memoranda, we specifically stated:

No new issues may be raised by a party in the Memorandum and

the issues raised in the pleadings but not included in the Memorandum shall
be deemed waived or abandoned.

Page 463 of 497

Being summations of the parties previous pleadings, the Court may

consider the Memoranda alone in deciding or resolving this petition.

Page 464 of 497

Pursuant to the above resolution, any argument raised in her petition, but not
raised in her Memorandum,[28] is deemed abandoned.[29] Hence, the only issue proper for
determination is the propriety of deducting P362,386.87 from her total benefits, for
taxation purposes. Nevertheless, in order to resolve the legality of the deduction, it is
imperative that we settle, once and for all, the ground relied upon by respondent in
terminating the services of the petitioner, as well as the nature of the benefits given to
her after such termination. Only then can we decide whether the amount deducted by
the respondent should be paid to the petitioner.

Respondent dismissed the petitioner from her employment based on Article 284 of
the Labor Code, as amended, which reads:

Art. 284. DISEASE AS GROUND FOR TERMINATION

An employer may terminate the services of an employee who has

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

As she was dismissed on the abovementioned ground, the law gives the petitioner the
right to demand separation pay. However, respondent established a retirement plan in
favor of all its employees which specifically provides for disability retirement, to wit:

Sec. 4. DISABILITY RETIREMENT

In the event that a Member is retired by the Company due to

permanent total incapacity or disability, as determined by a competent
physician appointed by the Company, his disability retirement benefit shall
be the Full Members Account Balance determined as of the last valuation
date. x x x.[30]

On the basis of the above-mentioned retirement plan, respondent offered the

petitioner a retirement package which consists of retirement plan benefits, insurance
Page 465 of 497

pension, and educational assistance.[31] The amount of P1,063,841.76 represented the

disability retirement benefit provided for in the plan; while the insurance pension was to
be paid by their insurer; and the educational assistance was voluntarily undertaken by
the respondent as a gesture of compassion to the petitioner. [32]

We have declared in Aquino v. National Labor Relations Commission [33] that the
receipt of retirement benefits does not bar the retiree from receiving separation
pay. Separation pay is a statutory right designed to provide the employee with the
wherewithal during the period that he/she is looking for another employment. On the
other hand, retirement benefits are intended to help the employee enjoy the remaining
years of his life, lessening the burden of worrying about his financial support, and are a
form of reward for his loyalty and service to the employer. [34] Hence, they are not
mutually exclusive. However, this is only true if there is no specific prohibition against
the payment of both benefits in the retirement plan and/or in the Collective Bargaining
Agreement (CBA).[35]

In the instant case, the Retirement Plan bars the petitioner from claiming
additional benefits on top of that provided for in the Plan. Section 2, Article XII of the
Retirement Plan provides:

Section 2. NO DUPLICATION OF BENEFITS

No other benefits other than those provided under this Plan shall be
payable from the Fund. Further, in the event the Member receives benefits
under the Plan, he shall be precluded from receiving any other benefits
under the Labor Code or under any present or future legislation under any
other contract or Collective Bargaining Agreement with the Company. [36]

There being such a provision, as held in Cruz v. Philippine Global Communications, Inc.,
[37]
petitioner is entitled only to either the separation pay under the law or retirement
benefits under the Plan, and not both.

Clearly, the benefits received by petitioner from the respondent represent her
retirement benefits under the Plan. The question that now confronts us is whether these
benefits are taxable. If so, respondent correctly made the deduction for tax
purposes. Otherwise, the deduction was illegal and respondent is still liable for the
completion of petitioners retirement benefits.

Page 466 of 497

Respondent argues that the legality of the deduction from petitioners total
benefits cannot be taken cognizance of by this Court since the issue was not raised
during the early stage of the proceedings. [38]

We do not agree.

Records reveal that as early as in petitioners position paper filed with the Labor
Arbiter, she already raised the legality of said deduction, albeit designated as unpaid
balance of the retirement package. Petitioner specifically averred that P362,386.87 was
not given to her by respondent as it was allegedly a part of the formers taxable income.
[39]
This is likewise evident in the Labor Arbiter and the NLRCs decisions although they
ruled that the issue was beyond the tribunals jurisdiction. They even suggested that
petitioners claim for illegal deduction could be addressed by filing a tax refund with the
Bureau of Internal Revenue.[40]

Contrary to the Labor Arbiter and NLRCs conclusions, petitioners claim for illegal
deduction falls within the tribunals jurisdiction. It is noteworthy that petitioner
demanded the completion of her retirement benefits, including the amount withheld by
respondent for taxation purposes. The issue of deduction for tax purposes is intertwined
with the main issue of whether or not petitioners benefits have been fully given her. It
is, therefore, a money claim arising from the employer-employee relationship, which
clearly falls within the jurisdiction[41] of the Labor Arbiter and the NLRC.

This is not the first time that the labor tribunal is faced with the issue of illegal
deduction. In Intercontinental Broadcasting Corporation (IBC) v. Amarilla, [42] IBC withheld
the salary differentials due its retired employees to offset the tax due on their retirement
benefits. The retirees thus lodged a complaint with the NLRC questioning said
withholding. They averred that their retirement benefits were exempt from income tax;
and IBC had no authority to withhold their salary differentials. The Labor Arbiter took
cognizance of the case, and this Court made a definitive ruling that retirement benefits
are exempt from income tax, provided that certain requirements are met.

Nothing, therefore, prevents us from deciding this main issue of whether the
retirement benefits are taxable.

We answer in the affirmative.

Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC) provides
for the exclusion of retirement benefits from gross income, thus:
Page 467 of 497

(6) Retirement Benefits, Pensions, Gratuities, etc.

a) Retirement benefits received under Republic Act 7641 and those

received by officials and employees of private firms, whether individual or
corporate, in accordance with a reasonable private benefit plan maintained
by the employer: Provided, That the retiring official or employee has been in
the service of the same employer for at least ten (10) years and is not less
than fifty (50) years of age at the time of his retirement: Provided further,
That the benefits granted under this subparagraph shall be availed of by an
official or employee only once. x x x.

Thus, for the retirement benefits to be exempt from the withholding tax, the
taxpayer is burdened to prove the concurrence of the following elements: (1) a
reasonable private benefit plan is maintained by the employer; (2) the retiring official or
employee has been in the service of the same employer for at least ten (10) years; (3)
the retiring official or employee is not less than fifty (50) years of age at the time of his
retirement; and (4) the benefit had been availed of only once. [43]

As discussed above, petitioner was qualified for disability retirement. At the time
of such retirement, petitioner was only 41 years of age; and had been in the service for
more or less eight (8) years. As such, the above provision is not applicable for failure to
comply with the age and length of service requirements. Therefore, respondent cannot
be faulted for deducting from petitioners total retirement benefits the amount
of P362,386.87, for taxation purposes.

WHEREFORE, the petition is DENIED for lack of merit. The Court of Appeals
Decision dated August 12, 2004 and its Resolution dated December 17, 2004, in CA-G.R.
SP No. 75706 are AFFIRMED.

SO ORDERED.
EN BANC
MANILA
ELECTRIC
COMPANY,
ALEXANDER
S.
DEYTO and RUBEN A. SAPITULA,
Petitioners,

G.R. No. 184769

Present:
CORONA, C.J.,
CARPIO,

Page 468 of 497

 versus

ROSARIO GOPEZ LIM,

Respondent.

CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,*
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.
Promulgated:

October 5, 2010
x - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO MORALES, J.:
The Court is once again confronted with an opportunity to define the evolving
metes and bounds of the writ of habeas data. May an employee invoke the remedies
available under such writ where an employer decides to transfer her workplace on the
basis of copies of an anonymous letter posted therein imputing to her disloyalty to the
company and calling for her to leave, which imputation it investigated but fails to inform
her of the details thereof?
Rosario G. Lim (respondent), also known as Cherry Lim, is an administrative clerk
at the Manila Electric Company (MERALCO).
On June 4, 2008, an anonymous letter was posted at the door of the Metering
Office of the Administration building of MERALCO Plaridel, Bulacan Sector, at which
respondent is assigned, denouncing respondent. The letter reads:
Cherry Lim:
MATAPOS MONG LAMUNIN LAHAT NG BIYAYA NG MERALCO,
NGAYON NAMAN AY GUSTO MONG PALAMON ANG BUONG
KUMPANYA SA MGA BUWAYA NG GOBYERNO. KAPAL NG MUKHA MO,
LUMAYAS KA RITO, WALANG UTANG NA LOOB.[1]
Copies of the letter were also inserted in the lockers of MERALCO linesmen. Informed
about it, respondent reported the matter on June 5, 2008 to the Plaridel Station of the
Philippine National Police.[2]

Page 469 of 497

By Memorandum[3] dated July 4, 2008, petitioner Alexander Deyto, Head of

MERALCOs Human Resource Staffing, directed the transfer of respondent to MERALCOs
Alabang Sector in Muntinlupa as A/F OTMS Clerk, effective July 18, 2008 in light of the
receipt of reports that there were accusations and threats directed against [her] from
unknown individuals and which could possibly compromise [her] safety and security.
Respondent, by letter of July 10, 2008 addressed to petitioner Ruben A. Sapitula,
Vice-President and Head of MERALCOs Human Resource Administration, appealed her
transfer and requested for a dialogue so she could voice her concerns and misgivings on
the matter, claiming that the punitive nature of the transfer amounted to a denial of
due process. Citing the grueling travel from her residence in Pampanga to Alabang and
back entails, and violation of the provisions on job security of their Collective Bargaining
Agreement (CBA), respondent expressed her thoughts on the alleged threats to her
security in this wise:
xxxx
I feel that it would have been better . . . if you could have
intimated to me the nature of the alleged accusations and threats so that
at least I could have found out if these are credible or even serious. But
as you stated, these came from unknown individuals and the way they
were handled, it appears that the veracity of these accusations and
threats to be [sic] highlysuspicious, doubtful or are just mere jokes if
they existed at all.
Assuming for the sake of argument only, that the alleged threats
exist as the management apparently believe, then my transfer to an
unfamiliar place and environment which will make me a sitting duck so
to speak, seems to betray the real intent of management which is
contrary to its expressed concern on my security and safety . . . Thus, it
made me think twice on the rationale for managements initiated
transfer. Reflecting further, it appears to me that instead of the
management supposedly extending favor to me, the net result and effect
of management action would be a punitive one.[4] (emphasis and
underscoring supplied)
Respondent thus requested for the deferment of the implementation of her
transfer pending resolution of the issues she raised.
No response to her request having been received, respondent filed a petition [5] for
the issuance of a writ of habeas data against petitioners before the Regional Trial Court
(RTC) of Bulacan, docketed as SP. Proc. No. 213-M-2008.
By respondents allegation, petitioners unlawful act and omission consisting of
their continued failure and refusal to provide her with details or information about the
alleged report which MERALCO purportedly received concerning threats to her safety and
security amount to a violation of her right to privacy in life, liberty and
security,correctible by habeas data. Respondent thus prayed for the issuance of a writ
commanding petitioners to file a written return containing the following:

Page 470 of 497

a)

a full disclosure of the data or information about respondent in

relation to the report purportedly received by petitioners on the
alleged threat to her safety and security; the nature of such data
and the purpose for its collection;

b)

the measures taken by petitioners to ensure the confidentiality of

such data or information; and

c)

the currency and accuracy of such data or information obtained.

Additionally, respondent prayed for the issuance of a Temporary Restraining Order

(TRO) enjoining petitioners from effecting her transfer to the MERALCO Alabang Sector.
By Order[6] of August 29, 2008, Branch 7 of the Bulacan RTC directed petitioners to
file their verified written return. And by Order of September 5, 2008, the trial court
granted respondents application for a TRO.
Petitioners moved for the dismissal of the petition and recall of the TRO on the
grounds that, inter alia, resort to a petition for writ of habeas data was not in order; and
the RTC lacked jurisdiction over the case which properly belongs to the National Labor
Relations Commission (NLRC).[7]
By Decision[8] of September 22, 2008, the trial court granted the prayers of
respondent including the issuance of a writ of preliminary injunction directing petitioners
to desist from implementing respondents transfer until such time that petitioners
comply with the disclosures required.
The trial court justified its ruling by declaring that, inter alia, recourse to a writ
of habeas data should extend not only to victims of extra-legal killings and political
activists but also to ordinary citizens, like respondent whose rights to life and security
are jeopardized by petitioners refusal to provide her with information or data on the
reported threats to her person.
Hence, the present petition for review under Rule 45 of 1997 Rules of Civil
Procedure and the Rule on the Writ of Habeas Data[9] contending that
1) the RTC
lacked jurisdiction over the case and cannot restrain MERALCOs prerogative as employer
to transfer the place of work of its employees, and 2) the issuance of the writ is outside
the parameters expressly set forth in the Rule on the Writ of Habeas Data.[10]
Maintaining that the RTC has no jurisdiction over what they contend is clearly a
labor dispute, petitioners argue that although ingeniously crafted as a petition for
habeas data, respondent is essentially questioning the

Page 471 of 497

transfer of her place of work by her employer[11] and the terms and conditions of her
employment which arise from an employer-employee relationship over which the NLRC
and the Labor Arbiters under Article 217 of the Labor Code have jurisdiction.
Petitioners thus maintain that the RTC had no authority to restrain the
implementation of the Memorandum transferring respondents place of work which is
purely a management prerogative, and that OCA-Circular No. 79-2003 [12] expressly
prohibits the issuance of TROs or injunctive writs in labor-related cases.
Petitioners go on to point out that the Rule on the Writ of Habeas Data directs the
issuance of the writ only against public officials or employees, or private individuals or
entities engaged in the gathering, collecting or storing of data or information regarding
an aggrieved partys person, family or home; and that MERALCO (or its officers) is clearly
not engaged in such activities.
The petition is impressed with merit.
Respondents plea that she be spared from complying with MERALCOs
Memorandum directing her reassignment to the Alabang Sector, under the guise of a
quest for information or data allegedly in possession of petitioners, does not fall within
the province of a writ of habeas data.

Section 1 of the Rule on the Writ of Habeas Data provides:

Section 1. Habeas Data. The writ of habeas data is a remedy
available to any person whose right to privacy in life, liberty or
security is violated or threatened by an unlawful act or
omission of a public official or employee or of a private individual or
entity engaged in the gathering, collecting or storing of data or
information regarding the person, family, home and correspondence of
the aggrieved party. (emphasis and underscoring supplied)
The habeas data rule, in general, is designed to protect by means of judicial
complaint the image, privacy, honor, information, and freedom of information of an
individual. It is meant to provide a forum to enforce ones right to the truth and to
informational privacy, thus safeguarding the constitutional guarantees of a persons right
to life, liberty and security against abuse in this age of information technology.
It bears reiteration that like the writ of amparo, habeas data was conceived as a
response, given the lack of effective and available remedies, to address the
extraordinary rise in the number of killings and enforced disappearances. Its intent is to
address violations of or threats to the rights to life, liberty or security as a remedy
independently from those provided under prevailing Rules. [13]
Castillo v. Cruz[14] underscores the emphasis laid down in Tapuz v. del
Rosario[15] that the writs of amparo and habeas data will NOT issue to protect
purely property or commercial concerns nor when the grounds invoked in support of the
petitions therefor are vague or doubtful.[16] Employment constitutes a property right
Page 472 of 497

under the context of the due process clause of the Constitution. [17] It is evident that
respondents reservations on the real reasons for her transfer - a legitimate concern
respecting the terms and conditions of ones employment - are what prompted her to
adopt the extraordinary remedy of habeas data. Jurisdiction over such concerns is
inarguably lodged by law with the NLRC and the Labor Arbiters.
In another vein, there is no showing from the facts presented that petitioners
committed any unjustifiable or unlawful violation of respondents right to privacy vis-avisthe right to life, liberty or security. To argue that petitioners refusal to disclose the
contents of reports allegedly received on the threats to respondents safety amounts to a
violation of her right to privacy is at best speculative. Respondent in fact trivializes
these threats and accusations from unknown individuals in her earlier-quoted portion of
her July 10, 2008 letter as highly suspicious, doubtful or are just mere jokes if they
existed at all.[18] And she even suspects that her transfer to another place of work
betray[s] the real intent of management] and could be a punitive move. Her
posture unwittingly concedes that the issue is labor-related.
WHEREFORE, the petition is GRANTED. The assailed September 22, 2008
Decision of the Bulacan RTC, Branch 7 in SP. Proc. No. 213-M-2008 is
herebyREVERSED and SET
ASIDE. SP.
Proc.
No. 213-M-2008
is,
accordingly, DISMISSED.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 180962

February 26, 2014

PIDLTRANCO SERVICE ENTERPRISES, INC., represented by its Vice-President for

Administration, M/GEN. NEMESIO M. SIGAYA, Petitioner,
vs.
PHILTRANCO WORKERS UNION-ASSOCIATION OF GENUINE LABOR
ORGANIZATIONS (PWU-AGLO), represented by JOSE JESSIE OLIVAR, Respondent.
DECISION
DEL CASTILLO, J.:
While a government office1 may prohibit altogether the filing of a motion for
reconsideration with respect to its decisions or orders, the fact remains that certiorari
inherently requires the filing of a motion for reconsideration, which is the tangible
representation of the opportunity given to the office to correct itself. Unless it is filed,
Page 473 of 497

there could be no occasion to rectify. Worse, the remedy of certiorari would be

unavailing. Simply put, regardless of the proscription against the filing of a motion for
reconsideration, the same may be filed on the assumption that rectification of the
decision or order must be obtained, and before a petition for certiorari may be instituted.
This Petition for Review on Certiorari2 seeks a review and setting aside of the September
20, 2007 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100324, 4 as well as
its December 14, 2007 Resolution5 denying petitioners Motion for Reconsideration.
Factual Antecedents
On the ground that it was suffering business losses, petitioner Philtranco Service
Enterprises, Inc., a local land transportation company engaged in the business of
carrying passengers and freight, retrenched 21 of its employees. Consequently, the
company union, herein private respondent Philtranco Workers Union-Association of
Genuine Labor Organizations (PWU-AGLU), filed a Notice of Strike with the Department of
Labor and Employment (DOLE), claiming that petitioner engaged in unfair labor
practices. The case was docketed as NCMB-NCR CASE No. NS-02-028-07.
Unable to settle their differences at the scheduled February 21, 2007 preliminary
conference held before Conciliator-Mediator Amorsolo Aglibut (Aglibut) of the National
Conciliation and Mediation Board (NCMB), the case was thereafter referred to the Office
of the Secretary of the DOLE (Secretary of Labor), where the case was docketed as Case
No. OS-VA-2007-008.
After considering the parties respective position papers and other submissions, Acting
DOLE Secretary Danilo P. Cruz issued a Decision 6 dated June 13, 2007, the dispositive
portion of which reads, as follows:
WHEREFORE, premises considered, we hereby ORDER Philtranco to:
1. REINSTATE to their former positions, without loss of seniority rights, the
ILLEGALLY TERMINATED 17 "union officers", x x x, and PAY them BACKWAGES from
the time of termination until their actual or payroll reinstatement, provided in the
computation of backwages among the seventeen (17) who had received their
separation pay should deduct the payments made to them from the backwages
due them.
2. MAINTAIN the status quo and continue in full force and effect the terms and
conditions of the existing CBA specifically, Article VI on Salaries and Wages
(commissions) and Article XI, on Medical and Hospitalization until a new
agreement is reached by the parties; and
3. REMIT the withheld union dues to PWU-AGLU without unnecessary delay.
Page 474 of 497

The PARTIES are enjoined to strictly and fully comply with the provisions of the existing
CBA and the other dispositions of this Decision.
SO ORDERED.7
Petitioner received a copy of the above Decision on June 14, 2007. It filed a Motion for
Reconsideration on June 25, 2007, a Monday. Private respondent, on the other hand,
submitted a "Partial Appeal."
In an August 15, 2007 Order8 which petitioner received on August 17, 2007, the
Secretary of Labor declined to rule on petitioners Motion for Reconsideration and private
respondents "Partial Appeal", citing a DOLE Regulation 9 which provided that voluntary
arbitrators decisions, orders, resolutions or awards shall not be the subject of motions
for reconsideration. The Secretary of Labor held:
WHEREFORE, the complainants and the respondents respective pleadings are hereby
NOTED as pleadings that need not be acted upon for lack of legal basis.
SO ORDERED.10
The Assailed Court of Appeals Resolutions
On August 29, 2007, petitioner filed before the CA an original Petition for Certiorari and
Prohibition, and sought injunctive relief, which case was docketed as CA-G.R. SP No.
100324.
On September 20, 2007, the CA issued the assailed Resolution which decreed as follows:
WHEREFORE, premises considered, the instant Petition for Certiorari and Prohibition with
Prayer for Temporary Restraining Order and Preliminary Injunction is hereby DISMISSED.
Philtrancos pleading entitled "Reiterating Motion for The Issuance of Writ of Preliminary
Injunction and/or Temporary Restraining Order" is NOTED.
SO ORDERED.11
The CA held that, in assailing the Decision of the DOLE voluntary arbitrator, petitioner
erred in filing a petition for certiorari under Rule 65 of the 1997 Rules, when it should
have filed a petition for review under Rule 43 thereof, which properly covers decisions of
voluntary labor arbitrators.12 For this reason, the petition is dismissible pursuant to
Supreme Court Circular No. 2-90.13 The CA added that since the assailed Decision was
not timely appealed within the reglementary 15-day period under Rule 43, the same
became final and executory. Finally, the appellate court ruled that even assuming for the
sake of argument that certiorari was indeed the correct remedy, still the petition should
be dismissed for being filed out of time. Petitioners unauthorized Motion for
Page 475 of 497

Reconsideration filed with the Secretary of Labor did not toll the running of the
reglementary 60-day period within which to avail of certiorari; thus, from the time of its
receipt of Acting Labor Secretary Cruzs June 13, 2007 Decision on June 14 or the
following day, petitioner had until August 13 to file the petition yet it filed the same
only on August 29.
Petitioner filed a Motion for Reconsideration, which was denied by the CA through the
second assailed December 14, 2007 Resolution. In denying the motion, the CA held that
the fact that the Acting Secretary of Labor rendered the decision on the voluntary
arbitration case did not remove the same from the jurisdiction of the NCMB, which thus
places the case within the coverage of Rule 43.
Issues
In this Petition,14 the following errors are assigned:
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER AVAILED
OF THE ERRONEOUS REMEDY IN FILING A PETITION FOR CERTIORARI UNDER RULE 65
INSTEAD OF UNDER RULE 43 OF THE RULES OF COURT.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PETITION FOR
CERTIORARI WAS FILED OUT OF TIME.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION
OUTRIGHT ON THE BASIS OF PURE TECHNICALITY. 15
Petitioners Arguments
In its Petition and Reply,16 petitioner argues that a petition for certiorari under Rule 65
and not a petition for review under Rule 43 is the proper remedy to assail the June 13,
2007 Decision of the DOLE Acting Secretary, pointing to the Courts pronouncement in
National Federation of Labor v. Hon. Laguesma 17 that the remedy of an aggrieved party
against the decisions and discretionary acts of the NLRC as well as the Secretary of Labor
is to timely file a motion for reconsideration, and then seasonably file a special civil
action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
Petitioner adds that, contrary to the CAs ruling, NCMB-NCR CASE No. NS-02-028-07 is
not a simple voluntary arbitration case. The character of the case, which involves an
impending strike by petitioners employees; the nature of petitioners business as a
public transportation company, which is imbued with public interest; the merits of its
case; and the assumption of jurisdiction by the Secretary of Labor all these
circumstances removed the case from the coverage of Article 262, 18 and instead placed
it under Article 263,19 of the Labor Code. Besides, Rule 43 does not apply to judgments or
final orders issued under the Labor Code. 20
Page 476 of 497

On the procedural issue, petitioner insists that it timely filed the Petition for Certiorari
with the CA, arguing that Rule 65 fixes the 60-day period within which to file the petition
from notice of the denial of a timely filed motion for reconsideration, whether such
motion is required or not. It cites the Courts pronouncement in ABS-CBN Union Members
v. ABS-CBN Corporation21 that "before a petition for certiorari under Rule 65 of the Rules
of Court may be availed of, the filing of a motion for reconsideration is a condition sine
qua non to afford an opportunity for the correction of the error or mistake complained of"
and since "a decision of the Secretary of Labor is subject to judicial review only through a
special civil action of certiorari x x x [it] cannot be resorted to without the aggrieved
party having exhausted administrative remedies through a motion for reconsideration".
Respondents Arguments
In its Comment,22 respondent argues that the Secretary of Labor decided Case No. OSVA-2007-008 in his capacity as voluntary arbitrator; thus, his decision, being that of a
voluntary arbitrator, is only assailable via a petition for review under Rule 43. It further
echoes the CAs ruling that even granting that certiorari was the proper remedy, the
same was filed out of time as the filing of a motion for reconsideration, which was an
unauthorized pleading, did not toll the running of the 60-day period. Finally, it argues
that on the merits, petitioners case could not hold water as it failed to abide by the
requirements of law in effecting a retrenchment on the ground of business losses.
Our Ruling
The Court grants the Petition.
It cannot be said that in taking cognizance of NCMB-NCR CASE No. NS-02-028-07, the
Secretary of Labor did so in a limited capacity, i.e., as a voluntary arbitrator. The fact is
undeniable that by referring the case to the Secretary of Labor, Conciliator-Mediator
Aglibut conceded that the case fell within the coverage of Article 263 of the Labor Code;
the impending strike in Philtranco, a public transportation company whose business is
imbued with public interest, required that the Secretary of Labor assume jurisdiction over
the case, which he in fact did. By assuming jurisdiction over the case, the provisions of
Article 263 became applicable, any representation to the contrary or that he is deciding
the case in his capacity as a voluntary arbitrator notwithstanding.
It has long been settled that the remedy of an aggrieved party in a decision or resolution
of the Secretary of Labor is to timely file a motion for reconsideration as a precondition
for any further or subsequent remedy, and then seasonably file a special civil action for
certiorari under Rule 65 of the 1997 Rules on Civil Procedure. 23 There is no distinction:
when the Secretary of Labor assumes jurisdiction over a labor case in an industry
indispensable to national interest, "he exercises great breadth of discretion" in finding a
solution to the parties dispute.24 "[T]he authority of the Secretary of Labor to assume
jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an
Page 477 of 497

industry indispensable to national interest includes and extends to all questions and
controversies arising therefrom. The power is plenary and discretionary in nature to
enable him to effectively and efficiently dispose of the primary dispute." 25 This wide
latitude of discretion given to the Secretary of Labor may not be the subject of appeal.
Accordingly, the Secretary of Labors Decision in Case No. OS-VA-2007-008 is a proper
subject of certiorari, pursuant to the Courts pronouncement in National Federation of
Labor v. Laguesma,26 thus:
Though appeals from the NLRC to the Secretary of Labor were eliminated, presently
there are several instances in the Labor Code and its implementing and related rules
where an appeal can be filed with the Office of the Secretary of Labor or the Secretary of
Labor issues a ruling, to wit:
xxxx
(6) Art. 263 provides that the Secretary of Labor shall decide or resolve the labor dispute
[over] which he assumed jurisdiction within thirty (30) days from the date of the
assumption of jurisdiction. His decision shall be final and executory ten (10) calendar
days after receipt thereof by the parties.
From the foregoing we see that the Labor Code and its implementing and related rules
generally do not provide for any mode for reviewing the decision of the Secretary of
Labor. It is further generally provided that the decision of the Secretary of Labor shall be
final and executory after ten (10) days from notice. Yet, like decisions of the NLRC which
under Art. 223 of the Labor Code become final after ten (10) days, decisions of the
Secretary of Labor come to this Court by way of a petition for certiorari even beyond the
ten-day period provided in the Labor Code and the implementing rules but within the
reglementary period set for Rule 65 petitions under the 1997 Rules of Civil Procedure. x x
x
xxxx
In fine, we find that it is procedurally feasible as well as practicable that petitions for
certiorari under Rule 65 against the decisions of the Secretary of Labor rendered under
the Labor Code and its implementing and related rules be filed initially in the Court of
Appeals. Paramount consideration is strict observance of the doctrine on the hierarchy of
the courts, emphasized in St. Martin Funeral Homes v. NLRC, on "the judicial policy that
this Court will not entertain direct resort to it unless the redress desired cannot be
obtained in the appropriate courts or where exceptional and compelling circumstances
justify availment of a remedy within and calling for the exercise of our primary
jurisdiction."27

Page 478 of 497

On the question of whether the Petition for Certiorari was timely filed, the Court agrees
with petitioners submission. Rule 65 states that where a motion for reconsideration or
new trial is timely filed, whether such motion is required or not, the petition shall be filed
not later than 60 days counted from the notice of the denial of the motion. 28 This can
only mean that even though a motion for reconsideration is not required or even
prohibited by the concerned government office, and the petitioner files the motion just
the same, the 60-day period shall nonetheless be counted from notice of the denial of
the motion. The very nature of certiorari which is an extraordinary remedy resorted to
only in the absence of plain, available, speedy and adequate remedies in the course of
law requires that the office issuing the decision or order be given the opportunity to
correct itself. Quite evidently, this opportunity for rectification does not arise if no motion
for reconsideration has been filed. This is precisely what the Court said in the ABS-CBN
Union Members case, whose essence continues to this day. Thus:
Section 8, Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code,
provides:
"The Secretary shall have fifteen (15) calendar days within which to decide the appeal
from receipt of the records of the case. The decision of the Secretary shall be final and
inappealable." x x x
The aforecited provision cannot be construed to mean that the Decision of the public
respondent cannot be reconsidered since the same is reviewable by writ of certiorari
under Rule 65 of the Rules of Court. As a rule, the law requires a motion for
reconsideration to enable the public respondent to correct his mistakes, if any. In Pearl S.
Buck Foundation, Inc., vs. NLRC, this Court held:
"Hence, the only way by which a labor case may reach the Supreme Court is through a
petition for certiorari under Rule 65 of the Rules of Court alleging lack or excess of
jurisdiction or grave abuse of discretion. Such petition may be filed within a reasonable
time from receipt of the resolution denying the motion for reconsideration of the NLRC
decision." x x x
Clearly, before a petition for certiorari under Rule 65 of the Rules of Court may be availed
of, the filing of a motion for reconsideration is a condition sine qua non to afford an
opportunity for the correction of the error or mistake complained of.
So also, considering that a decision of the Secretary of Labor is subject to judicial review
only through a special civil action of certiorari and, as a rule, cannot be resorted to
without the aggrieved party having exhausted administrative remedies through a motion
for reconsideration, the aggrieved party, must be allowed to move for a reconsideration
of the same so that he can bring a special civil action for certiorari before the Supreme
Court.29

Page 479 of 497

Indeed, what needs to be realized is that while a government office may prohibit
altogether the filing of a motion for reconsideration with respect to its decisions or
orders, the fact remains that certiorari inherently requires the filing of a motion for
reconsideration, which is the tangible representation of the opportunity given to the
office to correct itself. Unless it is filed, there could be no occasion to rectify. Worse, the
remedy of certiorari would be unavailing. Simply put, regardless of the proscription
against the filing of a motion for reconsideration, the same may be filed on the
assumption that rectification of the decision or order must be obtained, and before a
petition for certiorari may be instituted.
Petitioner received a copy of the Acting Secretary of Labors Decision on June 14,
2007.1wphi1 It timely filed a Motion for Reconsideration on June 25, which was a
Monday, or the first working day following the last day (Sunday, June 24) for filing the
motion. But for lack of procedural basis, the same was effectively denied by the
Secretary of Labor via his August 15, 2007 Order which petitioner received on August 17.
It then filed the Petition for Certiorari on August 29, or well within the fresh 60-day period
allowed by the Rules from August 17. Given these facts, the Court finds that the Petition
was timely filed.
Going by the foregoing pronouncements, the CA doubly erred in dismissing CA-G.R. SP
No. 100324.
WHEREFORE, the Petition is GRANTED. The assailed September 20, 2007 and December
14, 2007 Resolutions of the Court of Appeals are REVERSED and SET ASIDE. The Petition
in CA-G.R. SP No. 100324 is ordered REINSTATED and the Court of Appeals is DIRECTED
to RESOLVE the same with DELIBERATE DISPATCH.
SO ORDERED.

CASES ON LABOR RELATIONS

THIRD DIVISION
TUNAY
NA
PAGKAKAISA
NG
MANGGAGAWA SA ASIABREWERY,
Petitioner,
- versus -

ASIA BREWERY, INC.,

Page 480 of 497

G.R. No. 162025

Present:
CARPIO MORALES, J.,
Chairperson,
BRION,
BERSAMIN,
ABAD,* and
VILLARAMA, JR., JJ.
Promulgated:

Respondent.
August 3, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
For resolution is an appeal by certiorari filed by petitioner under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, assailing the Decision [1] dated November
22, 2002 and Resolution[2] dated January 28, 2004 rendered by the Court of Appeals (CA)
in CA-G.R. SP No. 55578, granting the petition of respondent company and reversing the
Voluntary Arbitrators Decision[3] dated October 14, 1999.
The facts are:
Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale and
distribution of beer, shandy, bottled water and glass products. ABI entered into a
Collective Bargaining Agreement (CBA), [4] effective for five (5) years from August 1,
1997 to July 31, 2002, with Bisig at Lakas ng mga Manggagawa sa AsiaIndependent (BLMA-INDEPENDENT), the exclusive bargaining representative of ABIs
rank-and-file employees. On October 3, 2000, ABI and BLMA-INDEPENDENT signed a
renegotiated CBA effective from August 1, 2000 to 31 July 2003.[5]
Article I of the CBA defined the scope of the bargaining unit, as follows:
Section 1. Recognition. The COMPANY recognizes the UNION as the
sole and exclusive bargaining representative of all the regular rank-and-file
daily paid employees within the scope of the appropriate bargaining unit
with respect to rates of pay, hours of work and other terms and conditions
of employment. The UNION shall not represent or accept for
membership employees outside the scope of the bargaining unit
herein defined.
Section 2. Bargaining Unit. The bargaining unit shall be comprised
of all regular rank-and-file daily-paid employees of the COMPANY. However,
the following jobs/positions as herein defined shall be excluded from the
bargaining unit, to wit:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Page 481 of 497

Managers
Assistant Managers
Section Heads
Supervisors
Superintendents
Confidential and Executive Secretaries
Personnel, Accounting and Marketing Staff
Communications Personnel
Probationary Employees

10.
11.
12.

Security and Fire Brigade Personnel

Monthly Employees
Purchasing and Quality Control Staff[6] [EMPHASIS
SUPPLIED.]

Subsequently, a dispute arose when ABIs management stopped deducting union

dues from eighty-one (81) employees, believing that their membership in BLMAINDEPENDENT violated the CBA. Eighteen (18) of these affected employees are QA
Sampling Inspectors/Inspectresses and Machine Gauge Technician who formed part of
the Quality Control Staff. Twenty (20) checkers are assigned at the Materials Department
of the Administration Division, Full Goods Department of the Brewery Division and
Packaging Division. The rest are secretaries/clerks directly under their respective division
managers.[7]
BLMA-INDEPENDENT claimed that ABIs actions restrained the employees right to
self-organization and brought the matter to the grievance machinery. As the parties
failed to amicably settle the controversy, BLMA-INDEPENDENT lodged a complaint before
the National Conciliation and Mediation Board (NCMB). The parties eventually agreed to
submit the case for arbitration to resolve the issue of [w]hether or not there is restraint
to employees in the exercise of their right to self-organization.[8]
In his Decision, Voluntary Arbitrator Bienvenido Devera sustained the BLMAINDEPENDENT after finding that the records submitted by ABI showed that the positions
of the subject employees qualify under the rank-and-file category because their
functions are merely routinary and clerical. He noted that the positions occupied by the
checkers and secretaries/clerks in the different divisions are not managerial or
supervisory, as evident from the duties and responsibilities assigned to them. With
respect to QA Sampling Inspectors/Inspectresses and Machine Gauge Technician, he
ruled that ABI failed to establish with sufficient clarity their basic functions as to consider
them Quality Control Staff who were excluded from the coverage of the CBA.
Accordingly, the subject employees were declared eligible for inclusion within the
bargaining unit represented by BLMA-INDEPENDENT. [9]
On appeal, the CA reversed the Voluntary Arbitrator, ruling that:
WHEREFORE, foregoing premises considered, the questioned decision
of the Honorable Voluntary Arbitrator Bienvenido De Vera is hereby
REVERSED and SET ASIDE, and A NEW ONE ENTERED DECLARING THAT:
a) the 81 employees are excluded from and are not eligible
for inclusion in the bargaining unit as defined in Section 2,
Article I of the CBA;
b) the 81 employees cannot validly become members of
respondent and/or if already members, that their
membership is violative of the CBA and that they should
disaffiliate from respondent; and

Page 482 of 497

c) petitioner has not committed any act that restrained or

tended to restrain its employees in the exercise of their
right to self-organization.
NO COSTS.
SO ORDERED.[10]
BLMA-INDEPENDENT filed a motion for reconsideration. In the meantime, a
certification election was held on August 10, 2002 wherein petitioner Tunay na
Pagkakaisa ng Manggagawa sa Asia (TPMA) won. As the incumbent bargaining
representative of ABIs rank-and-file employees claiming interest in the outcome of the
case, petitioner filed with the CA an omnibus motion for reconsideration of the decision
and intervention, with attached petition signed by the union officers. [11] Both motions
were denied by the CA.[12]
The petition is anchored on the following grounds:
(1)
THE COURT OF APPEALS ERRED IN RULING THAT THE 81 EMPLOYEES ARE
EXCLUDED FROM AND ARE NOT ELIGIBLE FOR INCLUSION IN THE
BARGAINING UNIT AS DEFINED IN SECTION 2, ARTICLE 1 OF THE CBA[;]
(2)
THE COURT OF APPEALS ERRED IN HOLDING THAT THE 81 EMPLOYEES
CANNOT VALIDLY BECOME UNION MEMBERS, THAT THEIR MEMBERSHIP IS
VIOLATIVE OF THE CBA AND THAT THEY SHOULD DISAFFILIATE FROM
RESPONDENT;
(3)
THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER
(NOW PRIVATE RESPONDENT) HAS NOT COMMITTED ANY ACT THAT
RESTRAINED OR TENDED TO RESTRAIN ITS EMPLOYEES IN THE EXERCISE OF
THEIR RIGHT TO SELF-ORGANIZATION.[13]
Although Article 245 of the Labor Code limits the ineligibility to join, form and
assist any labor organization to managerial employees, jurisprudence has extended this
prohibition to confidential employees or those who by reason of their positions or nature
of work are required to assist or act in a fiduciary manner to managerial employees and
hence, are likewise privy to sensitive and highly confidential records. [14] Confidential
employees are thus excluded from the rank-and-file bargaining unit. The rationale for
their separate category and disqualification to join any labor organization is similar to the
inhibition for managerial employees because if allowed to be affiliated with a Union, the
latter might not be assured of their loyalty in view of evident conflict of interests and the
Union can also become company-denominated with the presence of managerial
employees in the Union membership.[15] Having access to confidential information,
confidential employees may also become the source of undue advantage. Said
Page 483 of 497

employees may act as a spy or spies of either party to a collective bargaining

agreement.[16]
In Philips Industrial Development, Inc. v. NLRC,[17] this Court held that petitioners
division secretaries, all Staff of General Management, Personnel and Industrial Relations
Department, Secretaries of Audit, EDP and Financial Systems are confidential
employees not included within the rank-and-file bargaining unit. [18] Earlier, in Pier 8
Arrastre & Stevedoring Services, Inc. v. Roldan-Confesor,[19] we declared that legal
secretaries who are tasked with, among others, the typing of legal documents,
memoranda and correspondence, the keeping of records and files, the giving of and
receiving notices, and such other duties as required by the legal personnel of the
corporation, fall under the category of confidential employees and hence excluded from
the bargaining unit composed of rank-and-file employees. [20]
Also considered having access to vital labor information are the executive
secretaries of the General Manager and the executive secretaries of the Quality
Assurance Manager, Product Development Manager, Finance Director, Management
System Manager, Human Resources Manager, Marketing Director, Engineering Manager,
Materials Manager and Production Manager.[21]
In the present case, the CBA expressly excluded Confidential and Executive
Secretaries from the rank-and-file bargaining unit, for which reason ABI seeks their
disaffiliation from petitioner. Petitioner, however, maintains that except for Daisy Laloon,
Evelyn Mabilangan and Lennie Saguan who had been promoted to monthly paid
positions, the following secretaries/clerks are deemed included among the rank-and-file
employees of ABI:[22]

Page 484 of 497

As can be gleaned from the above listing, it is rather curious that there would
be several secretaries/clerks for just one (1) department/division performing tasks which
are mostly routine and clerical. Respondent insisted they fall under the Confidential and
Executive Secretaries expressly excluded by the CBA from the rank-and-file bargaining
unit. However, perusal of the job descriptions of these secretaries/clerks reveals that
their assigned duties and responsibilities involve routine activities of recording and
monitoring, and other paper works for their respective departments while secretarial
tasks such as receiving telephone calls and filing of office correspondence appear to
Page 485 of 497

have been commonly imposed as additional duties. [23] Respondent failed to indicate who
among these numerous secretaries/clerks have access to confidential data relating to
management policies that could give rise to potential conflict of interest with their Union
membership. Clearly, the rationale under our previous rulings for the exclusion
ofexecutive secretaries or division secretaries would have little or no significance
considering the lack of or very limited access to confidential information of these
secretaries/clerks. It is not even farfetched that the job category may exist only on
paper since they are all daily-paid workers. Quite understandably, petitioner had earlier
expressed the view that the positions were just being reclassified as these employees
actually discharged routine functions.
We thus hold that the secretaries/clerks, numbering about forty (40), are rank-andfile employees and not confidential employees.
With respect to the Sampling Inspectors/Inspectresses and the Gauge Machine
Technician, there seems no dispute that they form part of the Quality Control Staff who,
under the express terms of the CBA, fall under a distinct category. But we disagree with
respondents contention that the twenty (20) checkers are similarly confidential
employees being quality control staff entrusted with the handling and custody of
company properties and sensitive information.
Again, the job descriptions of these checkers assigned in the storeroom section of
the Materials Department, finishing section of the Packaging Department, and the
decorating and glass sections of the Production Department plainly showed that they
perform routine and mechanical tasks preparatory to the delivery of the finished
products.[24] While it may be argued that quality control extends to post-production
phase -- proper packaging of the finished products -- no evidence was presented by the
respondent to prove that these daily-paid checkers actually form part of the companys
Quality Control Staff who as such were exposed to sensitive, vital and confidential
information about [companys] products or have knowledge of mixtures of the
products, their defects, and even their formulas which are considered trade
secrets. Such allegations of respondent must be supported by evidence. [25]
Consequently, we hold that the twenty (20) checkers may not be considered
confidential employees under the category of Quality Control Staff who were expressly
excluded from the CBA of the rank-and-file bargaining unit.
Confidential employees are defined as those who (1) assist or act in a confidential
capacity, (2) to persons who formulate, determine, and effectuate management policies in
the field of labor relations. The two (2) criteria are cumulative, and both must be met if
an employee is to be considered a confidential employee that is, the confidential
relationship must exist between the employee and his supervisor, and the supervisor must
handle the prescribed responsibilities relating to labor relations. The exclusion from
bargaining units of employees who, in the normal course of their duties, become aware of
management policies relating to labor relations is a principal objective sought to be
accomplished by the confidential employee rule.[26] There is no showing in this case that
the secretaries/clerks and checkers assisted or acted in a confidential capacity to
managerial employees and obtained confidential information relating to labor relations
Page 486 of 497

policies. And even assuming that they had exposure to internal business operations of the
company, respondent claimed, this is not per se ground for their exclusion in the
bargaining unit of the daily-paid rank-and-file employees.[27]
Not being confidential employees, the secretaries/clerks and checkers are not
disqualified from membership in the Union of respondents rank-and-file employees.
Petitioner argues that respondents act of unilaterally stopping the deduction of union
dues from these employees constitutes unfair labor practice as it restrained the
workers exercise of their right to self-organization, as provided in Article 248 (a) of
the Labor Code.
Unfair labor practice refers to acts that violate the workers right to organize.
The prohibited acts are related to the workers right to self organization and to the
observance of a CBA. For a charge of unfair labor practice to prosper, it must be shown
that ABI was motivated by ill will, bad faith, or fraud, or was oppressive to labor, or done
in a manner contrary to morals, good customs, or public policy, and, of course, that
social humiliation, wounded feelings or grave anxiety resulted x x x [28] from ABIs act in
discontinuing the union dues deduction from those employees it believed were excluded
by the CBA. Considering that the herein dispute arose from a simple disagreement in the
interpretation of the CBA provision on excluded employees from the bargaining unit,
respondent cannot be said to have committed unfair labor practice that restrained its
employees in the exercise of their right to self-organization, nor have thereby
demonstrated an anti-union stance.
WHEREFORE, the petition is GRANTED. The Decision dated November 22,
2002 and Resolution dated January 28, 2004 of the Court of Appeals in CA-G.R. SP No.
55578 are hereby REVERSED and SET ASIDE. The checkers and secretaries/clerks of
respondent company are hereby declared rank-and-file employees who are eligible to
join the Union of the rank-and-file employees.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 93468 December 29, 1994

NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS BANK
SUPERVISORS CHAPTER, petitioner,
vs.
Page 487 of 497

HON. RUBEN D. TORRES, SECRETARY OF LABOR AND EMPLOYMENT and

REPUBLIC PLANTERS BANK,respondents.
Filemon G. Tercero for petitioner.
The Government Corporate Counsel for Republic Planters Bank.

BELLOSILLO, J.:
NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS BANK
SUPERVISORS CHAPTER seeks nullification of the decision of public respondent Secretary
of Labor dated 23 March 1990, which modified the order of Med-Arbiter Manases T. Cruz
dated 17 August 1989 as well as his order dated 20 April 1990 denying reconsideration.
On 17 March 1989, NATU filed a petition for certification election to determine the
exclusive bargaining representative of respondent Bank's employees occupying
supervisory positions. On 24 April 1989, the Bank moved to dismiss the petition on the
ground that the supposed supervisory employees were actually managerial and/or
confidential employees thus ineligible to join, assist or form a union, and that the petition
lacked the 20% signatory requirement under the Labor Code.
On 17 August 1989, Med-Arbiter Manases T. Cruz granted the petition thus
WHEREFORE, . . . let a certification election be ordered conducted among all
the regular employees of the Republic Planters Bank occupying supervisory
positions or the equivalent within 20 days from receipt of a copy of this
Order. The choice shall be: (1) National Association of Trade Unions (NATU)Republic Planters Bank Supervisors Chapter; and (2) No Union.
The payroll three months prior to the filing of this petition shall be utilized in
determining the list of eligible voters . . . . 1
Respondent Bank appealed the order to the Secretary of Labor on the main ground that
several of the employees sought to be included in the certification election, particularly
the Department Managers, Branch Managers/OICs, Cashiers and Controllers were
managerial and/or confidential employees and thus ineligible to join, assist or form a
union. It presented annexes detailing the job description and duties of the positions in
question and affidavits of certain employees. It also invoked provisions of the General
Banking Act and the Central Bank Act to show the duties and responsibilities of the bank
and its branches.

Page 488 of 497

On 23 March 1990, public respondent issued a decision partially granting the appeal,
which is now being challenged before us
WHEREFORE, . . . the appeal is hereby partially granted. Accordingly, the
Order dated 17 August 1989 is modified to the extent that Department
Managers, Assistant Managers, Branch Managers, Cashiers and Controllers
are declared managerial employees. Perforce, they cannot join the union of
supervisors such as Division Chiefs, Accounts Officers, Staff Assistants and
OIC's (sic) unless the latter are regular managerial employees . . . . 2
NATU filed a motion for reconsideration but the same was denied on 20 April
1990. 3 Hence this recourse assailing public respondent for rendering the decision of 23
March 1990 and the order of 20 April 1990 both with grave abuse of discretion.
The crucial issue presented for our resolution is whether the Department Managers,
Assistant Managers, Branch Managers/OICs, Cashiers and Controllers of respondent Bank
are managerial and/or confidential employees hence ineligible to join or assist the union
of petitioner.
NATU submits that an analysis of the decision of public respondent readily yields certain
flaws that result in erroneous conclusions. Firstly, a branch does not enjoy relative
autonomy precisely because it is treated as one unit with the head office and has to
comply with uniform policies and guidelines set by the bank itself. It would be absurd if
each branch of a particular bank would be adopting and implementing different policies
covering multifarious banking transactions. Moreover, respondent Bank's own evidence
clearly shows that policies and guidelines covering the various branches are set by the
head office. Secondly, there is absolutely no evidence showing that bank policies are laid
down through the collective action of the Branch Manager, the Cashier and the
Controller. Thirdly, the organizational setup where the Branch Manager exercises control
over branch operations, the Controller controls the Accounting Division, and the Cashier
controls the Cash Division, is nothing but a proper delineation of duties and
responsibilities. This delineation is a Central Bank prescribed internal control measure
intended to objectively establish responsibilities among the officers to easily pinpoint
culpability in case of error. The "dual control" and "joint custody" aspects mentioned in
the decision of public respondent are likewise internal control measures prescribed by
the Central Bank.
Neither is there evidence showing that subject employees are vested with powers or
prerogatives to hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees. The bare allegations in the affidavits of respondent Bank's Executive
Assistant to the President 4 and the Senior Manager of the Human Resource Management
Department 5 that those powers and prerogatives are inherent in subject positions are
self-serving. Their claim cannot be made to prevail upon the actual duties and
responsibilities of subject employees.
Page 489 of 497

The other evidence of respondent Bank which purports to show that subject employees
exercise managerial functions even belies such claim. Insofar as Department Managers
and Assistant Managers are concerned, there is absolutely no reason mentioned in the
decision why they are managerial employees. Not even respondent Bank in its appeal
questioned the inclusion of Assistant Managers among the qualified petitioning
employees. Public respondent has deviated from the real issue in this case, which is, the
determination of whether subject employees are managerial employees within the
contemplation of the Labor Code, as amended by RA 6715; instead, he merely
concentrated on the nature, conduct and management of banks conformably with the
General Banking Act and the Central Bank Act.
Petitioner concludes that subject employees are not managerial employees but
supervisors. Even assuming that they are confidential employees, there is no legal
prohibition against confidential employees who are not performing managerial functions
to form and join a union.
On the other hand, respondent Bank maintains that the Department Managers, Branch
Managers, Cashiers and Controllers are inherently possessed of the powers enumerated
in Art. 212, par. (m), of the Labor Code. It relies heavily on the affidavits of its Executive
Assistant to the President and Senior Manager of the Human Resource Department. The
Branch Managers, Cashiers and Controllers are vested not only with policy-making
powers necessary to run the affairs of the branch, given the independence and relative
autonomy which it enjoys in the pursuit of its goals and objectives, but also with the
concomitant disciplinary authority over the employees.
The Solicitor General argues that NATU loses sight of the fact that by virtue of the appeal
of respondent Bank, the whole case is thrown open for consideration by public
respondent. Even errors not assigned in the appeal, such as the exclusion by the MedArbiter of Assistant Managers from the managerial employees category, is within his
discretion to consider as it is closely related to the errors properly assigned. The fact that
Department Managers are managerial employees is borne out by the evidence of
petitioner itself. Furthermore, while it assails public respondent's finding that subject
employees are managerial employees, petitioner never questioned the fact that said
officers also occupy confidential positions and thus remain prohibited from forming or
joining any labor organization.
Respondent Bank has no legal personality to move for the dismissal of the petition for
certification election on the ground that its supervisory employees are in reality
managerial employees. An employer has no standing to question the process since this
is the sole concern of the workers. The only exception is where the employer itself has to
file the petition pursuant to Art. 258 of the Labor Code because of a request to bargain
collectively. 6

Page 490 of 497

Public respondent, invoking RA 6715 and the inherent functions of Department

Managers, Assistant Managers, Branch Managers, Cashiers and Controllers, held that
these officers properly fall within the definition of managerial employees. The
ratiocination in his Decision of 23 March 1990 7 is that
Republic Act No. 6715, otherwise known as the Herrera-Veloso Law, restored
the right of supervisors to form their own unions while maintaining the
proscription on the right to self-organization of managerial employees.
Accordingly, the Labor Code, as amended, distinguishes managerial,
supervisory and rank-and-file employees thus:
Art. 212 (m) Managerial employee is one who is vested with
powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline
employees. Supervisory employees are those who, in the
interest of the employer, effectively recommend such
managerial actions, if the exercise of such managerial
authority is not routinary in nature but requires the use of
independent judgment. All employees not falling within any of
the above definitions are considered rank-and-file employees
(emphasis supplied).
At first glance, pursuant to the above-definitions and based on their job
descriptions as guideposts, there would seem to be no difficulty in
distinguishing a managerial employee from that of a supervisor, or from
that of a mere rank-and-file employee. Yet, this task takes on a different
dimension when applied to banks, particularly the branches thereof. This is
so because unlike ordinary corporations, a bank's organizational operation
is governed and regulated by the General Banking Act and the Central Bank
Act, both special laws . . . .
As pointed out by the respondent, in the banking industry, a branch is the
microcosm of a banking institution, uniquely autonomous and
self-governing.
This relative autonomy of a branch finds legal basis in Section 27 of the
General Banking Act, as amended, thus:
. . . . The bank shall be responsible for all business conducted
in such branches to the same extent and in the same manner
as though such business had all been conducted in the head
office.

Page 491 of 497

For the purpose of this Act, a bank and its branches shall be
treated as a unit (emphasis supplied).
Conformably with the above, bank policies are laid down and/or executed
through the collective action of the Branch Manager, Cashier and Controller
at the branch level. The Branch Manager exercises over-all control and
supervision over branch operation being on the top of the branch's pyramid
structure. However, both the controller and the cashier who are called in
banking parlance as "Financial Managers" due to their fiscal functions are
given such a share and sphere of responsibility in the operations of the
bank. The cashier controls and supervises the cash division while the
controller that of the Accounting Division. Likewise, their assigned task is of
great significance, without which a bank or branch for that matter cannot
operate or function.
Through the collective action of these three branch officers operational
transactions are carried out like: The two (2)-signature requirement of the
manager, on one hand, and that of the controller or cashier on the other
hand as required in bank's issuances and releases. This is the so-called
"dual control" through check-and-balance as prescribed by the Central
Bank, per Section 1166.6, Book I, Manual of Regulations for Banks and
Financial Intermediaries. Another is in the joint custody of the branch's cash
in vault, accountable forms, collaterals, documents of title, deposit, ledgers
and others, among the branch manager and at least two (2) officers of the
branch as required under Section 1166.6 of the Manual of Regulations for
Banks and Other Financial Intermediaries.
This structural set-up creates a triad of managerial authority among the
branch manager, cashier and controller. Hence, no officer of the bank ". . .
have (sic) complete authority and responsibility for handling all phases of
any transaction from beginning to end without some control or balance from
some other part of the organization" (Section 1166.3, Division of Duties and
Responsibilities, Ibid).This aspect in the banking system which calls for the
division of duties and responsibilities is a clear manifestation of managerial
power and authority. No operational transaction at branch level is carried
out by the singular act of the Branch Manager but rather through the
collective act of the Branch Manager, Cashier/Controller (emphasis
supplied).
Noteworthy is the "on call client" set up in banks. Under this scheme, the
branch manager is tasked with the responsibility of business development
and marketing of the bank's services which place him on client call. During
such usual physical absences from the branch, the cashier assumes the
reins of branch control and administration. On those occasions, the "dual
Page 492 of 497

control system" is clearly manifest in the transactions and operations of the

branch bank as it will then require the necessary joint action of the
controller and the cashier.
The grave abuse of discretion committed by public respondent is at once apparent. Art.
212, par. (m), of the Labor Code is explicit. A managerial employee is (a) one who is
vested with powers or prerogatives to lay down and execute management policies, or to
hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees; or (b)
one who is vested with both powers or prerogatives. A supervisory employee is different
from a managerial employee in the sense that the supervisory employee, in the interest
of the employer, effectively recommends such managerial actions, if the exercise of such
managerial authority is not routinary in nature but requires the use of independent
judgment.
Ranged against these definitions and after a thorough examination of the evidence
submitted by both parties, we arrive at a contrary conclusion. Branch Managers,
Cashiers and Controllers of respondent Bank are not managerial employees but
supervisory employees. The finding of public respondent that bank policies are laid down
and/or executed through the collective action of these employees is simply erroneous.
His discussion on the division of their duties and responsibilities does not logically lead to
the conclusion that they are managerial employees, as the term is defined in Art. 212,
par. (m).
Among the general duties and responsibilities of a Branch Manager is "[t]o discharge his
duties and authority with a high sense of responsibility and integrity and shall at all
times be guided by prudence like a good father of the family, and sound judgment in
accordance with and within the limitations of the policy/policies promulgated by the
Board of Directors and implemented by the Management until suspended, superseded,
revoked or modified" (par. 5, emphasis supplied). 8 Similarly, the job summary of a
Controller states: "Supervises the Accounting Unit of the branch;sees to the compliance
by the Branch with established procedures, policies, rules and regulations of the Bank
and external supervising authorities; sees to the strict implementation of control
procedures (emphasis supplied). 9 The job description of a Cashier does not mention any
authority on his part to lay down policies, either. 10 On the basis of the foregoing
evidence, it is clear that subject employees do not participate in policy-making but are
given approved and established policies to execute and standard practices to
observe, 11 leaving little or no discretion at all whether to implement said policies or
not.12 It is the nature of the employee's functions, and not the nomenclature or title
given to his job, which determines whether he has rank-and-file, supervisory or
managerial status. 13
Moreover, the bare statement in the affidavit of the Executive Assistant to the President
of respondent Bank that the Branch Managers, Cashiers and Controllers "formulate and
implement the plans, policies and marketing strategies of the branch towards the
Page 493 of 497

successful accomplishment of its profit targets and objectives," 14 is contradicted by the

following evidence submitted by respondent Bank itself:
(a) Memorandum issued by respondent Bank's Assistant Vice President to
all Regional Managers and Branch Managers giving them temporary
discretionary authority to grant additional interest over the prescribed
board rates for both short-term and long-term CTDs subject, however, to
specific limitations and guidelines set forth in the same memorandum; 15
(b) Memorandum issued by respondent Bank's Executive Vice President to
all Regional Managers and Branch Officers regarding the policy and
guidelines on drawing against uncollected deposits (DAUD); 16
(c) Memorandum issued by respondent Bank's President to all Field Offices
regarding the guidelines on domestic bills purchased
(DBP); 17 and
(d) Memorandum issued by the same officer to all Branch Managers
regarding lending authority at the branch level and the terms and
conditions thereof. 18
As a consequence, the affidavit of the Executive Assistant cannot be given any weight at
all.
Neither do the Branch Managers, Cashiers and Controllers have the power to hire,
transfer, suspend, lay off, recall, discharge, assign or discipline employees. The Senior
Manager of the Human Resource Management Department of respondent Bank, in her
affidavit, stated that "the power to hire, fire, suspend, transfer, assign or otherwise
impose discipline among subordinates within their respective jurisdictions is lodged with
the heads of the various departments, the branch managers and officers-in-charge, the
branch cashiers and the branch controllers. Inherent as it is in the aforementioned
positions, the authority to hire, fire, suspend, transfer, assign or otherwise discipline
employees within their respective domains was deemed unnecessary to be incorporated
in their individual job descriptions; By way of illustration, on August 24, 1989, Mr. Renato
A. Tuates, the Officer-in-Charge/Branch Cashier of the Bank's Dumaguete Branch, placed
under preventive suspension and thereafter terminated the teller of the same branch . . .
. Likewise, on February 22, 1989, Mr. Francis D. Robite, Sr., the Officer-in-Charge of
International Department, assigned the cable assistant of the International Department
as the concurrent FCDU Accountable Forms Custodian." 19
However, a close scrutiny of the memorandum of Mr. Tuates reveals that he does not
have said managerial power because as plainly stated therein, it was issued "upon
instruction from Head Office." 20 With regard to the memorandum of Mr. Robite, Sr., it
appears that the power he exercised was merely in an isolated instance, taking into
Page 494 of 497

account the other evidence submitted by respondent Bank itself showing lack of said
power by other Branch Managers/OICs:
(a) Memorandum from the Branch Manager for the
AVP-Manpower Management Department expressing the opinion that a
certain employee, due to habitual absenteeism and tardiness, must be
penalized in accordance with respondent Bank's Code of Discipline; and
(b) Memorandum from a Branch OIC for the Assistant Vice President
recommending a certain employee's promotional adjustment to the present
position he occupies.
Clearly, those officials or employees possess only recommendatory powers subject to
evaluation, review and final action by higher officials. Therefore, the foregoing affidavit
cannot bolster the stand of respondent Bank.
The positions of Department Managers and Assistant Managers were also declared by
public respondent as managerial, without providing any basis therefor. Petitioner asserts
that the position of Assistant Manager was not even included in the appeal filed by
respondent Bank. While we agree with the Office of the Solicitor General that it is within
the discretion of public respondent to consider an unassigned issue that is closely related
to an issue properly assigned, still, public respondent's error lies in the fact that his
finding has no leg to stand on. Anyway, inasmuch as the entire records are before us,
now is the opportunity to discuss this issue.
We analyzed the evidence submitted by respondent Bank in support of its claim that
Department Managers are managerial employees 21 and concluded that they are not.
Like Branch Managers, Cashiers and Controllers, Department Managers do not possess
the power to lay down policies nor to hire, transfer, suspend, lay off, recall, discharge,
assign or discipline employees. They occupy supervisory positions, charged with the duty
among others to "recommend proposals to improve and streamline operations." 22 With
respect to Assistant Managers, there is absolutely no evidence submitted to substantiate
public respondent's finding that they are managerial employees; understandably so,
because this position is not included in the appeal of respondent Bank.
As regards the other claim of respondent Bank that Branch Managers/OICs, Cashiers and
Controllers are confidential employees, having control, custody and/or access to
confidential matters, e.g., the branch's cash position, statements of financial condition,
vault combination, cash codes for telegraphic transfers, demand drafts and other
negotiable instruments, 23 pursuant to Sec. 1166.4 of the Central Bank Manual regarding
joint custody, 24 this claim is not even disputed by petitioner. A confidential employee is
one entrusted with confidence on delicate matters, or with the custody, handling, or care
and protection of the employer's property. 25 While Art. 245 of the Labor Code singles out
managerial employees as ineligible to join, assist or form any labor organization, under
Page 495 of 497

the doctrine of necessary implication, confidential employees are similarly disqualified.

This doctrine states that what is implied in a statute is as much a part thereof as that
which is expressed, as elucidated in several cases 26 the latest of which is Chua v. Civil
Service Commission 27 where we said:
No statute can be enacted that can provide all the details involved in its
application. There is always an omission that may not meet a particular
situation. What is thought, at the time of enactment, to be an all-embracing
legislation may be inadequate to provide for the unfolding events of the
future. So-called gaps in the law develop as the law is enforced. One of the
rules of statutory construction used to fill in the gap is the doctrine of
necessary implication . . . . Every statute is understood, by implication, to
contain all such provisions as may be necessary to effectuate its object and
purpose, or to make effective rights, powers, privileges or jurisdiction which
it grants, including all such collateral and subsidiary consequences as may
be fairly and logically inferred from its terms. Ex necessitate
legis . . . .
In applying the doctrine of necessary implication, we took into consideration the
rationale behind the disqualification of managerial employees expressed in Bulletin
Publishing Corporation v. Sanchez, 28 thus: ". . . if these managerial employees would
belong to or be affiliated with a Union, the latter might not be assured of their loyalty to
the Union in view of evident conflict of interests. The Union can also become companydominated with the presence of managerial employees in Union membership." Stated
differently, in the collective bargaining process, managerial employees are supposed to
be on the side of the employer, to act as its representatives, and to see to it that its
interests are well protected. The employer is not assured of such protection if these
employees themselves are union members. Collective bargaining in such a situation can
become one-sided. 29 It is the same reason that impelled this Court to consider the
position of confidential employees as included in the disqualification found in Art. 245 as
if the disqualification of confidential employees were written in the provision. If
confidential employees could unionize in order to bargain for advantages for themselves,
then they could be governed by their own motives rather than the interest of the
employers. Moreover, unionization of confidential employees for the purpose of
collective bargaining would mean the extension of the law to persons or individuals who
are supposed to act "in the interest of" the employers. 30 It is not farfetched that in the
course of collective bargaining, they might jeopardize that interest which they are dutybound to protect. Along the same line of reasoning we held in Golden Farms, Inc. v.
Ferrer-Calleja 31 reiterated in Philips Industrial Development, Inc. v. NLRC, 32that
"confidential employees such as accounting personnel, radio and telegraph operators
who, having access to confidential information, may become the source of undue
advantage. Said employee(s) may act as spy or spies of either party to a collective
bargaining agreement."

Page 496 of 497

In fine, only the Branch Managers/OICs, Cashiers and Controllers of respondent Bank,
being confidential employees, are disqualified from joining or assisting petitioner Union,
or joining, assisting or forming any other labor organization. But this ruling should be
understood to apply only to the present case based on the evidence of the parties, as
well as to those similarly situated. It should not be understood in any way to apply to
banks in general.
WHEREFORE, the petition is partially GRANTED. The decision of public respondent
Secretary of Labor dated 23 March 1990 and his order dated 20 April 1990 are
MODIFIED, hereby declaring that only the Branch Managers/OICs, Cashiers and
Controllers of respondent Republic Planters Bank are ineligible to join or assist petitioner
National Association of Trade Unions (NATU)-Republic Planters Bank Supervisors Chapter,
or join, assist or form any other labor organization.
SO ORDERED.

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