Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 93699 September 10, 1993

RAMON PRIETO, PACIFICO CANILLO, and WILFREDO AZUELA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, AR and SONS INTERNATIONAL
DEVELOPMENT CORP., SAUDI SERVICES and OPERATING COMPANY, LTD., and SAUDI
ARABIAN MORRISON, respondents.
Capuyan & Quimpo Law Office for petitioners.
Carag, Caballes, Jamora, Rodriguez & Somera Law Offices for private respondent.

CRUZ, J.:
The petitioners seek modification of the decision of the National Labor Relations Commission dated May 31,
1990, reversing the decision of the Philippine Overseas Employment Administration dated July 24, 1989. It is
averred that the public respondent committed grave abuse of discretion in ruling in favor of the private
respondents, contrary to the evidence on record.
This case arose from a complaint filed by Ramon Prieto, Pacifico Canillo and Wilfredo Azuela against AR and
Sons International Development Corporation, Saudi Services and Operations Co. Ltd., and Saudi Arabian
Morrison. 1Their claim was for non-payment of wages, illegal dismissal, illegal exaction of placement fees,
illegal imposition of performance bond, substitution of contract and deployment of workers to an unaccredited
principal.
The complainants alleged they were recruited by AR and Sons International Development Corporation (AR and
Sons) for employment for a period of 24 months with Saudi Services and Operating Co., Ltd. (SSOC) in Saudi
Arabia. The corresponding Agency Worker Agreements, which were duly approved by the POEA, provided for
their respective positions and salaries as follows:
Name Position Salary (per month in
US Dollars)
Prieto Mechanic A/C $370.00
Azuela Mechanic A/C $370.00
Canillo Clerk $420.00
Later, however, taking advantage of their need for employment, the respondent placement agency coerced them
into signing another employment contract with Saudi Arabia Morrison (SAM) without the knowledge and
approval of the POEA. The second contract gave all three of them the lower positions of assistant cook with a
salary of only SR625.00 per month for a period of three years. 2
The complainants said that when they reached Jeddah, Saudi Arabia, in November 1987, they were asked to
sign still another employment contract by a certain Muhammad Abbas, a representative of SAM, which would
further lower their salaries to SR250.00 a month. When they refused, they were not assigned any work but were

confined in a small room in a villa and given spoiled food for their sustenance. On December 22, 1987, they
were summarily dismissed and repatriated to the Philippines. 3
The respondents denied the charges and said that the complainants entered into separate uniform Agency
Worker Agreements where it was stipulated that they would be employed by SSOC for 24 months upon
departure from the Philippines. When the petitioners arrived in Jeddah, it was discovered that Prieto and Azuela
were not qualified as mechanics and that Canillo was not qualified as clerk, so all three of them were rejected.
The complainants then requested SSOC to help them secure employment as assistant cooks with SAM, which at
that time was also a foreign principal of AR and Sons. Taking pity on them, SSOC referred them to the latter
agency but they also failed to pass the trade tests for assistant cooks. It was for this reason that they were finally
repatriated to the Philippines at the expense of the latter agency.
After considering the evidence and arguments of the parties, the POEA held in favor of the complainants. The
dispositive portion of its decision decreed as follows:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered ordering AR & SONS
INTERNATIONAL DEVELOPMENT CORPORATION and SAUDI ARABIAN MORRISON
to pay jointly and severally complainants Ramon Prieto, Pacifico Canillo and Wilfredo Azuela
the following amounts to be paid in Philippine Currency at the prevailing rate of exchange at the
rate of actual payment:
1. for Ramon Prieto
a) SIX HUNDRED SIXTEEN US DOLLARS AND 67/100 (US$616.67)
representing his salaries from November 2, 1987 to December 22, 1987;
b) EIGHT THOUSAND TWO HUNDRED SIXTY THREE US DOLLARS AND
33/100 (US$8,263.33) representing his salaries for the unexpired portion of his
employment contract.
2. for Pacifico Canillo
a) SIX HUNDRED TEN US DOLLARS (US$610.00) representing his salaries
from November 12, 1987 to December 22, 1987;
b) NINE THOUSAND FOUR HUNDRED SEVENTY US DOLLARS
(US$9,470.00) representing his salaries for the unexpired portion of his
employment contract.
3. for Wilfredo Azuela
a) SIX HUNDRED SIXTEEN US DOLLARS AND 67/100 (US$616.67)
representing his salaries from November 2, 1987 to December 22, 1987;
b) EIGHT THOUSAND TWO HUNDRED SIXTY THREE US DOLLARS AND
33/100 (US$8,263.33) representing his salaries for the unexpired portion of his
employment contract; and
4. FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees.
SO ORDERED.
The decision was reversed by the NLRC, which ordered the dismissal of the complaint. The NLRC found that
the complainants had misrepresented themselves as mechanics and cooks when they were not qualified for these
positions and so had only themselves to blame if they were subsequently rejected by a foreign employer.

The factual findings of administrative bodies are as a rule binding on this Court, but this is true only when they
do not come under the established exceptions. One of these is where the findings of the POEA and the NLRC
are contrary to each other, 4 as in this case, and there is a necessity to determine which of them should be
preferred as more conformable to the established facts.
A study of the two decisions, together with the evidence and the arguments adduced by the parties, inclines the
Court in favor of the POEA.
We reject the respondents' argument that the petitioners' services were terminated because they were not
qualified either as mechanics or as assistant cooks. It is presumed that before their deployment, the petitioners
were subjected to the trade tests required by law to be conducted by the recruiting agency to insure employment
of only technically qualified workers for the foreign principal. There was no misrepresentation on the part of the
petitioners. They had applied as A/C mechanics and clerk, and we may assume that the trade tests conducted on
them were for these positions and not for the position of assistant cook. If they fell short of the employer's
expectations, the fault lies not with the petitioners but with the recruiting agency for deploying them even if
they did not possess the skills necessary for the positions they were seeking.
As we said in one case: 5
. . . Moreover, before the private respondents were hired they were lengthily interviewed by a
representative of the foreign employer, Modern System. They must have passed, otherwise, they
would not have been hired. They must also be subjected to a trade test because this is one of the
requirements for employment abroad. Thirdly, the private respondents were not given sufficient
time to prove their fitness for the positions they were hired. Two weeks for this purpose is not
enough.
The private respondents point to the petitioners' allegation in their complaint that they were mere assistant cooks
and argue that this belies their representation that they did not apply for these positions. The argument has no
merit. The petitioners were not assisted by lawyers when they filed their complaint and must have had in mind
the positions stipulated in the second contract. In the amended complaint, this statement was rectified. At any
rate, the slight error must not be taken against the petitioners. As we held in Cuadra v. NLRC, 6 "our overseas
workers are mostly ordinary laborers not conversant with legal principles and with the manner they can assert
and protect rights. They have no compatriot lawyers to consult and no labor unions to support them in the
foreign land. . . . The claims of our overseas workers should therefore be received with sympathy and allowed,
if warranted, conformably to the constitutional mandate for the protection of the working class."
We find no basis either for the conclusion of the NLRC that there was no
employer-employee relationship between the parties. The record shows that the petitioners became employees
of Saudi Services and Operating Company, Ltd., and later of Saudi Arabian Morrison, both entities being
represented by AR and Sons International Development Corporation, which admitted in its Comment that the
petitioners were "hired and deployed abroad . . ." This relationship is even more firmly supported by the Agency
Worker Agreements between the petitioners and AR and Sons acting for SSOC which were approved by the
POEA under Accreditation Certificate No 8181, 7 and by the second contract under which the petitioners were
deployed to SAM, its other principal, by AR and Sons. 8
Article 279 of the Labor Code provides:
Art. 279. Security of Tenure In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this title. An employee
who was unjustly dismissed from work shall be entitled to reinstatement without lose of seniority
rights and to his backwages computed from the time his compensation was withheld from him up
to the time of reinstatement.
Where the employer-employee relationship has been established, the burden of proof in termination cases lies
with the employer. 9 This burden was not discharged by the private respondents. It is clear form the record that

the petitioners were hired as mechanics and clerk (or as assistant cooks under the second contract) after
presumably having passed the corresponding trade tests conducted by the recruiting agency prior to their
deployment. If AR and Sons felt they were not qualified for these positions, it should have rejected their
applications outright instead of accepting their recruitment fees just the same and assuring them that their
employment had already been approved by the foreign principal. It was the fault of AR and Sons for holding the
petitioners to its foreign principal as qualified when they were found later to be deficient. As a result of its
negligence, if not its deliberate misrepresentation, the petitioners found themselves stranded in a foreign land,
without the employment and income that they hoped would give them a better life.
The principle of "no work, no pay" does not apply in this case for, as correctly pointed out by POEA, the fact
that the complainants had not worked at the jobsite was not of their own doing. If they were not able to work at
all, it was because they refused to sign the third contract providing for another lowering of their salaries in
violation of their first agreement as approved by the POEA. They had a right to insist on the higher salaries
agreed upon in the original contract and to reject the subsequent impositions of SAM, which obviously thought
the petitioners would have to accept because they had no choice.
Rule V, Book I of the Omnibus Rules Implementing the Labor Code defines the duties and obligations of a duly
licensed placement and recruitment agency. Section 2(e) requires a private employment agency to assume all
responsibilities for the implementation of the contract of employment of an overseas worker. Section 10(a) (2)
provides that a private employment agency can be sued jointly and severally with the principal or foreign-based
employer for any violation of the recruitment agreement or the contract of employment.
Book II, Rule II, Section 1(f) (3) of the new Rules and Regulations Governing Overseas Employment
promulgated by the Governing Board of the POEA substantially reiterates Rule II of Book II, Section 1(d) (3) of
1985 POEA Rules, which governs this case. It provides that a private employment agency shall assume joint
and solidary liability with the employer for all claims and liabilities that may arise in connection with the
implementation of the contracts including but not limited to payment of wages, health and disability
compensation and repatriation. There is no doubt that, under the facts established in this case, AR and Sons is
jointly and solidarily liable with overseas employer SAM for the claims of the petitioners.
The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they
have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract,
maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of debasement, are
only a few of the inhumane acts to which they are subjected by their foreign employers, who probably feel they
can do as they please in their own country. While these workers may indeed have relatively little defense against
exploitation while they are abroad, that disadvantage must not continue to burden them when they return to their
own territory to voice their muted complaint. There is no reason why, in their very own land, the protection of
our own laws cannot be extended to them in full measure for the redress of their grievances.
WHEREFORE, the challenged decision of the NLRC dated May 31, 1980 is REVERSED and SET ASIDE. The
POEA decision dated July 24, 1989 is REINSTATED, with costs against the private respondents.
SO ORDERED.

SECOND DIVISION
G.R. No. 106027 July 25, 1994
BPI CREDIT CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and
BENJAMIN JOVELLANOS, Respondents.

Sycip, Salazar, Hernandez & Gatmaitan for petitioner.chanrobles virtual law library
Severo S. Jovellanos for private respondent.
PUNO, J.:
The most frequently assaulted right of workers is their right to security of tenure. The Constitution shields this
right against unjustified attacks. The petition at bench represents another attempt to negate this constitutional
right of workers to security of tenure. It cannot succeed.chanroblesvirtualawlibrarychanrobles virtual law library
The records show that private respondent Benjamin Jovellanos is the Marketing Assistant of petitioner BPI
Family Bank, Dagupan City branch. Ricardo Torio worked as Credit Investigator Appraiser in the same
bank.chanroblesvirtualawlibrarychanrobles virtual law library
On July 8, 1987, a certain Alex Racimo executed an Affidavit linking Jovellanos and Torio to certain
anomalies, viz:
(1) That I obtained a loan from the BPI Family Bank, Dagupan City in the amount of P200,000.00;chanrobles
virtual law library
(2) That in the processing of my application for this loan I had dealt with RIC TORIO, an old
acquaintance;chanrobles virtual law library
(3) That in the beginning when I was still applying for a loan I was made to believe by RIC TORIO that I will
not pay any charges except the application fee in the sum of P500.00, which still be refunded to me upon release
of my approved loan;chanrobles virtual law library
(4) That when my loan was released the above named person approached me and demanded from me something
which they termed it for the boys and he mentioned the name of BEN JOVELLANOS a co-employee at the BPI
Credit Corporation, Dagupan City;chanrobles virtual law library
(5) That out of gratitude I was handling to him the sum of P1,000.00 but he ignored it and instead he told me
that he ought to charge five (5%) of the total amount of the approved loan, upon release, but considering that we
were friends, 2% would be enough;chanrobles virtual law library
(6) That I tried to bargain with him that he accepts the P1,000.00 and just as soon as I sell my property in
Dagupan, I will give him the remaining P3,000.00, but he declined and turned his back towards me;chanrobles
virtual law library
(7) That I found it very strange because instead of being refunded the amount of P500.00 which I paid as
application fee, said person is collecting from me a certain percentage of my approved loan; . . . .
Upon receipt of the affidavit, petitioner confronted respondent Jovellanos on August 12, 1987. According to the
petition, Gaspar Antonio de los Santos, AVP of petitioner ". . . brought up the subject as he and Jovellanos
were on their way home from a staff presentation at about 9:45 p.m." 1It is also stated that Santos ". . .
confronted Jovellanos about the contents of the affidavit without naming Racimo as its author."2Respondent
Jovellanos was also instructed to report to the head office of the petitioner on August 17,
1987.chanroblesvirtualawlibrarychanrobles virtual law library
On August 17, 1987, petitioner alleged that de los Santos "once more brought up the matter of the reported
irregularities with Jovallanos." 3On this occasion, according to petitioner, de los Santos "named Racimo and
read portions of his (Racimo's) affidavit."4Thereafter, de los Santos served the notice of preventive suspension
on Jovellanos signed by Socorro Lantin, another AVP of petitioner. 5The notice reads:
Please be advised that pending investigation of the reported irregular transactions pertaining to Real Estate
Mortgage Loans of which you are CI-Appraiser with the end in view of ascertaining degree of responsibility

and/or extent of violation of Bank policies and regulations as well as possible losses to the Bank, you are hereby
relieved of your duties and placed under preventive suspension effective
immediately.chanroblesvirtualawlibrarychanrobles virtual law library
In the meantime, you are free to submit whatever explanation/statement you may have about the incident or any
information that could held in the prove of the reported anomally.
Respondent Jovellanos denied the charge against him. He said he did not know
Racimo.chanroblesvirtualawlibrarychanrobles virtual law library
On August 20, 1987, respondent Jovellanos wrote a letter to Lantin seeking to lift his preventive suspension.
Attached to the letter was his Affidavit which reads:
That I was made aware of the affidavit executed by Alex Racimo of Binalonan, Pangasinan before the Clerk of
Court of the Regional Trial Court, Urdaneta, Pangasinan, which contained among others, Alex Racimo's
statement.
(a) that Ric Torio asked Alex Racimo some money in return to the approval of his loan with BPI Credit
Corporation;chanrobles virtual law library
(b) That in asking the money, Ric Torio represented to Alex Racimo that I was the one who instructed Ric Torio
to make the demand;
That I never instructed Ric Torio to ask for money from Alex Racimo nor I ever connived with him to ask or
demand for money; and in fact and in truth I did not know that Ric Torio asked for money from Alex
Racimo;chanrobles virtual law library
That if I had known that Ric Torio used my name, I would not have consented to it;chanrobles virtual law
library
That I have not engaged myself in any irregular or anomalous transaction in relation to my duties and
responsibilities as marketing assistant with BPI Credit Corporation.
Likewise attached was the Sworn Clarificatory Statement of Racimo, viz:
That I previously executed an affidavit before the Clerk of Court, Regional Trial Court, Urdaneta,
Pangasinan; chanrobles virtual law library
That in said affidavit, I stated that Ric Torio upon the instruction of Ben Jovellanos asked me money in return to
the approval of my loan with BPI Credit Corporation;chanrobles virtual law library
That in fairness to Ben Jovellanos, I should like to clarify my statement as follows:chanrobles virtual law library
(a) That Ben Jovellanos never personally approached me or asked me for money;chanrobles virtual law library
(b) That I did not have any basis to tell whether Ben Jovellanos really instructed or convinced (sic) with Ric
Torio in asking money; hence Ben Jovellanos might have just been used by Ric Torio in asking money.
Respondent Jovellanos bewailed the failure of petitioner to give the details of the "reported irregular
transactions to real estate mortgage loans." 6chanrobles virtual law library
Respondent's preventive suspension was not lifted. Instead, it was extended as petitioner formed a committee 7to
investigate the reported irregularities. According to the petition, the result of the investigation is as follows: 8
xxx xxx xxxchanrobles virtual law library

7. The results of the investigation, which were affirmed under oath by the head of the audit/investigating team,
revealed the following: On the solicitation of a percentage of the approved loans, the team visited ten (10)
clients of BPI Credit other than Mr. Alex Racimo to verify whether the employees were demanding for a
percentage of the approved loans. The team was able to talk to seven (7) clients with the following results:
(a) Five (5) clients said that the employees did not ask them for any consideration for the approval of their
loans.chanroblesvirtualawlibrarychanrobles virtual law library
(b) Two (2) clients said that they were approached by the employees for certain considerations. They were,
however, hesitant to give their written statements, probably afraid that the employees would avenge them. One
of them, Imelda Ico, said that Torio and Jovellanos asked her for a "blow out" on two separate occasions; the
first was when she filed her loan application, and later, when her loan was approved. She, thus, tendered two
"blow outs" which Torio and Jovellanos, together with ten to thirteen of their friends attended. The client also
informed the team that before she applied for a loan at BPI Credit, she was forewarned by her friends of certain
employees who reportedly demand a percentage of the approved loan. The other, Angelita Reminguer, said that
Jovellanos asked for five percent of the approved loan (P800,000.00) while the second release of her
construction loan was being processed. She complained to SAM PS Coquia of BPI Dagupan Branch who
advised her not to give in to the demand. SAM PS Coquia relayed the client's complaint to the Manager of the
Dagupan Branch and the Business Center Head.
8. With respect to the overvaluation of properties, twelve (12) properties previously appraised, by Torio were reappraised by the appraiser of BPI Dagupan Business Center. Torio's appraisal of two of these properties varied
considerably from the figures reached when these were re-appraised. The first property which was owned by
Pedro/Victoria Revote and subject of a real estate mortgage as security for a P100,000.00 loan, was appraised
by Torio on 3 July 1986 as follows:
Land: 287 sq. m. @ 400/sq.m. P114,800,00
Bungalow: 130.35 sq.m. @ 2,300/
sq. m. 299,000.00
----Total: Appraised Value P413,800,00chanrobles virtual law library
Torio did not subject the property to depreciation since the "Estimated Remaining Economic Life based on
Present Physical condition" equaled the "Normal Economic Life for Type of Building." The bungalow,
moreover, was reported to be well-maintained.chanroblesvirtualawlibrarychanrobles virtual law library
9. On the other hand, Jorge Monje, Appraiser of BPI Dagupan Branch submitted a markedly different appraisal
of the property on 4 September 1987. He depreciated the bungalow based on the estimated remaining life of
seven years:
Land: 287 sq. m. @ 400/sq . m. P114,800.00
Improvement:
10.35 sq. m. @
2,300/sq.m. 299,806.00
Less: 72% depreciation
(based on estimated
remaining life of
7 years) 215,859.00 83,946.00
Total Appraised value P198,746.00chanrobles virtual law library
Monje also found that the improvement, which was built in 1969, was not properly maintained. Mr. John
Cornel, an appraiser of Dagupan Business Center who accompanied Monje during the inspection, appraised the

property at P222,729.00. The difference of P23,983.00 from the appraisal of Jorge Monje was due to the lower
depreciation rated adopted by Cornel. Compared to the appraisals made by Monje and Cornel, Torio appraised
the property at twice its value. Moreover, the fact that the property was foreclosed by the Rural Bank of
Malsiqui on 17 September 1984 and redeemed by the borrowers on 1 October 1984, was not reflected on the
Loan Offering Memo addressed to the Credit Committee. This Loan Offering Memo was signed by Marketing
AssistantBenjamin Jovellanos. That he signed the same was never denied by him. He likewise never bothered to
explain why he, knowing that the collateral had a history of foreclosure and defaults, omitted mentioning this
important fact in the Loan Offering Memo.
Respondent Jovellanos was then served a Notice of Termination effective November 25, 1987 on the ground of
wilfull breach of trust. Jovellanos countered by filing a complaint for illegal dismissal with damages. On
September 5, 1990, the Labor Arbiter ruled in favor of Respondent Jovellanos, thus:
Wherefore, consistent with the foregoing tenor, judgment is hereby rendered, to wit:chanrobles virtual law
library
1. As to complainant Benjamin Jovellanos, respondent is guilty of illegal dismissal, accordingly, respondent BPI
Credit Corporation is ordered, as follows:chanrobles virtual law library
a) To reinstate immediately complainant Benjamin Jovellanos to his former position or equivalent thereto
without loss of seniority rights or at the option of respondent BPI CREDIT CORPORATION, payroll
reinstatement;chanrobles virtual law library
b) To pay complainant Benjamin Jovellanos two (2) years backwages without qualification or deduction in the
amount of SEVENTY SIX THOUSAND AND EIGHT HUNDRED PESOS (P76,800.00); andchanrobles
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c) To pay attorney's fees ten percent (10%) of the judgment award in the amount of P7,680.00.
Petitioner appealed to the respondent NLRC. On December 20, 1991, the Third Division of the respondent
NLRC, affirmed the ruling of the Labor Arbiter except that it deleted the award of attorney's fees in favor of
respondent Jovellanos. 9Petitioner's motion for reconsideration was denied by the respondent commission on
April 30, 1992. 10chanrobles virtual law library
In this petition for certiorari, petitioner argues:
ARGUMENTS
Ichanrobles virtual law library
THE HONORABLE COMMISSION COMMITTED A GRAVE ABUSE DISCRETION IN FINDING THAT
THERE WAS NO JUST CAUSE FOR THE DISMISSAL OF PRIVATE RESPONDENT.
IIchanrobles virtual law library
THE HONORABLE COMMISSION COMMITTED A GROSS MISAPPRECIATION OF THE ATTENDANT
FACTS AND OF THE APPLICABLE LAW IN FINDING THAT PETITIONER DID NOT OBSERVE DUE
PROCESS BEFORE TERMINATING PRIVATE RESPONDENT'S SERVICES.
We find no merit in the petition.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner's submissions ignore the prosecution accorded by our Constitution to the worker's precious right to
security of tenure. The enthronement of the worker's right to security of tenure in our fundamental law was not
achieved overnight. For all its liberality towards labor, our 1935 Constitution did not elevate the right as a
constitutional right. For a long time, the worker's security of tenure had only the protective mantle of statutes
and their interpretative rules and regulations. It was an uncertain protection that sometimes yielded to the

political permutations of the times. It took labor nearly four decades of sweat and tears to persuade our people
thru their leaders, to exalt the worker's right to security of tenure as a sacrosanct constitutional right. It was
Article II, section 2 of our 1973 Constitution that declared as a policy that the State shall assure the right of
workers to security of tenure. The 1987 Constitution is even more solicitous of the welfare of labor. Section 3 of
its Article XIII mandates that the State shall afford full protection to labor and declares that all workers shall be
entitled to security of tenure. Among the enunciated State policies are the promotion of social justice11and a just
and dynamic social order. 12In contrast, the prerogative of management to dismiss a worker, as an aspect of
property right, has never been endowed with a constitutional status.chanroblesvirtualawlibrarychanrobles virtual
law library
The unequivocal constitutional declaration that all workers shall be entitled to security of tenure spurred our
lawmakers to strengthen the protective walls around this hard earned right. The right was protected from undue
infringement both by our substantive and procedural laws. Thus, the causes for dismissing employees were
more defined and restricted; 13on the other hand, the procedure of termination was also more clearly
delineated. 14These substantive and procedural laws must be strictly complied with before a worker can be
dismissed from his employment.chanroblesvirtualawlibrarychanrobles virtual law library
Prescinding from these premises, we affirm the ruling of the NLRC that private respondent was dismissed; in
violation of his right to procedural due process. Article 277(b) of the Labor Code provides the procedure for
terminating a worker, viz:
xxx xxx xxxchanrobles virtual law library
(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 termination was for a valid or authorized cause
shall rest on the employer. The Secretary of the Department of a Labor and Employment may suspend the
effects of the termination pending resolution of the dispute in the event of a prima facie finding by the
appropriate official of the Department of Labor and Employment before whom such dispute is pending that the
termination may cause a serious labor dispute or is in implementation of a mass lay-off.
In the case at bench, petitioner did not give fair notice to private respondent of the charges against him.
According to the petitioner, on August 12, 1987, its Assistant Vice President de los Santos ". . . brought up the
subject as he and Jovellanos were on their way home from a staff presentation at about 9:45 p.m." He also ". . .
confronted Jovellanos about the contents of the affidavit without naming g Racimo as its author." Such
casualness and incompleteness of information cannot satisfy the requirements of due process. Neither could the
notice of preventive suspension served on private respondent on August 17, 1987 have any curative effect. A
reading of said notice will show that it required private respondent to explain his participation in certain ". . .
reported irregular transactions pertaining to Real Estate Mortgage Loans of which you are CI-Appraiser . . ."
The lack of specificity or the generality of the charge speaks for itself. Worse still, petitioner thereafter
conducted its own ex parte investigation without the participation of the private respondent. It interviewed a
certain Imelda Ico who revealed that Jovellanos and Torio asked her for a "blow out" when she filed her loan
application, and later when her loan was approved. Another woman, Angelita Reminguer, also declared that
Jovellanos asked for five percent (5%) of her approved loan. The two, however, refused to give any sworn
statement. Private respondent who was not aware of the investigation was never given an opportunity to
disprove their accusation. Yet, primarily on the basis of the damaging statements of Ico and Reminguer,
petitioner dismissed private respondent effective November 25, 1987 on the ground of willful breach of trust.
The opportunity of private respondent to defend himself was thus more chimerical than
real.chanroblesvirtualawlibrarychanrobles virtual law library

We also affirm the ruling of the NLRC that the evidence on record does not justify the dismissal of the private
respondent. Alex Racimo retracted his affidavit implicating private respondent. The charges made by Imelda Ico
and Angelita Reminguer hardly had any evidentiary value. As ruled by the Labor Arbiter and the NLRC:
As gleaned from the record, other charges made against complainant Jovellanos accusing him of soliciting
percentage fee by a certain Angelita Reminguer and Imelda Ico could not also be given credit. Firstly, because it
is an unsworn statement; Secondly, being mere allegation unsupportive (sic) by corroborative evidence; Thirdly,
complainant Jovellanos was not aware of such accusation during his confrontation with the assistant VicePresident of BPI Credit, Gaspar Centino de los Santos. Neither was it specified in his suspension order leading
to his termination. It is pertinent further, to note the fact that the foreclosure and redemption of a real property
not having been reflected on the loan offering memo addressed to the Credit Committee could have been done
intentionally by complainant Jovellanos. For such omission, We believe that complainant could not be solely
responsible, since the memo was also signed by the Business Center Head Francisco Nery and Assistant VicePresident Bienvenido Manangun who are higher in rank than complainant Jovellanos being merely marketing
assistant. This omission therefore, should not be taken against him and charge of cooperating or lending
assistance to the Credit Investigator in the overvaluation of the appraisal of the property of a client of the Bank.
All these notwithstanding, petitioner insists that on ground of loss of trust and confidence it can dismiss private
respondent considering the nature of his position as Marketing Assistant. It posits the thesis that the dismissal
can be justified as long as it has "some basis" since the position of private respondent calls for trust. Time does
not stand still and petitioner ought to know that this thesis has long been entombed by our Constitution which
has elevated the security of tenure of our workers to a constitutional right. We hold that this right cannot be
eroded, let alone be forfeited except upon a clear and convincing showing of a just and lawful cause. In the case
at bench, it is not disputed that private respondent has served the petitioner from April 23, 1976 up to September
18, 1987 starting as credit investigator until he rose to the position of Marketing Assistant. His eleven (11) years
of service with the petitioner has not been tainted with any kind of dishonesty. We cannot allow petitioner to
disregard this long length of faithful service on the basis of evidence that is hearsay, uncorroborated, and
untrustworthy, otherwise, the tenurial right of our workers would have but a scrap
value.chanroblesvirtualawlibrarychanrobles virtual law library
IN VIEW WHEREOF, the petition is DISMISSED, there being no showing of grave abuse of discretion
committed by the public respondent in its Decision of December 20, 1991. Costs against
petitioner.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 82511 March 3, 1992

GLOBE-MACKAY CABLE AND RADIO CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and IMELDA SALAZAR, respondents.
Castillo, Laman, Tan & Pantaleon for petitioner.
Gerardo S. Alansalon for private respondent.

ROMERO, J.:
For private respondent Imelda L. Salazar, it would seem that her close association with Delfin Saldivar would
mean the loss of her job. In May 1982, private respondent was employed by Globe-Mackay Cable and Radio
Corporation (GMCR) as general systems analyst. Also employed by petitioner as manager for technical
operations' support was Delfin Saldivar with whom private respondent was allegedly very close.
Sometime in 1984, petitioner GMCR, prompted by reports that company equipment and spare parts worth
thousands of dollars under the custody of Saldivar were missing, caused the investigation of the latter's
activities. The report dated September 25, 1984 prepared by the company's internal auditor, Mr. Agustin
Maramara, indicated that Saldivar had entered into a partnership styled Concave Commercial and Industrial
Company with Richard A. Yambao, owner and manager of Elecon Engineering Services (Elecon), a supplier of
petitioner often recommended by Saldivar. The report also disclosed that Saldivar had taken petitioner's missing
Fedders airconditioning unit for his own personal use without authorization and also connived with Yambao to
defraud petitioner of its property. The airconditioner was recovered only after petitioner GMCR filed an action
for replevin against Saldivar. 1
It likewise appeared in the course of Maramara's investigation that Imelda Salazar violated company reglations
by involving herself in transactions conflicting with the company's interests. Evidence showed that she signed
as a witness to the articles of partnership between Yambao and Saldivar. It also appeared that she had full
knowledge of the loss and whereabouts of the Fedders airconditioner but failed to inform her employer.
Consequently, in a letter dated October 8, 1984, petitioner company placed private respondent Salazar under
preventive suspension for one (1) month, effective October 9, 1984, thus giving her thirty (30) days within
which to, explain her side. But instead of submitting an explanations three (3) days later or on October 12, 1984
private respondent filed a complaint against petitioner for illegal suspension, which she subsequently amended
to include illegal dismissal, vacation and sick leave benefits, 13th month pay and damages, after petitioner
notified her in writing that effective November 8, 1984, she was considered dismissed "in view of (her) inability
to refute and disprove these findings. 2
After due hearing, the Labor Arbiter in a decision dated July 16, 1985, ordered petitioner company to reinstate
private respondent to her former or equivalent position and to pay her full backwages and other benefits she
would have received were it not for the illegal dismissal. Petitioner was also ordered to pay private respondent
moral damages of P50,000.00. 3
On appeal, public respondent National Labor Relations, Commission in the questioned resolution dated
December 29, 1987 affirmed the aforesaid decision with respect to the reinstatement of private respondent but
limited the backwages to a period of two (2) years and deleted the award for moral damages. 4
Hence, this petition assailing the Labor Tribunal for having committed grave abuse of discretion in holding that
the suspension and subsequent dismissal of private respondent were illegal and in ordering her reinstatement
with two (2) years' backwages.
On the matter of preventive suspension, we find for petitioner GMCR.
The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's acts in conflict with his position
as technical operations manager, necessitated immediate and decisive action on any employee closely,
associated with Saldivar. The suspension of Salazar was further impelled by th.e discovery of the missing
Fedders airconditioning unit inside the apartment private respondent shared with Saldivar. Under such
circumstances, preventive suspension was the proper remedial recourse available to the company pending
Salazar's investigation. By itself, preventive suspension does, not signify that the company has adjudged the
employee guilty of the charges she was asked to answer and explain. Such disciplinary measure is resorted to
for the protection of the company's property pending investigation any alleged malfeasance or misfeasance
committed by the employee. 5

Thus, it is not correct to conclude that petitioner GMCR had violated Salazar's right to due process when she
was promptly suspended. If at all, the fault, lay with private respondent when she ignored petitioner's
memorandum of October 8, 1984 "giving her ample opportunity to present (her) side to the Management."
Instead, she went directly to the Labor Department and filed her complaint for illegal suspension without giving
her employer a chance to evaluate her side of the controversy.
But while we agree with the propriety of Salazar's preventive suspension, we hold that her eventual separation
from employment was not for cause.
What is the remedy in law to rectify an unlawful dismissal so as to "make whole" the victim who has not merely
lost her job which, under settled Jurisprudence, is a property right of which a person is not to be deprived
without due process, but also the compensation that should have accrued to her during the period when she was
unemployed?
Art. 279 of the Labor Code, as amended, provides:
Security of Tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement. 6 (Emphasis supplied)
Corollary thereto are the following provisions of the Implementing Rules and Regulations of the Labor Code:
Sec. 2. Security of Tenure. In cases of regular employments, the employer shall not terminate
the services of an employee except for a just cause as provided in the Labor Code or when
authorized by existing laws.
Sec. 3. Reinstatement. An employee who is unjustly dismissed from work shall by entitled to
reinstatement without loss of seniority rights and to backwages." 7 (Emphasis supplied)
Before proceeding any furthers, it needs must be recalled that the present Constitution has gone further than the
1973 Charter in guaranteeing vital social and economic rights to marginalized groups of society, including labor.
Given the pro-poor orientation of several articulate Commissioners of the Constitutional Commission of 1986,
it was not surprising that a whole new Article emerged on Social Justice and Human Rights designed, among
other things, to "protect and enhance the right of all the people to human dignity, reduce social, economic and
political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the
common good."8 Proof of the priority accorded to labor is that it leads the other areas of concern in the Article
on Social Justice, viz., Labor ranks ahead of such topics as Agrarian and Natural Resources Reform, Urban
Land Roform and Housing, Health, Women, Role and Rights of Poople's Organizations and Human Rights. 9
The opening paragraphs on Labor states
The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with
law. They shall be entitled to security of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making processes affecting their rights and
benefits is may be provided by law. 10 (Emphasis supplied)
Compare this with the sole.provision on Labor in the 1973 Constitution under the Article an Declaration of
Principles and State Policies that provides:

Sec. 9. The state shall afford protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employers. The State shall ensure the rights of workers to selforganization, collective baegaining, security of tenure, and just and humane conditions of work.
The State may provide for compulsory arbitration. 11
To be sure, both Charters recognize "security of tenure" as one of the rights of labor which the State is mandated
to protect. But there is no gainsaying the fact that the intent of the framers of the present Constitution was to
give primacy to the rights of labor and afford the sector "full protection," at least greater protection than
heretofore accorded them, regardless of the geographical location of the workers and whether they are
organized or not.
It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who substantially contributed to the
present formulation of the protection to labor provision and proposed that the same be incorporated in the
Article on Social Justice and not just in the Article on Declaration of Principles and State Policies "in the light
of the special importance that we are giving now to social justice and the necessity of emphasizing the scope
and role of social justice in national development." 12
If we have taken pains to delve into the background of the labor provisions in our Constitution and the Labor
Code, it is but to stress that the right of an employee not to be dismissed from his job except for a just or
authorized cause provided by law has assumed greater importance under the 1987 Constitution with the singular
prominence labor enjoys under the article on Social Justice. And this transcendent policy has been translated
into law in the Labor Code. Under its terms, where a case of unlawful or unauthorized dismissal has been
proved by the aggrieved employee, or on the other hand, the employer whose duty it is to prove the lawfulness
or justness of his act of dismissal has failed to do so, then the remedies provided in Article 279 should find,
application. Consonant with this liberalized stance vis-a-vis labor, the legislature even went further by enacting
Republic Act No. 6715 which took effect on March 2, 1989 that amended said Article to remove any possible
ambiguity that jurisprudence may have generated which watered down the constitutional intent to grant to labor
"full protection."13
To go back to the instant case, there being no evidence to show an authorized, much less a legal, cause for the
dismissal of private respondent, she had every right, not only to be entitled to reinstatement, but ay well, to full
backwages." 14
The intendment of the law in prescribing the twin remedies of reinstatement and payment of backwages is, in
the former, to restore the dismissed employee to her status before she lost her job, for the dictionary meaning of
the word "reinstate" is "to restore to a state, conditione positions etc. from which one had been removed" 15 and
in the latter, to give her back the income lost during the period of unemployment. Both remedies, looking to the
past, would perforce make her "whole."
Sadly, the avowed intent of the law has at times been thwarted when reinstatement has not been forthcoming
and the hapless dismissed employee finds himself on the outside looking in.
Over time, the following reasons have been advanced by the Court for denying reinstatement under the facts of
the case and the law applicable thereto; that reinstatement can no longer be effected in view of the long passage
of time (22 years of litigation) or because of the realities of the situation; 16 or that it would be "inimical to the
employer's interest; " 17 or that reinstatement may no longer be feasible; 18 or, that it will not serve the best
interests of the parties involved; 19 or that the company would be prejudiced by the workers' continued
employment; 20 or that it will not serve any prudent purpose as when supervening facts have transpired which
make execution on that score unjust or inequitable 21 or, to an increasing extent, due to the resultant atmosphere
of "antipathy and antagonism" or "strained relations" or "irretrievable estrangement" between the employer and
the employee. 22
In lieu of reinstatement, the Court has variously ordered the payment of backwages and separation pay 23 or
solely separation pay. 24

In the case at bar, the law is on the side of private respondent. In the first place the wording of the Labor Code is
clear and unambiguous: "An employee who is unjustly dismissed from work shall be entitled to
reinstatement. . . . and to his full backwages. . . ." 25 Under the principlesof statutory construction, if a statute is
clears plain and free from ambiguity, it must be given its literal meaning and applied without attempted
interpretation. This plain-meaning rule or verba legis derived from the maxim index animi sermo est (speech is
the index of intention) rests on the valid presumption that the words employed by, the legislature in a statute
correctly express its intent or will and preclude the court from construing it differently. 26 The legislature is
presumed to know the meaning of the words, to:have used words advisedly, and to have expressed its intent by
the use of such words as are found in the statute. 27 Verba legis non est recedendum, or from the words of a
statute there should be no departure. Neither does the provision admit of any qualification. If in the wisdom of
the Court, there may be a ground or grounds for non-application of the above-cited provision, this should be by
way of exception, such as when the reinstatement may be inadmissible due to ensuing strained relations
between the employer and the employee.
In such cases, it should be proved that the employee concerned occupies a position where he enjoys the trust
and confidence of his employer; and that it is likely that if reinstated, an atmosphere of antipathy and
antagonism may be generated as to adversely affect the efficiency and productivity of the employee concerned.
A few examples, will suffice to illustrate the Court's application of the above principles: where the employee is
a Vice-President for Marketing and as such, enjoys the full trust and confidence of top management; 28 or is the
Officer-In-Charge of the extension office of the bank where he works; 29 or is an organizer of a union who was
in a position to sabotage the union's efforts to organize the workers in commercial and industrial
establishments; 30 or is a warehouseman of a non-profit organization whose primary purpose is to facilitate and
maximize voluntary gifts. by foreign individuals and organizations to the Philippines; 31 or is a manager of its
Energy Equipment Sales. 32
Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwisey reinstatement
can never be possible simply because some hostility is invariably engendered between the parties as a result of
litigation. That is human nature. 33
Besides, no strained relations should arise from a valid and legal act of asserting one's right; otherwise an
employee who shall assert his right could be easily separated from the service, by merely paying his separation
pay on the pretext that his relationship with his employer had already become strained. 34
Here, it has not been proved that the position of private respondent as systems analyst is one that may be
characterized as a position of trust and confidence such that if reinstated, it may well lead to strained relations
between employer and employee. Hence, this does not constitute an exception to the general rule mandating
reinstatement for an employee who has been unlawfully dismissed.
On the other hand, has she betrayed any confidence reposed in her by engaging in transactions that may have
created conflict of interest situations? Petitioner GMCR points out that as a matter of company policy, it
prohibits its employees from involving themselves with any company that has business dealings with GMCR.
Consequently, when private respondent Salazar signed as a witness to the partnership papers of Concave (a
supplier of Ultra which in turn is also a supplier of GMCR), she was deemed to have placed. herself in an
untenable position as far as petitioner was concerned.
However, on close scrutiny, we agree with public respondent that such a circumstance did not create a conflict
of interests situation. As a systems analyst, Salazar was very far removed from operations involving the
procurement of supplies. Salazar's duties revolved around the development of systems and analysis of designs
on a continuing basis. In other words, Salazar did not occupy a position of trust relative to the approval and
purchase of supplies and company assets.
In the instant case, petitioner has predicated its dismissal of Salazar on loss of confidence. As we have held
countless times, while loss of confidence or breach of trust is a valid ground for terminations it must rest an
some basis which must be convincingly established. 35 An employee who not be dismissed on mere

presumptions and suppositions. Petitioner's allegation that since Salazar and Saldivar lived together in the same
apartment, it "presumed reasonably that complainant's sympathy would be with Saldivar" and its averment that
Saldivar's investigation although unverified, was probably true, do not pass this Court's test. 36 While we should
not condone the acts of disloyalty of an employee, neither should we dismiss him on the basis of suspicion
derived from speculative inferences.
To rely on the Maramara report as a basis for Salazar's dismissal would be most inequitous because the bulk of
the findings centered principally oh her friend's alleged thievery and anomalous transactions as technical
operations' support manager. Said report merely insinuated that in view of Salazar's special relationship with
Saldivar, Salazar might have had direct knowledge of Saldivar's questionable activities. Direct evidence
implicating private respondent is wanting from the records.
It is also worth emphasizing that the Maramara report came out after Saldivar had already resigned from GMCR
on May 31, 1984. Since Saldivar did not have the opportunity to refute management's findings, the report
remained obviously one-sided. Since the main evidence obtained by petitioner dealt principally on the alleged
culpability of Saldivar, without his having had a chance to voice his side in view of his prior resignation,
stringent examination should have been carried out to ascertain whether or not there existed independent legal
grounds to hold Salatar answerable as well and, thereby, justify her dismissal. Finding none, from the records,
we find her to have been unlawfully dismissed.
WHEREFORE, the assailed resolution of public respondent National Labor Relations Commission dated
December 29, 1987 is hereby AFFIRMED. Petitioner GMCR is ordered to REINSTATE private respondent
Imelda Salazar and to pay her backwages equivalent to her salary for a period of two (2) years only.
This decision is immediately executory.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 201701

June 3, 2013

UNILEVER PHILIPPINES, INC., Petitioner,

vs.
MARIA RUBY M. RIVERA, Respondent.
DECISION
MENDOZA, J.:
Subject of this disposition is the petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
petitioner Unilever Philippines, Inc. (Unilever) questioning the June 22, 2011 Decision2 and the April 25, 2012
Resolution3 of the Court of Appeals (CA)-Cagayan de Oro City, in CA G.R. SP No. 02963-MIN, an Illegal
Dismissal case filed by respondent Maria Ruby M. Rivera (Rivera). The CA affirmed with modification the
March 31, 2009 Resolution of the National Labor Relations Commission (NLRC) finding Rivera's dismissal
from work to be valid as it was for a just cause and declaring that she was not entitled to any retirement benefit.
The CA, however, awarded separation pay in her favor as a measure of social justice.
The Facts
Unilever is a company engaged in the production, manufacture, sale, and distribution of various food, home and
personal care products, while Rivera was employed as its Area Activation Executive for Area 9 South in the
cities of Cotabato and Davao. She was primarily tasked with managing the sales, distribution and promotional
activities in her area and supervising Ventureslink International, Inc. (Ventureslink), a third party service

provider for the companys activation projects. Unilever enforces a strict policy that every trade activity must be
accompanied by a Trade Development Program (TDP) and that the allocated budget for a specific activity must
be used for such activity only.4
Sometime in 2007, Unilevers internal auditor conducted a random audit and found out that there were fictitious
billings and fabricated receipts supposedly from Ventureslink amounting to P11,200,000.00. It was also
discovered that some funds were diverted from the original intended projects. Upon further verification,
Ventureslink reported that the fund deviations were upon the instruction of Rivera.
On July 16, 2007, Unilever issued a show-cause notice to Rivera asking her to explain the following charges, to
wit: a) Conversion and Misappropriation of Resources; b) Breach of Fiduciary Trust; c) Policy Breaches; and d)
Integrity Issues.
Responding through an email, dated July 16, 2007, Rivera admitted the fund diversions, but explained that such
actions were mere resourceful utilization of budget because of the difficulty of procuring funds from the head
office.5 She insisted that the diverted funds were all utilized in the companys promotional ventures in her area
of coverage.
Through a letter, dated August 23, 2007, Unilever found Rivera guilty of serious breach of the companys Code
of Business Principles compelling it to sever their professional relations. In a letter, dated September 20, 2007,
Rivera asked for reconsideration and requested Unilever to allow her to receive retirement benefits having
served the company for fourteen (14) years already. Unilever denied her request, reasoning that the forfeiture of
retirement benefits was a legal consequence of her dismissal from work.
On October 19, 2007, Rivera filed a complaint for Illegal Dismissal and other monetary claims against Unilever.
On April 28, 2008, the Labor Arbiter (LA) dismissed her complaint for lack of merit and denied her claim for
retirement benefits, but ordered Unilever to pay a proportionate 13th month pay and the corresponding cash
equivalent of her unused leave credits. The decretal portion of the LA decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing for lack of merit the illegal
dismissal complaint. However, UNILEVER PHILIPPINES, INC. is hereby ordered to pay complainant the total
amount of PESOS: FIFTY SEVEN THOUSAND EIGHTY TWO & 90/100 ONLY (P57,082.90) representing
proportionate 13th month pay and unused leave credits.
The complaint against individual respondents Recto Sampang and Alejandro Concha are likewise dismissed for
it was not shown that they acted in bad faith in the dismissal of complainant. Moreover, their legal personality is
separate and distinct from that of the corporation.
All other money claims are dismissed for lack of basis.6
On appeal, the NLRC partially granted Riveras prayer. In its Resolution, dated November 28, 2008, the NLRC
held that although she was legally dismissed from the service for a just cause, Unilever was guilty of violating
the twin notice requirement in labor cases. Thus, Unilever was ordered to pay her P30,000.00 as nominal
damages, retirement benefits and separation pay. The dispositive portion reads:
WHEREFORE, foregoing premises considered, the appeal is PARTIALLY GRANTED. The assailed Decision
dated 28 April 2008 is hereby MODIFIED in the sense that respondent UNILEVER PHILIPPINES, INC. is
hereby ordered to pay the following sums:
1. The amount of P30,000.00 representing nominal damages for violation of complainants right to
procedural due process;
2. Retirement benefits under the companys applicable retirement policy or written agreement, and in the
absence of which, to pay complainant her retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6) months being considered as one whole year;

3. Separation pay under the companys applicable policy or written agreement, and in the absence of
which, to pay separation pay equivalent to at least one-half (1/2) month salary for every year of service,
a fraction of at least six (6) months being considered as one whole year.
The rest of the Decision is hereby AFFIRMED.
SO ORDERED.7
Unilever asked for a reconsideration of the NLRC decision. In its Resolution, dated March 31, 2009, the NLRC
modified its earlier ruling by deleting the award of separation pay and reducing the nominal damages
fromP30,000.00 to P20,000.00, but affirmed the award of retirement benefits to Rivera. The fallo reads:
WHEREFORE, foregoing premises considered, the instant Motion for Partial Reconsideration is PARTLY
GRANTED. The Resolution dated 28 November 2008 of the Commission is hereby
RECONSIDERED as follows:
(1)The award of separation pay is hereby deleted for lack of factual and legal basis; and
(2)The award of nominal damages is hereby tempered and reduced to the amount of P20,000.00.
The rest of the award for retirement benefits is affirmed in toto.
SO ORDERED.8
Unsatisfied with the ruling, Unilever elevated the case to CA-Cagayan de Oro City via a petition for certiorari
under Rule 65 of the Rules of Court.
On June 22, 2011, the CA affirmed with modification the NLRC resolution. Justifying the deletion of the award
of retirement benefits, the CA explained that, indeed, under Unilevers Retirement Plan, a validly dismissed
employee cannot claim any retirement benefit regardless of the length of service. Thus, Rivera is not entitled to
any retirement benefit. It stated, however, that there was no proof that she personally gained any pecuniary
benefit from her infractions, as her instructions were aimed at increasing the sales efficiency of the company
and competing in the local market. For said reason, the CA awarded separation pay in her favor as a measure of
social justice.9 The decretal portion of the CA decision reads:
WHEREFORE, the assailed Resolution dated March 31, 2009 of the NLRC (Branch 5), Cagayan De Oro City is
hereby AFFIRMED with MODIFICATION. Consequently, UNILEVER is directed to pay MARIA RUBY M.
RIVERA the following:
a) Separation pay, to be computed based on the companys applicable policy or written agreement, or in
the absence thereof, the equivalent of at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year;
b) P20,000.00 as nominal damages; and
c) Proportionate 13th month pay and unused leave credits, to be computed based on her salary during the
period relevant to the case.
The award of retirement benefits is hereby DELETED.
SO ORDERED.10
Unilever filed a motion for partial reconsideration,11 but it was denied in a Resolution, dated April 25, 2012.
Hence, this petition.12

In support of its position, Unilever submits for consideration the following

GROUNDS
I.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
GRANTING AFFIRMATIVE RELIEFS IN FAVOR OF RIVERA EVEN IF SHE DID NOT FILE ANY
PETITION FOR CERTIORARI TO CHALLENGE THE NLRC RESOLUTIONS.
II.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AWARDING SEPARATION PAY IN FAVOR OF RIVERA CONSIDERING THAT THE LATTER WAS
VALIDLY DISMISSED FROM EMPLOYMENT BASED ON JUST CAUSES UNDER THE LAW.
III.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
RULING THAT THE COMPANY VIOLATED RIVERAS RIGHT TO PROCEDURAL DUE PROCESS
BEFORE TERMINATING HER EMPLOYMENT, AND CONSEQUENTLY, IN AWARDING NOMINAL
DAMAGES.13
Unilever argues that Rivera did not file any separate petition for certiorari before the CA. Neither did she file
any comment on its petition. Hence, it was erroneous for the CA to grant an affirmative relief because it was
inconsistent with the doctrine that a party who has not appealed cannot obtain from the appellate court any
affirmative relief other than the ones granted in the appealed decision. The petitioner stresses that Rivera
misappropriated company funds amounting to millions of pesos and that granting her separation pay
undermines the serious misdeeds she committed against the company. Moreover, the length of her service with
Unilever does not mitigate her offense, but even aggravates the depravity of her acts.14
The petition is partly meritorious.
The pivotal issue in the case at bench is whether or not a validly dismissed employee, like Rivera, is entitled to
an award of separation pay.
As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article
28215of the Labor Code is not entitled to a separation pay.16 Section 7, Rule I, Book VI of the Omnibus Rules
Implementing the Labor Code provides:
Sec. 7. Termination of employment by employer. The just causes for terminating the services of an employee
shall be those provided in Article 282 of the Code. The separation from work of an employee for a just cause
does not entitle him to the termination pay provided in the Code, without prejudice, however, to whatever
rights, benefits and privileges he may have under the applicable individual or collective agreement with the
employer or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as an act of
"social justice" or on "equitable grounds." In both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) did not reflect on the moral character of the employee.17 The leading case of
Philippine Long Distance Telephone Co. vs. NLRC18 is instructive on this point:
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense
involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be

required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the
erring employee for his offense. And we do not agree that the punishment is his dismissal only and the
separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee
who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he
will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is
again found out.1wphi1This kind of misplaced compassion is not going to do labor in general any good as it
will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the
Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best, it may mitigate the penalty but it certainly will not condone the offense. Compassion
for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an
undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be
an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands
are clean and their motives blameless and not simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers
who have tainted the cause of labor with the blemishes of their own character.19
In the subsequent case of Toyota Motor Philippines Corporation Workers Association (TMPCWA) v. National
Labor Relations Commission,20 it was further elucidated that "in addition to serious misconduct, in dismissals
based on other grounds under Art. 282 like willful disobedience, gross and habitual neglect of duty, fraud or
willful breach of trust, and commission of a crime against the employer or his family, separation pay should not
be conceded to the dismissed employee."21 In Reno Foods, Inc, v. Nagkakaisang Lakas ng Manggagawa
(NLM)-Katipunan,22 the Court wrote that "separation pay is only warranted when the cause for termination is
not attributable to the employees fault, such as those provided in Articles 283 and 284 of the Labor Code, as
well as in cases of illegal dismissal in which reinstatement is no longer feasible. It is not allowed when an
employee is dismissed for just cause."23
In this case, Rivera was dismissed from work because she intentionally circumvented a strict company policy,
manipulated another entity to carry out her instructions without the companys knowledge and approval, and
directed the diversion of funds, which she even admitted doing under the guise of shortening the laborious
process of securing funds for promotional activities from the head office. These transgressions were serious
offenses that warranted her dismissal from employment and proved that her termination from work was for a
just cause. Hence, she is not entitled to a separation pay.
More importantly, Rivera did not appeal the March 31, 2009 ruling of the NLRC disallowing the award of
separation pay to her. It was Unilever who elevated the case to the CA. It is axiomatic that a party who does not
appeal, or file a petition for certiorari, is not entitled to any affirmative relief.24 Due process prevents the grant
of additional awards to parties who did not appeal.25 An appellee who is not an appellant may assign errors in
his brief where his purpose is to maintain the judgment, but he cannot seek modification or reversal of the
judgment or claim affirmative relief unless he has also appealed.26 It was, therefore, erroneous for the CA to
grant an affirmative relief to Rivera who did not ask for it.
Lastly, Unilever questions the grant of nominal damages in favor of Rivera for its alleged non-observance of the
requirements of procedural due process. It insists that she was given ample opportunity "to explain her side,
interpose an intelligent defense and adduce evidence on her behalf." 27
The Court is not persuaded. Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code
expressly states:
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.
King of Kings Transport, Inc. v. Mamac28 detailed the steps on how procedural due process can be satisfactorily
complied with. Thus:
To clarify, the following should be considered in terminating the services of employees:
(1) The first written notice to be served on the employees should contain the specific causes or grounds
for termination against them, and a directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules
means every kind of assistance that management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed as a period of at least five (5) calendar
days from receipt of the notice to give the employees an opportunity to study the accusation against
them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A general description of the charge will not
suffice. Lastly, the notice should specifically mention which company rules, if any, are violated and/or
which among the grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the
charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or conference, the employees are given
the chance to defend themselves personally, with the assistance of a representative or counsel of their
choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to
an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.29
In this case, Unilever was not direct and specific in its first notice to Rivera. The words it used were couched in
general terms and were in no way informative of the charges against her that may result in her dismissal from
employment. Evidently, there was a violation of her right to statutory due process warranting the payment of
indemnity in the form of nominal damages. Hence, the Court finds no compelling reason to reverse the award of
nominal damages in her favor. The Court, however, deems it proper to increase the award of nominal damages
from P20,000.00 to P30,000.00, as initially awarded by the NLRC, in accordance with existing jurisprudence.30

WHEREFORE, the petition is hereby PARTIALLY GRANTED.1wphi1 The June 22, 2011 Decision and the
April 25, 2012 Resolution of the Court of Appeals (CA)-Cagayan de Oro City in CA-G.R. SP No. 02963-MIN
are AFFIRMED with MODIFICATION. The dispositive portion should read as follows:
WHEREFORE, the March 31, 2009 Resolution of the NLRC (Branch 5), Cagayan de Oro City, is hereby
AFFIRMED with MODIFICATION. UNILEVER PHILIPPINES, INC., is hereby directed to pay MARIA
RUBY M. RIVERA the following:
a) P30,000.00 as nominal damages; and
b) Proportionate 13th month pay and unused leave credits, to be computed based on her salary during
the period relevant to the case.
The award of retirement benefit is DELETED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157010

June 21, 2005

PHILIPPINE NATIONAL BANK, petitioner,

vs.
FLORENCE O. CABANSAG, respondent.
DECISION
PANGANIBAN, J.:
The Court reiterates the basic policy that all Filipino workers, whether employed locally or overseas, enjoy the
protective mantle of Philippine labor and social legislations. Our labor statutes may not be rendered ineffective
by laws or judgments promulgated, or stipulations agreed upon, in a foreign country.
The Case
Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to reverse and set
aside the July 16, 2002 Decision2 and the January 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR
SP No. 68403. The assailed Decision dismissed the CA Petition (filed by herein petitioner), which had sought to
reverse the National Labor Relations Commission (NLRC)s June 29, 2001 Resolution,4 affirming Labor Arbiter
Joel S. Lustrias January 18, 2000 Decision.5
The assailed CA Resolution denied herein petitioners Motion for Reconsideration.
The Facts
The facts are narrated by the Court of Appeals as follows:
"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She applied for
employment, with the Singapore Branch of the Philippine National Bank, a private banking corporation
organized and existing under the laws of the Philippines, with principal offices at the PNB Financial Center,
Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was under the helm of Ruben C. Tobias, a
lawyer, as General Manager, with the rank of Vice-President of the Bank. At the time, too, the Branch Office

had two (2) types of employees: (a) expatriates or the regular employees, hired in Manila and assigned abroad
including Singapore, and (b) locally (direct) hired. She applied for employment as Branch Credit Officer, at a
total monthly package of $SG4,500.00, effective upon assumption of duties after approval. Ruben C. Tobias
found her eminently qualified and wrote on October 26, 1998, a letter to the President of the Bank in Manila,
recommending the appointment of Florence O. Cabansag, for the position.
xxxxxxxxx
"The President of the Bank was impressed with the credentials of Florence O. Cabansag that he approved the
recommendation of Ruben C. Tobias. She then filed an Application, with the Ministry of Manpower of the
Government of Singapore, for the issuance of an Employment Pass as an employee of the Singapore PNB
Branch. Her application was approved for a period of two (2) years.
"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a temporary
appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month and, upon her
successful completion of her probation to be determined solely, by the Bank, she may be extended at the
discretion of the Bank, a permanent appointment and that her temporary appointment was subject to the
following terms and conditions:
1. You will be on probation for a period of three (3) consecutive months from the date of your
assumption of duty.
2. You will observe the Banks rules and regulations and those that may be adopted from time to time.
3. You will keep in strictest confidence all matters related to transactions between the Bank and its
clients.
4. You will devote your full time during business hours in promoting the business and interest of the
Bank.
5. You will not, without prior written consent of the Bank, be employed in anyway for any purpose
whatsoever outside business hours by any person, firm or company.
6. Termination of your employment with the Bank may be made by either party after notice of one (1)
day in writing during probation, one month notice upon confirmation or the equivalent of one (1) days
or months salary in lieu of notice.
"Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine Embassy in
Singapore processed the employment contract of Florence O. Cabansag and, on March 8, 1999, she was issued
by the Philippine Overseas Employment Administration, an Overseas Employment Certificate, certifying that
she was a bona fide contract worker for Singapore.
xxxxxxxxx
"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on March 9, 1999, her
initial Performance Report. Ruben C. Tobias was so impressed with the Report that he made a notation and,
on said Report: GOOD WORK. However, in the evening of April 14, 1999, while Florence O. Cabansag was
in the flat, which she and Cecilia Aquino, the Assistant Vice-President and Deputy General Manager of the
Branch and Rosanna Sarmiento, the Chief Dealer of the said Branch, rented, she was told by the two (2) that
Ruben C. Tobias has asked them to tell Florence O. Cabansag to resign from her job. Florence O. Cabansag was
perplexed at the sudden turn of events and the runabout way Ruben C. Tobias procured her resignation from the
Bank. The next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia Aquino and
Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the information, with the
explanation that her resignation was imperative as a cost-cutting measure of the Bank. Ruben C. Tobias,
likewise, told Florence O. Cabansag that the PNB Singapore Branch will be sold or transformed into a
remittance office and that, in either way, Florence O. Cabansag had to resign from her employment. The more

Florence O. Cabansag was perplexed. She then asked Ruben C. Tobias that she be furnished with a Formal
Advice from the PNB Head Office in Manila. However, Ruben C. Tobias flatly refused. Florence O. Cabansag
did not submit any letter of resignation.
"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and demanded that
she submit her letter of resignation, with the pretext that he needed a Chinese-speaking Credit Officer to
penetrate the local market, with the information that a Chinese-speaking Credit Officer had already been hired
and will be reporting for work soon. She was warned that, unless she submitted her letter of resignation, her
employment record will be blemished with the notation DISMISSED spread thereon. Without giving any
definitive answer, Florence O. Cabansag asked Ruben C. Tobias that she be given sufficient time to look for
another job. Ruben C. Tobias told her that she should be out of her employment by May 15, 1999.
"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and adamantly ordered
her to submit her letter of resignation. She refused. On April 20, 1999, she received a letter from Ruben C.
Tobias terminating her employment with the Bank.
xxxxxxxxx
"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and against the
Respondents, the decretal portion of which reads as follows:
WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding respondents guilty of
Illegal dismissal and devoid of due process, and are hereby ordered:
1. To reinstate complainant to her former or substantially equivalent position without loss of seniority
rights, benefits and privileges;
2. Solidarily liable to pay complainant as follows:
a) To pay complainant her backwages from 16 April 1999 up to her actual reinstatement. Her
backwages as of the date of the promulgation of this decision amounted to SGD 40,500.00 or its
equivalent in Philippine Currency at the time of payment;
b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine Currency at the
time of payment;
c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in Philippine
Currency at the time of payment;
d) Monetary equivalent of leave credits earned on Sunday banking in the amount of SGD
1,557.67 or its equivalent in Philippine Currency at the time of payment;
e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60 or its
equivalent in Philippine Currency at the time of payment.
f) Monetary equivalent of unused vacation leave benefits in the amount of SGD 319.85 or its
equivalent in Philippine Currency at the time of payment.
g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine Currency at the
time of payment;
3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its equivalent in
Philippine Currency at the time of payment, and moral damages in the amount of PhP 200,000.00,
exemplary damages in the amount of PhP 100,000.00;

4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine Currency at the time
of payment, representing attorneys fees.
SO ORDERED." 6 [Emphasis in the original.]
PNB appealed the labor arbiters Decision to the NLRC. In a Resolution dated June 29, 2001, the Commission
affirmed that Decision, but reduced the moral damages to P100,000 and the exemplary damages to P50,000. In
a subsequent Resolution, the NLRC denied PNBs Motion for Reconsideration.
Ruling of the Court of Appeals
In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in evidence
the Singaporean law supposedly governing the latters employment Contract with respondent. The appellate
court found that the Contract had actually been processed by the Philippine Embassy in Singapore and approved
by the Philippine Overseas Employment Administration (POEA), which then used that Contract as a basis for
issuing an Overseas Employment Certificate in favor of respondent.
According to the CA, even though respondent secured an employment pass from the Singapore Ministry of
Employment, she did not thereby waive Philippine labor laws, or the jurisdiction of the labor arbiter or the
NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit herself solely to the Ministry
of Manpower of Singapores jurisdiction over disputes arising from her employment. The appellate court further
noted that a cursory reading of the Ministrys letter will readily show that no such waiver or submission is stated
or implied.
Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of respondent. The bank
had also failed to give her sufficient notice and an opportunity to be heard and to defend herself. The CA ruled
that she was consequently entitled to reinstatement and back wages, computed from the time of her dismissal up
to the time of her reinstatement.
Hence, this Petition.7
Issues
Petitioner submits the following issues for our consideration:
"1. Whether or not the arbitration branch of the NLRC in the National Capital Region has jurisdiction
over the instant controversy;
"2. Whether or not the arbitration of the NLRC in the National Capital Region is the most convenient
venue or forum to hear and decide the instant controversy; and
"3. Whether or not the respondent was illegally dismissed, and therefore, entitled to recover moral and
exemplary damages and attorneys fees."8
In addition, respondent assails, in her Comment,9 the propriety of Rule 45 as the procedural mode for seeking a
review of the CA Decision affirming the NLRC Resolution. Such issue deserves scant consideration.
Respondent miscomprehends the Courts discourse in St. Martin Funeral Home v. NLRC,10 which has indeed
affirmed that the proper mode of review of NLRC decisions, resolutions or orders is by a special civil action
for certiorari under Rule 65 of the Rules of Court. The Supreme Court and the Court of Appeals
have concurrent original jurisdiction over such petitions for certiorari. Thus, in observance of the doctrine on
the hierarchy of courts, these petitions should be initially filed with the CA.11
Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for Certiorari. In seeking a
review by this Court of the CA Decision -- on questions of jurisdiction, venue and validity of employment
termination -- petitioner is likewise correct in invoking Rule 45.12

It is true, however, that in a petition for review on certiorari, the scope of the Supreme Courts judicial review
of decisions of the Court of Appeals is generally confined only to errors of law. It does not extend to questions
of fact. This doctrine applies with greater force in labor cases. Factual questions are for the labor tribunals to
resolve. 13In the present case, the labor arbiter and the NLRC have already determined the factual issues. Their
findings, which are supported by substantial evidence, were affirmed by the CA. Thus, they are entitled to great
respect and are rendered conclusive upon this Court, absent a clear showing of palpable error or arbitrary
disregard of evidence.14
The Courts Ruling
The Petition has no merit.
First Issue:
Jurisdiction
The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as follows:
"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 extension, even in the absence
of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage,
rates of pay, hours of work and other terms and conditions of employment
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount of exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
(b) The commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
x x x x x x x x x."
More specifically, Section 10 of RA 8042 reads in part:
"SECTION 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 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 x x x x x x"

Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over claims
arising from employer-employee relations, including termination disputes involving all workers, among whom
are overseas Filipino workers (OFW).15
We are not unmindful of the fact that respondent was directly hired, while on a tourist status in Singapore, by
the PNB branch in that city state. Prior to employing respondent, petitioner had to obtain an employment pass
for her from the Singapore Ministry of Manpower. Securing the pass was a regulatory requirement pursuant to
the immigration regulations of that country.16
Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a local work
permit in order to be legally employed here. That permit, however, does not automatically mean that the noncitizen is thereby bound by local laws only, as averred by petitioner. It does not at all imply a waiver of ones
national laws on labor. Absent any clear and convincing evidence to the contrary, such permit simply means that
its holder has a legal status as a worker in the issuing country.1avvphil.zw+
Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment Certificate
from the POEA through the Philippine Embassy in Singapore. The Certificate, issued on March 8, 1999,
declared her a bona fide contract worker for Singapore. Under Philippine law, this document authorized her
working status in a foreign country and entitled her to all benefits and processes under our statutes. Thus, even
assuming arguendothat she was considered at the start of her employment as a "direct hire" governed by and
subject to the laws, common practices and customs prevailing in Singapore17 she subsequently became a
contract worker or an OFW who was covered by Philippine labor laws and policies upon certification by the
POEA. At the time her employment was illegally terminated, she already possessed the POEA employment
Certificate.
Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office in
Singapore.18 Significantly, respondents employment by the Singapore branch office had to be approved by
Benjamin P. Palma Gil,19 the president of the bank whose principal offices were in Manila. This circumstance
militates against petitioners contention that respondent was "locally hired"; and totally "governed by and
subject to the laws, common practices and customs" of Singapore, not of the Philippines. Instead, with more
reason does this fact reinforce the presumption that respondent falls under the legal definition of migrant
worker, in this case one deployed in Singapore. Hence, petitioner cannot escape the application of Philippine
laws or the jurisdiction of the NLRC and the labor arbiter.
In any event, we recall the following policy pronouncement of the Court in Royal Crown Internationale v.
NLRC:20
"x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine
labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in
keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and
employers.1awphi1.net For the State assures the basic rights of all workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work [Article 3 of the Labor Code of the
Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is
likewise rendered imperative by Article 17 of the Civil Code which states that laws which have for their object
public order, public policy and good customs shall not be rendered ineffective by laws or judgments
promulgated, or by determination or conventions agreed upon in a foreign country."
Second Issue:
Proper Venue
Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:

"Section 1. Venue (a) All cases which Labor Arbiters have authority to hear and decide may be filed in the
Regional Arbitration Branch having jurisdiction over the workplace of the complainant/petitioner; Provided,
however that cases of Overseas Filipino Worker (OFW) shall be filed before the Regional Arbitration Branch
where the complainant resides or where the principal office of the respondent/employer is situated, at the option
of the complainant.
"For purposes of venue, workplace shall be understood as the place or locality where the employee is regularly
assigned when the cause of action arose. It shall include the place where the employee is supposed to report
back after a temporary detail, assignment or travel. In the case of field employees, as well as ambulant or
itinerant workers, their workplace is where they are regularly assigned, or where they are supposed to regularly
receive their salaries/wages or work instructions from, and report the results of their assignment to their
employers."
Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a migrant worker "refers to a
person who is to be engaged, is engaged or has been engaged in a remunerated activity in a state of which he or
she is not a legal resident; to be used interchangeably with overseas Filipino worker."21 Undeniably, respondent
was employed by petitioner in its branch office in Singapore. Admittedly, she is a Filipino and not a legal
resident of that state. She thus falls within the category of "migrant worker" or "overseas Filipino worker."
As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal. The law
gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2) at the RAB where
the principal office of her employer is situated. Since her dismissal by petitioner, respondent has returned to the
Philippines -- specifically to her residence at Filinvest II, Quezon City. Thus, in filing her Complaint before the
RAB office in Quezon City, she has made a valid choice of proper venue.
Third Issue:
Illegal Dismissal
The appellate court was correct in holding that respondent was already a regular employee at the time of her
dismissal, because her three-month probationary period of employment had already ended. This ruling is in
accordance with Article 281 of the Labor Code: "An employee who is allowed to work after a probationary
period shall be considered a regular employee." Indeed, petitioner recognized respondent as such at the time it
dismissed her, by giving her one months salary in lieu of a one-month notice, consistent with provision No. 6
of her employment Contract.
Notice and Hearing Not Complied With
As a regular employee, respondent was entitled to all rights, benefits and privileges provided under our labor
laws. One of her fundamental rights is that she may not be dismissed without due process of law. The twin
requirements of notice and hearing constitute the essential elements of procedural due process, and neither of
these elements can be eliminated without running afoul of the constitutional guarantee.22
In dismissing employees, the employer must furnish them two written notices: 1) one to apprise them of the
particular acts or omissions for which their dismissal is sought; and 2) the other to inform them of the decision
to dismiss them. As to the requirement of a hearing, its essence lies simply in the opportunity to be heard.23
The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission for which
her dismissal was being sought. Neither was she given any chance to be heard, as required by law. At any rate,
even if she were given the opportunity to be heard, she could not have defended herself effectively, for she
knew no cause to answer to.
All that petitioner tendered to respondent was a notice of her employment termination effective the very same
day, together with the equivalent of a one-month pay. This Court has already held that nothing in the law gives

an employer the option to substitute the required prior notice and opportunity to be heard with the mere
payment of 30 days salary.24
Well-settled is the rule that the employer shall be sanctioned for noncompliance with the requirements of, or for
failure to observe, due process that must be observed in dismissing an employee.25
No Valid Cause for Dismissal
Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid grounds or causes for an
employees dismissal. The employer has the burden of proving that it was done for any of those just or
authorized causes. The failure to discharge this burden means that the dismissal was not justified, and that the
employee is entitled to reinstatement and back wages.29
Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for terminating the
employment of respondent. It merely insists that her dismissal was validly effected pursuant to the provisions of
her employment Contract, which she had voluntarily agreed to be bound to.
Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and
their agreement would have the force of law between them. However, petitioner overlooks the qualification that
those terms and conditions agreed upon must not be contrary to law, morals, customs, public policy or public
order.30 As explained earlier, the employment Contract between petitioner and respondent is governed by
Philippine labor laws. Hence, the stipulations, clauses, and terms and conditions of the Contract must not
contravene our labor law provisions.
Moreover, a contract of employment is imbued with public interest. The Court has time and time again
reminded parties that they "are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other."31 Also, while a contract is the law between
the parties, the provisions of positive law that regulate such contracts are deemed included and shall limit and
govern the relations between the parties.32
Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal cause for
the termination of employment, the law considers the matter a case of illegal dismissal.33
Awards for Damages Justified
Finally, moral damages are recoverable when the dismissal of an employee is attended by bad faith or
constitutes an act oppressive to labor or is done in a manner contrary to morals, good customs or public
policy.34 Awards for moral and exemplary damages would be proper if the employee was harassed and
arbitrarily dismissed by the employer.35
In affirming the awards of moral and exemplary damages, we quote with approval the following ratiocination of
the labor arbiter:
"The records also show that [respondents] dismissal was effected by [petitioners] capricious and high-handed
manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to morals, good customs and public
policy. Bad faith and fraud are shown in the acts committed by [petitioners] before, during and after
[respondents] dismissal in addition to the manner by which she was dismissed. First, [respondent] was
pressured to resign for two different and contradictory reasons, namely, cost-cutting and the need for a
Chinese[-]speaking credit officer, for which no written advice was given despite complainants request. Such
wavering stance or vacillating position indicates bad faith and a dishonest purpose. Second, she was employed
on account of her qualifications, experience and readiness for the position of credit officer and pressured to
resign a month after she was commended for her good work. Third, the demand for [respondents] instant
resignation on 19 April 1999 to give way to her replacement who was allegedly reporting soonest, is whimsical,
fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic] until 15 May 1999 within
which to leave. Fourth, the pressures made on her to resign were highly oppressive, anti-social and caused her

absolute torture, as [petitioners] disregarded her situation as an overseas worker away from home and family,
with no prospect for another job. She was not even provided with a return trip fare. Fifth, the notice of
termination is an utter manifestation of bad faith and whim as it totally disregards [respondents] right to
security of tenure and due process. Such notice together with the demands for [respondents] resignation
contravenes the fundamental guarantee and public policy of the Philippine government on security of tenure.
"[Respondent] likewise established that as a proximate result of her dismissal and prior demands for
resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock and social humiliation. Her standing in the social and business community as
well as prospects for employment with other entities have been adversely affected by her dismissal. [Petitioners]
are thus liable for moral damages under Article 2217 of the Civil Code.
xxxxxxxxx
"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating [respondents]
employment and are therefore liable for exemplary damages. This should served [sic] as protection to other
employees of [petitioner] company, and by way of example or correction for the public good so that persons
similarly minded as [petitioners] would be deterred from committing the same acts."36
The Court also affirms the award of attorneys fees. It is settled that when an action is instituted for the recovery
of wages, or when employees are forced to litigate and consequently incur expenses to protect their rights and
interests, the grant of attorneys fees is legally justifiable.37
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against
petitioner.
SO ORDERED.

G.R. No. 167614

ANTONIO M. SERRANO, petitioner,
versus
GALLANT MARITIME SERVICES, INC. AND MARLOW NAVIGATION CO., INC., respondents.
Promulgated on: March 24, 2009
--------------------------------------------------------------------------------------------

CONCURRING OPINION
BRION, J.:
I concur with the ponencias conclusion that Section 10 of Republic Act No. 8042, or the Migrant
Workers and Overseas Filipinos Act (R.A. No. 8042), is unconstitutional insofar as it provides that
In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, the worker shall be entitled to the full reimbursement of
his placement fee with interest at twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

My conclusion, however, proceeds from a different reason and constitutional basis. I believe that this provision
should be struck down for violations of the constitutional provisions in favor of labor [1] and of the substantive
aspect of the due process clause.[2] Given these bases, I see no necessity in invoking the equal protection
clause. Underlying this restraint in invoking the equal protection clause is my hesitation to join the ponencia in

declaring a classification as suspect and in using the strict scrutiny standard without clearly defined parameters
on when this approach applies.
I begin by reading the assailed provision Section 10, R.A. No. 8042 in its constitutional context. Section
18, Article II of the Constitution declares it a state policy to affirm labor as a primary social economic force and
to protect the rights of workers and promote their welfare. This policy is emphatically given more life and
vitality under Article XIII, Section 3 of the Constitution which reads:
Section 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with
law. They shall be entitled to security of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the
right of labor to its just share in the fruits of production and the right of enterprises to reasonable
returns to investments, and to expansion and growth.
On June 7, 1995, Congress enacted R.A. No. 8042 to establish a higher standard of protection and
promotion of the welfare of migrant workers, their families and of overseas Filipinos in distress.[3] The
express policy declarations of R.A. No. 8042 show that its purposes are reiterations of the very same policies
enshrined in the Constitution.R.A. No. 8042, among others, recites that:
(b) The State shall afford full protection to labor, local and overseas, organized and unorganized,
and promote full employment and equality of employment opportunities for all. Towards this end,
the State shall provide adequate and timely social, economic and legal services to Filipino
migrant workers.[4]
xxx
(e) Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be
denied to any person by reason of poverty. In this regard, it is imperative that an effective
mechanism be instituted to ensure that the rights and interests of distressed overseas Filipinos, in
general, and Filipino migrant workers, in particular, documented or undocumented, are
adequately protected and safeguarded.
These declared purposes patently characterize R.A. No. 8042 as a direct implementation of the
constitutional objectives on Filipino overseas work so that it must be read and understood in terms of these
policy objectives. Under this interpretative guide, any provision in R.A. No. 8042 inimical to the interest of an
overseas Filipino worker (OFW) cannot have any place in the law.
Further examination of the law shows that while it acknowledges that the State shall promote full employment, it
states at the same time that the State does not promote overseas employment as a means to sustain economic
growth and national development. The existence of overseas employment program rests solely on the assurance
that the dignity and fundamental human rights and freedoms of Filipino citizens shall not, at any time, be
compromised or violated. In blunter terms, the overseas employment program exists only for OFW protection.
Having said all these, the law concludes its Declaration of Policies with a statement the lawmakers may
have perceived as an exception to the laws previously declared policies, by stating [n]onetheless, the
deployment of Filipino overseas workers, whether land-based or sea-based, by local service contractors and
manning agencies employing them shall be encouraged. Appropriate incentives may be extended to them. Thus,
in express terms, the law recognizes that there can be incentives to service contractors and manning agencies in
the spirit of encouraging greater deployment efforts. No mention at all, however, was made of incentives to the

contractors and agencies principals, i.e., the foreign employers in whose behalf the contractors and agencies
recruit OFWs.
The matter of money claims the immediate subject of the present case is governed by Section 10 of the
law. This section grants the National Labor Relations Commission (NLRC) jurisdiction over OFW money
claims. On liability for money claims, the sections states:
SECTION 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 the 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.
The liability of the principal/employer and the recruitment/placement agency for any and
all claims under this section shall be joint and several. This provision shall be incorporated in the
contract for overseas employment and shall be a condition precedent for its approval. The
performance bond to be filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment
contract and shall not be affected by any substitution, amendment or modification made locally
or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive
of damages under this section shall be paid within four (4) months from the approval of the
settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as
defined by law or contract, the worker shall be entitled to the full reimbursement of his
placement fee with interest at twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

Under these terms, the law protects the OFW as against the employer and the recruitment agency in case of
illegal termination of service, but limits this liability to the reimbursement of the placement fee and interest, and
the payment of his salaries for the unexpired portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less. After earlier declaring the principal/employer and the
contractor/recruitment agency jointly and solidarily liable, the limitation of liability appears to be a step
backward that can only be justified, under the terms of the law, if it is an appropriate incentive. To be
appropriate, the incentive must necessarily relate to the laws purpose with reasonable expectation that it would
serve this purpose; it must also accrue to its intended beneficiaries (the recruitment/placement agencies), and
not to parties to whom the reason for the grant does not apply.
These considerations bring us to the question can the disputed portion of Section 10 stand constitutional
scrutiny?
I submit that it cannot as it violates the constitutional provisions in favor of labor, as well as the requirements of
substantive due process.
The best indicator of the effect of the disputed portion of Section 10 on OFWs can be seen from the
results of the pre-R.A. No. 8042 rulings of this Court that the ponenciapainstakingly arranged in tabular
form. The ponencias table shows that by our own past rulings, before R.A. No. 8042, all illegal dismissals
merited the payment of the salaries that the OFWs would have received for the unexpired portion of their

contracts.[5] After R.A. No. 8042, our rulings vary on the computation of what should be paid to illegally
dismissed OFWs, but in all cases the principals/agencys adjudged liability was for less than the unexpired
portion of the OFWs contract.[6]
Anyway viewed, the situation of illegally dismissed OFWs changed for the worse after R.A. No.
8042. In this sense, the disputed portion of Section 10 is one that goes against the interests of labor, based on
R.A. No. 8042s own declared purposes and, more importantly, on constitutional standards. Section 10
diminished rather than enhanced the protection the Constitution envisions for OFWs.
The more significant violation, however, that the disputed portion of Section 10 spawns relates to its
character as a police power measure, and its failure to meet the substantive due process requirements of Article
III, Section 1 of the Constitution.
By the Office of the Solicitor Generals (OSG) own representations, the disputed Section 10 is a police
power measure adopted to mitigate the solidary liability of placement agencies. It redounds to the benefit of the
migrant workers whose welfare the government seeks to promote. The survival of legitimate placement
agencies helps [assure] the government that migrant workers are properly deployed and are employed under
decent and humane conditions.[7] To constitutionally test the validity of this measure, substantive due process
requires that there be: (1) a lawful purpose; and (2) lawful means or method to achieve the lawful purpose.[8]
I see nothing inherently unconstitutional in providing incentives to local service contractors and
manning agencies; they are significant stakeholders in the overseas employment program and providing them
with encouragement as R.A. No. 8042 apparently envisions in its Declaration of Policies will ultimately
redound to the benefit of the OFWs they recruit and deploy for overseas work. The Constitution itself also
expressly recognizes the right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.[9] As entities acting for the
principals/employers in the overseas employment program, the recruitment/manning agencies deserve no
less. Viewed from this perspective, the purpose of encouraging greater efforts at securing work for OFWs
cannot but be constitutionally valid. Thus, the issue before us in considering substantive due process is reduced
to whether the means taken to achieve the purpose of encouraging recruitment efforts (i.e., the incentive
granted limiting the liability of recruitment/manning agencies for illegal dismissals) is reasonable.
The first significant consideration in examining this issue is the question of liability who is liable when a
foreign principal/employer illegally terminates the services of an OFW? Under Philippine law, the employer, as
the contracting party who violated the terms of the contract, is primarily liable. [10] In the overseas employment
situation, the protective measures adopted under the law and the Philippine Overseas Employment
Administration (POEA) rules to protect the OFW in his or her overseas contract best tell us how we regard
liability under this contract.
First, POEA Rules require, as a condition precedent to an OFW deployment, the execution of a master
contract signed by a foreign principal/employer before it can be accredited by the POEA as an entity who can
source its manpower needs from the Philippines under its overseas employment program.[11] The master contract
contains the terms and conditions the foreign principal/employer binds itself to in its employment relationship
with the OFWs it will employ. Second, signed individual contracts of employment between the foreign
principal/employer or its agent and the OFW, drawn in accordance with the master contract, are required as
well.[12] Third, the foreign aspects or incidents of these contracts are submitted to the Philippine labor attachs for
verification at site.[13] This is a protective measure to ensure the existence and financial capability of the foreign
principal/employer. Labor attaches verify as well the individual employment contracts signed by foreign
principals/employers overseas. Fourth, the POEA Rules require the issuance by the foreign principal-employer
of a special power of attorney authorizing the recruitment/manning agency to sign for and its behalf, and
allowing itself to sue or be sued on the employment contracts in the Philippines through its authorized
recruitment/manning agency.[14] Fifth, R.A. No. 8042 itself and its predecessor laws have always provided that
the liability between the principal and its agent (the recruitment/manning agency) is joint and solidary,[15] thus

ensuring that either the principal or the agent can be held liable for obligations due to OFWs. Finally, OFWs
themselves can sue at the host countries with the assistance of Philippine embassies and labor offices.[16]
These measures collectively protect OFWs by ensuring the integrity of their contracts; by establishing
the responsible parties; and by providing the mechanisms for their enforcement. In all these, the primary
recourse is with the foreign principal employer who has direct and primary responsibility under the employment
contract.
Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden
twist affecting the principal/employers liability. While intended as an incentive accruing to recruitment/manning
agencies, the law, as worded, simply limits the OFWs recovery in wrongful dismissal situations. Thus, it
redounds to the benefit of whoever may be liable, including the principal/employer the direct employer
primarily liable for the wrongful dismissal. In this sense, Section 10 read as a grant of incentives to
recruitment/manning agencies oversteps what it aims to do by effectively limiting what is otherwise the full
liability of the foreign principals/employers. Section 10, in short, really operates to benefit the wrong party and
allows that party, without justifiable reason, to mitigate its liability for wrongful dismissals. Because of this
hidden twist, the limitation of liability under Section 10 cannot be an appropriate incentive, to borrow the term
that R.A. No. 8042 itself uses to describe the incentive it envisions under its purpose clause.
What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to
encourage greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply limits
their liability for the wrongful dismissals of already deployed OFWs. This is effectively a legally-imposed
partial condonation of their liability to OFWs, justified solely by the laws intent to encourage greater
deployment efforts. Thus, the incentive, from a more practical and realistic view, is really part of a scheme to
sell Filipino overseas labor at a bargain for purposes solely of attracting the market. Ironically, the OSG
unabashedly confirmed this view in its Comment when it represented that[b]y limiting the liability to three
months, Filipino seafarers have better chance of getting hired by foreign employees.[17]
The so-called incentive is rendered particularly odious by its effect on the OFWs - the benefits accruing
to the recruitment/manning agencies and their principals are taken from the pockets of the OFWs to whom the
full salaries for the unexpired portion of the contract rightfully belong. Thus, the principals/employers and the
recruitment/manning agencies even profit from their violation of the security of tenure that an employment
contract embodies. Conversely, lesser protection is afforded the OFW, not only because of the lessened recovery
afforded him or her by operation of law, but also because this same lessened recovery renders a wrongful
dismissal easier and less onerous to undertake; the lesser cost of dismissing a Filipino will always be a
consideration a foreign employer will take into account in termination of employment decisions. This reality,
unfortunately, is one that we cannot simply wish away with the disputed Section 10 in place. Thus, this
inherently oppressive, arbitrary, confiscatory and inimical provision should be struck down for its conflict with
the substantive aspect of the constitutional due process guarantee. Specifically, the phrase for three (3) months
for every year of the unexpired terms, whichever is less in the fifth and final paragraph of Section 10 of R.A.
8042 should be declared unconstitutional.
With these conclusions, I see no need to further test the validity of the assailed clause under the equal
protection guarantee. My restraint in this regard rests on two reasons.
First, I believe that the ponencias use of the strict scrutiny standard of review on the premise that the
assailed clause established a suspect classification is misplaced.Second, I do not see the present case as an
occasion to further expand the use of the strict scrutiny standard which the Court first expanded in Central Bank
Employees Association, Inc. v. Bangko Sentral ng Pilipinas,[18]
A suspect classification is one where distinctions are made based on the most invidious bases for
classification that violate the most basic human rights, i.e., on the basis of race, national origin, alien
status, religious affiliation, and to a certain extent, sex and sexual orientation. [19] With a suspect classification,
the scrutiny of the classification is raised to its highest level: the ordinary presumption of constitutionality is
reversed and government carries the burden of proving that its challenged policy is constitutional. To withstand

strict scrutiny, the government must show that its policy is necessary to achieve a compelling state interest; if
this is proven, the state must then demonstrate that the legislation is narrowly tailored to achieve the intended
result.[20]
In the present case, I do not see the slightest indication that Congress actually intended to classify OFWs
between and among themselves, and in relation with local workers when it adopted the disputed portion of
Section 10. The congressional intent was to merely grant recruitment and manning agencies an incentive and
thereby encourage them into greater deployment efforts, although, as discussed above, the incentive really
works for the foreign principals benefit at the expense of the OFWs.
Even assuming that a classification resulted from the law, the classification should not immediately be
characterized as a suspect classification that would invite the application of the strict scrutiny standard. The
disputed portion of Section 10 does not, on its face, restrict or curtail the civil and human rights of any single
group of OFWs. At best, the disputed portion limits the monetary award for wrongful termination of
employment a tort situation affecting an OFWs economic interest. This characterization and
theunintended classification that unwittingly results from the incentive scheme under Section 10, to my mind,
render a strict scrutiny disproportionate to the circumstances to which it is applied.
I believe, too, that we should tread lightly in further expanding the concept of suspect classification after
we have done so in Central Bank,[21] where we held thatclassifications that result in prejudice to persons
accorded special protection by the Constitution[22] requires a stricter judicial scrutiny. The use of a suspect
classification label cannot depend solely on whether the Constitution has accorded special protection to a
specified sector. While the Constitution specially mentions labor as a sector that needs special protection, the
involvement of or relationship to labor, by itself, cannot automatically trigger a suspect classification and the
accompanying strict scrutiny; much should depend on the circumstances of the case, on the impact of the illegal
differential treatment on the sector involved, on the needed protection, and on the impact of recognizing a
suspect classification on future situations. In other words, we should carefully calibrate our moves when faced
with an equal protection situation so that we do not misappreciatethe essence of what a suspect classification is,
and thereby lessen its jurisprudential impact and value. Reserving this approach to the worst cases of
unacceptable classification and discrimination highlights the importance of striking at these types of unequal
treatment and is a lesson that will not be lost on all concerned, particularly the larger public. There is the added
reason, too, that the reverse onus that a strict scrutiny brings directly strikes, in the most glaring manner, at the
regularity of the performance of functions of a co-equal branch of government; inter-government harmony and
courtesy demand that we reserve this type of treatment to the worst violations of the Constitution.
Incidentally, I believe that we can arrive at the same conclusion and similarly strike down the disputed
Section 10 by using the lowest level of scrutiny, thereby rendering the use of the strict scrutiny unnecessary.
Given the OSGs positions, the resulting differential treatment the law fosters between Philippine-based workers
and OFWs in illegal dismissal situations does not rest on substantial distinctions that are germane to the purpose
of the law. No reasonable basis for classification exists since the distinctions the OSG pointed out do not justify
the different treatment of OFWs and Philippine-based workers, specifically, why one class should be excepted
from the consequences of illegal termination under the Labor Code, while the other is not.
To be sure, the difference in work locations and working conditions that the OSG pointed out are not
valid grounds for distinctions that should matter in the enforcement of employment contracts. Whether in
the Philippines or elsewhere, the integrity of contracts be they labor, commercial or political is a zealously
guarded value that we in thePhilippines should not demean by allowing a breach of OFW contracts easy to
undertake. This is true whatever may be the duration or character of employment; employment contracts,
whatever their term and conditions may be subject only to their consistency with the law, must be respected
during the whole contracted term and under the conditions agreed upon.
Significantly, the OSG could not even point to any reason other than the protection of recruitment
agencies and the expansion of the Philippine overseas program as justification for the limitation of liability that
has effectively distinguished OFWs from locally-based workers. These reasons, unfortunately, are not on the

same plane as protection to labor in our constitutional hierarchy of values. Even RA 8042 repeats that the State
does not promote overseas employment as a means to sustain economic growth and national
development. Under RA 8042s own terms, the overseas employment program exists only for OFW
protection. Thus viewed, the expansion of the Philippine overseas deployment program and the need for
incentives to achieve results are simply not valid reasons to justify a classification, particularly when the
incentive is in the form of oppressive and confiscatory limitation of liability detrimental to labor. No valid basis
for classification thus exists to justify the differential treatment that resulted from the disputed Section 10.
In light of all these, I vote to strike down the disputed portion of Section 10 of R.A. No. 8042.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 86963

August 6, 1999

BATONG BUHAY GOLD MINES, INC., petitioner,

vs.
HONORABLE DIONISIO DELA SERNA IN HIS CAPACITY AS THE UNDERSECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO
MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE OTHER COMPLAINANTS* IN CASE
NO. NCR-LSED-CI-2047-87; MFT CORPORATION AND SALTER HOLDINGS PTY.
LTD., respondents.
RESOLUTION
PURISIMA, J.:
At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court with a Prayer for Preliminary
Injunction and or Restraining Order brought by Batong Buhay Gold Mines, Inc. (BBGMI for brevity) to annul
three orders issued by respondent Undersecretary Dionisio dela Serna of the Department of Labor and
Employment, dated September 16, 1988, December 14, 1988 and February 13, 1989, respectively.
The Order of September 16, 1988 stated the facts as follows:
. . . on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O. Reyes and
1,247 others filed a complaint against Batong Buhay Gold Mines, Inc. for: (1) Non-payment of their
basic pay and allowances for the period of 6 July 1983 to 5 July 1984, inclusive, under Wage Order No.
2; (2) Non-payment of their basic pay and allowances for the period 16 June 1984 to 5 October 1986,
inclusive under Wage Order No. 5; (3) Non-payment of their salaries for the period 16 March 1986 to
the present; (4) Non-payment of their 13th month pay for 1985, 1986 and 1987; (5) Non-payment of
their vacation and sick leave, and the compensatory leaves of mine site employees; and (6) Nonpayment of the salaries of employees who were placed on forced leaves since November, 1985 to the
present, if this is not feasible, the affected employees be awarded corresponding separation pay.
On 9 February 1987, the Regional Director set the case for hearing on 17 February 1987.
On 17 February 1987, the respondent moved for the resetting of the case to 2 March 1987.
On 27 February 1987, the complainants filed a Motion for the issuance of an inspection authority.
xxx

xxx

xxx

On 13 July 1987, the Labor Standards and Welfare Officers submitted their report with the following
recommendations:
WHEREFORE, premises considered this case is hereby submitted with the recommendation that
an Order of Compliance be issued directing respondent Batong Buhay Gold Mines Inc. to pay
complainants' Elsie Rosalina Ty, et al. FOUR MILLION EIGHT HUNDRED EIGHTEEN
THOUSAND SEVEN HUNDRED FORTY-SIX PESOS AND FORTY CENTAVOS
(P4,818,746.40) by way of unpaid salaries of workers from March 16, 1987 to present, unpaid
and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th months pay for 1985 and
1986, and unpaid (sic) vacation/sick/compensatory leave benefits.
On 31 July 1987, the Regional Director1 adopted the recommendation of the LSWOs and issued an order
directing the respondent to pay the complainants the sum of P4,818,746.40 representing their unpaid
13th month pay for 1985 and 1986, wage and ECOLA differentials under wage order Nos. 2 and 5,
unpaid salaries from 16 March 1986 to present and vacation/sick leave benefits for 1984, 1985 and
1986.
On 19 August 1987, the complainants filed an ex-parte motion for the issuance of a writ of execution
and appointment of special sheriff.
xxx

xxx

xxx

On 21 August 1987, the Regional Director issued an Order directing the respondent to put up a cash or
surety bond otherwise a writ of execution will be issued.
xxx

xxx

xxx

When the respondent failed to post a cash/surety bond, and upon motion for the issuance of a writ of
execution by the complainants, the Regional Director, on 14 September 1987 issued a writ of execution
appointing Mr. John Espiridion C. Ramos as Special Sheriff and directing him to do the following:
You are to collect the above-stated amount from the respondent and deposit the same with
Cashier of this Office for appropriate disposition to herein complainants under the supervision of
the office of the Director. Otherwise, you are to execute this writ by attaching the goods and
chattels of the respondent not exempt from execution or in case of insufficiency thereof against
the real or immovable property of the respondent.
The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and seized three (3)
units of Peterbuilt trucks and then sold the same by public auction. Various materials and motor vehicles
were also seized on different dates and sold at public auction by said sheriff.
xxx

xxx

xxx

On 11 December 1987, the respondent finally posted a supersedeas bond which prompted this Office to
issue an Order dated 26 January 1988, restraining the complainants and sheriff Ramos from enforcing
the writ of execution. . . .2
BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to respondent
Undersecretary Dionisio de la Serna, contending that the Regional Director had no jurisdiction over the case.
On September 16, 1988, the public respondent issued the first challenged Order upholding the jurisdiction of the
Regional Director and annulling all the auction sales conducted by Special Sheriff John Ramos. The decretal
portion of the said Order ruled:

WHEREFORE, the Order dated 31 July 1987 of the Regional Director, National Capital Region, is
hereby AFFIRMED. Accordingly, the writ of execution dated 14 September 1987 issued in connection
thereto is hereby declared VALID.
However, the public auction sales conducted by special sheriff John Ramos pursuant to the writ of
execution dated 14 September 1987 on 24 September 2, 20, 23 and 29 October 1987 are all hereby
declared NULL AND VOID. Furthermore, the personal properties sold and the proceeds thereof which
have been turned over to the complainants thru their legal counsel are hereby ordered returned to the
custody of the respondent and the buyers respectively.
SO ORDERED.3
On October 13, 1988, a Motion for Reconsideration of the aforesaid order was presented by the complainants in
Case No. NCR-LSED-CI-2047-87 but the same was denied.
On November 7, 1988, a Motion for Intervention was filed by MFT Corporation, inviting attention to a Deed of
Sale executed in its favor by Fidel Bermudez, the highest bidder in the auction sale conducted on October 29,
1987.
On December 2, 1988, another Motion for Intervention was filed, this time by Salter Holdings Pty., Ltd.,
claiming that MFT Corporation assigned its rights over the subject properties in favor of movant as evidenced
by a Sales Agreement between MFT Corp. and Salter Holdings Pty., Ltd.
The two Motions for intervention were granted in the second questioned order dated December 14, 1988,
directing the exclusion from annulment of the properties sold at the October 29, 1987 auction sale and claimed
by the intervenors, including one cluster of junk mining machineries, equipment and supplies, and disposing
thus:
WHEREFORE, in view of the foregoing, the motions for reconsideration filed by intervenors MFT and
Salter are hereby granted. Correspondingly, this Office's Order dated 16 September 1988 is hereby
modified to exclude from annulment "the one lot of junk mining machineries, equipment and supplies
as-is-where-is" sold by Sheriff John C. Ramos in the auction sale of 29 October 1987.1wphi1.nt
xxx

xxx

xxx

Motions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and the respondent
employees but to no avail. The same were likewise denied in the third assailed Order dated February 13, 1989.
Hence, the petition under scrutiny, ascribing grave abuse of discretion amounting to lack or excess of
jurisdiction to the public respondent in issuing the three Orders under attack.
The questioned Orders aforementioned have given rise to the issues: (1) whether the Regional Director has
jurisdiction over the complaint filed by the employees of BBGMI; and (2) whether or not the auction sales
conducted by the said Special Sheriff are valid.
Anent the first issue, an affirmative ruling is indicated. The Regional Director has jurisdiction over the BBGMI
employees who are the complainants in Case Number NCR-LSED-CI-2047-87.
The subject labor standards case of the petition arose from the visitorial and enforcement powers by the
Regional Director of Department of Labor and Employment (DOLE). Labor standards refers to the minimum
requirements prescribed by existing laws, rules and regulations relating to wages, hours of work, cost of living
allowance and other monetary and welfare benefits, including occupational, safety and health standards.4 Labor
standards cases are governed by Article 128(b) of the Labor Code.
The pivot of inquiry here is whether the Regional Director has jurisdiction over subject labor standards case.

As can be gleaned from the records on hand, subject labor standards case was filed on February 5, 1987 at
which time Article 128 (b) read as follows5:
Art. 128 (b) Visitorial and enforcement powers
(b) The Minister of Labor or his duly authorized representative shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards provisions of this
Code based on the findings of labor regulation officers or industrial safety engineers made in the
course of inspection, and to issue writs of execution to the appropriate authority for the
enforcement of their order, except in cases where the employer contests the findings of the labor
regulations officers and raises issues which cannot be resolved without considering evidentiary
matters that are not verifiable in the ordinary course of inspection.
Petitioner theorizes that the Regional Director is without jurisdiction over subject case, placing reliance on the
ruling in Zambales Base Inc. vs. Minister of Labor6 and Oreshoot Mining Company vs. Arellano.7
Respondent Undersecretary Dionisio C. Dela Serna, on the other hand, upheld the jurisdiction of Regional
Director Luna C. Piezas by relying on E.O. 111, to quote:
Considering therefore that there still exists an employer-employee relationship between the parties; that
the case involves violations of the labor standard provisions of the labor code; that the issues therein
could be resolved without considering evidentiary matters that are not verifiable in the normal course of
inspection; and, if only to give meaning and not render nugatory and meaningless the visitorial and
enforcement powers of the Secretary of Labor and Employment as provided by Article 128(b) of the
Labor Code, as amended by Section 2 of Executive Order No. 111 which states:
The provisions of article 217 of this code to the contrary notwithstanding and in cases where the
relationship of employer-employee still exists, the Minister of Labor and Employment or his
duly authorized representative shall have the power to order and administer, after due notice and
hearing, compliance with the labor standards provision of this Code based on the findings of the
findings of labor regulation officers or industrial safety engineers made in the course of
inspection, and to issue writs of execution to the appropriate authority for the enforcement of
their order, except in cases where the employer contests the findings of the labor regulations
officers and raises issues which cannot be resolved without considering evidentiary matters that
are not verifiable in the ordinary course of inspection.
We agree with the complainants that the regional office a quo has jurisdiction to hear and decide the
instant labor standard case.
xxx

xxx

x x x8

The Court agrees with the public respondent. In the case of Maternity Children's Hospital vs. Secretary of
Labor(174 SCRA 632), the Court in upholding the jurisdiction of the Regional Director over the complaint on
underpayment of wages and ECOLAs filed on May 23, 1986, by the employees of Maternity Children's
Hospital, held:
This is a labor standards case and is governed by Art. 128(b) of the Labor Code, as amended by E.O.
111.
xxx

xxx

xxx

Prior to the promulgation of E.O. 111 on December 24, 1986, the Regional Director's authority over
money claims was unclear. The complaint in the present case was filed on May 23, 1986 when E.O. 111
was not yet in effect. . . .

We believe, however, that even in the absence of E.O. 111, Regional Directors already had enforcement
powers over money claims, effective under P.D. 850, issued on December 16, 1975, which transferred
labor standards cases from the arbitration system to the enforcement system.
In the aforecited case, the Court in reinforcing its conclusion that Regional Director has jurisdiction over labor
standards cases, treated E.O. 111 as a curative statute, ruling as follows:
E.O. No. 111 was issued on December 24, 1986 or three (3) months after the promulgation of the
Secretary of Labor's decision upholding private respondents' salary differentials and ECOLAs on
September 24, 1986. The amendment of the visitorial and enforcement powers of the Regional Director
(Article 128(b)) by said E.O. 111 reflects the intention enunciated in Policy Instructions Nos. 6 and 37 to
empower the Regional Directors to resolve uncontested money claims in cases where an employeremployee relationship still exists. This intention must be given weight and entitled to great respect. As
held in Progressive Worker's Union, et al. vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985, 150
SCRA 429:
. . . The interpretation by officers of laws which are entrusted to their administration is entitled to
great respect. We see no reason to detract from this rudimentary rule in administrative law,
particularly when later events have proved said interpretation to be in accord with the legislative
intent. . .
The proceedings before the Regional Director must, perforce be upheld on the basis of Article 128(b) as
amended by E.O. No. 111, dated December 24, 1986, this executive order "to be considered in the nature
of a curative statute with retrospective application." (Progressive Workers' Union, et al.
vs. Hon. Aguas, et al. (Supra); M. Garcia vs. Judge A. Martinez, et al. G.R. No. I-47629, may 28, 1979,
90 SCRA 331).
With regard to the petitioner's reliance on the cases of Zambales Base, Inc. vs. Minister of Labor (supra)
andOreshoot Mining Company vs. Arellano, (supra), this is misplaced. In the case of Zambales Base, Inc., the
court has already ruled that:
. . ., in view of the promulgation of Executive Order No. 111, Zambales Base Metals vs. Minister of
Labor is no longer good law. (Emphasis supplied) Executive Order No. 111 is in the character of a
curative law, that is to say, it was intended to remedy a defect that, in the opinion of the Legislature (the
incumbent Chief Executive in this case, in the exercise of her lawmaking powers under the Freedom
Constitution) had attached to the provision under the amendment.
xxx

xxx

x x x9

The case of Oreshoot Mining Corporation, on the other hand, involved money claims of illegally dismissed
employees. As the employer-employee relationship has already ceased and reinstatement is sought, jurisdiction
necessarily falls under the Labor Arbiter. Petitioner should not have used this to support its theory as this
petition involves labor standards cases and not monetary claims of illegally dismissed employees.
The Court would have ruled differently had the petitioner shown that subject labor standards case is within the
purview of the exception clause in Article 128 (b) of the Labor Code. Said provision requires the concurrence of
the following elements in order to divest the Regional Director or his representatives of jurisdiction, to wit: (a)
that the petitioner (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.10
Nowhere in the records does it appear that the petitioner alleged any of the aforestated grounds. In fact, in its
Motion for Reconsideration of the Order of the Regional Director dated August 20, 1987, the grounds which
petitioner raised were the following:

1. This Honorable Office has no jurisdiction to hear this case and its Order of 31 October 1987 is
therefore null and void;
2. Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole party respondent, the complaint
should have been directed also against the Asset Privatization Trust.
In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as the Urgent Omnibus Motion to
declare void the Writ of Execution for lack of jurisdiction and the Oppositions it filed on the Motions for
Intervention questioning the legal personality of the intervenors, questions as to the amounts complained of by
the employees or absence of violation of labor standards laws were never raised. Raising lack of jurisdiction in
a Motion to Dismiss is not the contest contemplated by the exception clause under Article 128(b) of the Labor
Code which would take the case out of the jurisdiction of the Regional Director and bring it before the Labor
Arbiter.
The only instance when there was a semblance of raising the aforestated grounds, was when they filed an
Appeal Memorandum dated January 14, 1988, before the respondent undersecretary. In the said Appeal
Memorandum, petitioner comes up with the defense that the Regional Director was without jurisdiction, as
employer-employee relationship was absent, since petitioner had ceased doing business since 1985.
Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint Inspection Authority No.
CI-2-047-87, were not allowed to look into records, vouchers and other related documents. The officers of the
petitioner alleged that the company is presently under receivership of the Development Bank of the
Philippines.11In lieu of this, the Regional Director had ordered that a summary investigation be
conducted.12 Despite proper notices, the petitioner refused to appear before the Regional Director. To give it
another chance, an order to file its position paper was issued to substantiate its defenses. Notwithstanding all
these opportunities to be heard, petitioner chose not to avail of such.
As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, (266 SCRA 111):
. . . Under Art. 128(a) of the Labor Code, the Secretary of Labor of his duly authorized representatives,
such as the Regional Directors, has visitorial powers which authorize him to inspect the records and
premises of an employer at any time of the day or night whenever work is being undertaken therein, to
question any employee and investigate any fact, condition or matter, and to determine violations of labor
laws, wage orders or rules and regulations. If the employer refuses to attend the inspection or conference
or to submit any record, such as payrolls and daily time records, he will be deemed to have waived his
right to present evidence. (emphasis supplied)
Petitioner's refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the premises of
their head office in Makati and the failure to file their position paper is equivalent to a waiver of its right to
contest the claims of the employees. This Court had occasion to hold there is no violation of due process where
the Regional Director merely required the submission of position papers and resolved the case summarily
thereafter.13 Furthermore, the issuance of the compliance order was well within the jurisdiction of the Regional
Director, as Section 14 of the Rules on the Disposition of Labor Standards Cases provides:
Sec. 14. Failure to Appear Where the employer or the complainant fails or refuses to appear during
the investigation, despite proper notice, for two (2) consecutive hearings without justifiable reasons, the
hearing officer may recommend to the Regional Director the issuance of a compliance order based on
the evidence at hand or an order of dismissal of the complaint as the case may be. (Emphasis supplied)
It bears stressing that this petition involves a labor standards case and it is in keeping with the law that "the
worker need not litigate to get what legally belongs to him, for the whole enforcement machinery of the
Department of Labor exists to insure its expeditious delivery to him free of charge."14
Thus, their claim of closure for business, among other things, are factual issues which cannot be brought here
for the first time. As petitioner refused to participate in the proceedings below where it could have ventilated the

appropriate defenses, to do so in this petition is unavailing. The reason for this is that factual issues are not
proper subjects of a special civil action for certiorari to the Supreme Court.15
It is therefore abundantly clear that at the time of the filing of the claims of petitioner's employees, the Regional
Director was already exercising visitorial and enforcement powers.
Regional Director's visitorial and enforcement powers under Art. 128 (b) has undergone series of amendments
which the Court feels to be worth mentioning.
Confusion was engendered by the promulgation of the decision in the case of Servando's Inc. vs. Secretary of
Labor and Employment and the Regional Director, Region VI, Department of Labor and Employment.16 In the
said case, the Regional Director took cognizance of the labor standards cases of the employees of Servando's
Inc., but this Court held that:
In the case of Briad Agro Development Corporation vs. Dela Cerna and Camus Engineering
Corp. vs. Sec.Of labor applying E.O. 111 the Court recognized the concurrent jurisdiction of the
Secretary of labor (or Regional Directors) and the labor Arbiters to pass on employees money claims,
including those cases which the labor Arbiters had previously exercised jurisdiction. However, in a
subsequent modificatory resolution in the Briad Agro Case, dated 9 November 1989, the Court modified
its original decision in view of the enactment of RA 6715, and upheld the power of the Regional
Directors to adjudicate money claims subject to the conditions set forth in Section 2 of said law (RA
6715).
The power then of the Regional Director (under the present state of law) to adjudicate employees money
claims is subject to the concurrence of all the requisites provided under Sec. 2 of RA 6715, to wit:
(a) the claim is represented by an employer or person employed in domestic or household
service, or househelper;
(b) the claim arises from employer-employee relationship;
(c) the claimant does not seek reinstatement; and
(d) the aggregate money claim of each employee or househelper does not exceed P5,000.
xxx

xxx

x x x17

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by RA 6715 as to include
labor standards cases under Article 128 (b) and no longer limited to ordinary monetary claims under Article 129.
In fact, in the Motion for Reconsideration18 presented by the private respondents in the Servando case, the court
applied more squarely the P5,000 limit to the visitorial and enforcement power of the Regional Director, to wit:
To construe the visitorial power of the Secretary of Labor to order and enforce compliance with labor
laws as including the power to hear and decide cases involving employee's claims for wages, arising
from employer-employee relations, even if the amount of said claims exceed P5,000 for each employee,
would, in our considered opinion, emasculate and render meaningless, if not useless, the provisions of
Art. 217 (a) and (6) and Article 129 of the Labor Code which, as above-pointed out, confer exclusive
jurisdiction on the Labor Arbiter to hear and decide such employees' claims, regardless of amount, can
be heard and determined by the Secretary of Labor his visitorial power. This does not, however, appear
to be the legislative intent.
But prevailing law and jurisprudence rendered the Servando ruling inapplicable. In the recent case of Francisco
Guico, Jr. versus The Honorable Secretary of Labor & Employment Leonardo A. Quisumbing, GR # 131750,
promulgated on November 16, 1998, this Court upheld the jurisdiction of the Regional Director notwithstanding
the fact that the amounts awarded exceeded P5,000.

Republic Act 7730, the law governing the visitorial and enforcement powers of the Labor Secretary and his
representatives reads:
Art. 128 (b) 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.
xxx

xxx

x x x(emphasis supplied)

The present law, RA 7730, can be considered a curative statute to reinforce the conclusion that the Regional
Director has jurisdiction over the present labor standards case.
Well-settled is the rule that jurisdiction over the subject matter is determined by the law in force when the action
was commenced, unless a subsequent statute provides for its retroactive application, as when it is a curative
legislation.19
Curative statutes are intended to supply defects, abridge superfluities in existing laws and curb certain evils.
They are intended to enable persons to carry into effect that which they have designed and intended, but has
failed of expected legal consequence by reason of some statutory disability or irregularity in their own action.
They make valid that which, before the enactment of the statute, was invalid.20
In arriving at this conclusion, the case of Briad Agro Development vs. De La Cerna21 comes to the fore. In the
said case, RA 6115 was held to be a curative statute. There, the Court ruled that RA 6715 is deemed a curative
statute and should be applied to pending cases. The rationale of the ruling of the Court was that prior to RA
6715, Article 217 as amended by E.O. 111, created a scenario where the Labor Arbiter and the Regional
Director of DOLE had overlapping jurisdiction over money claims. Such a situation was viewed as a defect in
the law so that when RA 6715 was passed, it was treated or interpreted by the Court as a rectification of the
infirmity of the law, and therefore curative in nature, with retroactive application.
Parenthetically, the same rationale applies in treating RA 7730 as a curative statute. Explicit in its title22 is the
legislative intent to rectify the error brought about by this Court's ruling that RA 6715 covers even labor
standards cases where the amounts to be awarded by the Regional Director exceed P5,000 as provided for under
RA 6715. Congressional records relative to Republic Act 7730 reveal that, "this bill seeks to do away with the
jurisdictional limitations imposed thru said ruling (referring to Servando) and to finally settle any lingering
doubts on the visitorial and enforcement powers of the Secretary of Labor and Employment."23
All the foregoing studiedly considered, the ineluctable conclusion is that the application of RA 7730 to the case
under consideration is proper.
Thus, it is decisively clear that the public respondent did not act with grave abuse of discretion in issuing the
Order dated September 16, 1988.
The second issue for resolution is the validity of the auction sales conducted by Special Sheriff Ramos. It bears
stressing that the writ of execution issued by the Regional Director led to the several auction sales conducted on
September 24, 1987, October 2, 1987, October 23, 1987, October 29, 1987 and October 30, 1987.
In the first Order of public respondent, the five (5) auction sales were declared null and void. As the public
respondent put it, "the scandalously low price for which the personal properties of the respondent were sold
leads us to no other recourse but to invalidate the auction sales conducted by the special sheriff."24

In the September 16, 1988 Order25 of public respondent, the personal properties and corresponding prices for
which they were sold were as follows:
Personal properties sold on September 24, 1987:
1. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A4102-65, Chassis No. 139155-P
not running condition.
2. One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-8040, Chassis No. 6A410235,
truck with Engine No. (Truck 4) not running condition.
3. One (1) unit 1978 Model peterbuilt truck with Engine No. 6A410319, Chassis No. 139163-P
Truck No. 4 not running condition.
Proceeds of Sale P178,000.00
Personal Properties Sold on October 2, 1987
1. One (1) unit peterbuilt truck model 1978, with Engine No. 6A410347, Chassis No. 1391539-P.
2. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A410325, Chassis No. 139149.
3. One (1) unit payloader (caterpillar with Engine No. (not visible) 966.
4. One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not visible); and one (1) Lot of
scarp irons impounded inside the Batong Buhay Compound, Calanan, Kalinga Apayao.
5. One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate No. PBV 386.
Proceeds of Sale P228,750.00
Personal Properties Sold on October 23, 1987:
1. One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340, Chassis No. 81400500227
Plate No. BAT 353, burned, damage not running condition, type of body jeep motor not visible.
2. Two (2) units peterbuilts, damaged, burned motor Nos. (not visible) and Chassis Nos. not
visible.
3. One (1) Unit Layland, burned, damaged and Motor No. not visible.
4. Two (units) air compressor, burned, damaged and one (1) generator.
5. One (1) Unit Loader Michigan 50, damaged and burned, and
6. One (1) rock crasher, damaged, burned, scrap iron junk.
Proceeds of Sale P98,000.00
Properties sold on October 29, 1987
1. One (1) lot of scrap construction materials.
2. One (1) lot of scrap mining machineries equipments and supplies.
3. One (1) lot of junk machineries, equipments and supplies.

Proceeds of Sale P1,699,999.99

Personal Properties Sold on October 20, 1987*
1. One (1) lot of scrap construction materials.
2. One (1) lot of scrap mining machineries, equipments and supplies.
Proceeds of Sale P2,185,000.00
Total Proceeds Sale P4,389,749.99
to satisfy the judgment award in the amount of P4,818,746.00.
As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial agencies are not to be
disturbed absent any showing of grave abuse of discretion tainting the same. But in the case under scrutiny,
there was grave abuse of discretion when the public respondent, without any evidentiary support, adjudged such
prices as "scandalously low". He merely relied on the self-serving assertion by the petitioner that the value of
the auctioned properties was more than the price bid. Obviously, this ratiocination did not suffice to set aside the
auction sales.
The presumption of regularity in the performance of official function is applicable here. Conformably, any party
alleging irregularity vitiating auction sales must come forward with clear and convincing proof.
Furthermore, it is a well-settled principle that:
Mere inadequacy of price is not, of itself sufficient ground to set aside an execution sale where the sale
is regular, proper and legal in other respects, the parties stand on an equal footing, there are no
confidential relation between them, there is no element of fraud, unfairness, or oppression, and there is
no misconduct, accident, mistake or surprise connected with, and tending to cause, the inadequacy.26
Consequently, in declaring the nullity of the subject auction sales on the ground of inadequacy of price, the
public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction.
But, this is not to declare the questioned auction sales as valid. The same are null and void since on the
properties of petitioner involved was constituted a mortgage between petitioner and the Development Bank of
the Philippines, as shown by the:
(a) Deed of Mortgage dated December 28, 1973;
(b) Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975;
(c) Amendment to Joint Mortgage dated October 18, 1976.
(d) Confirmation of Mortgage dated March 27, 1979; and
(e) Additional Joint First Mortgage dated March 31, 1981.27
The aforementioned documents were executed between the petitioner and Development Bank of the Philippines
(DBP) even prior to the filing of the complaint of petitioner's employees. The properties having been mortgaged
to DBP, the applicable law is Section 14 of Executive Order No. 81, dated 3 December 1986, otherwise known
as the "The 1986 Revised Charter of the Development Bank of the Philippines," which exempts the properties
of petitioner mortgaged to DBP from attachment or execution sales. Section 14 of E.O. 81, reads:
Sec. 14. Exemption from Attachment. The provisions of any law to the contrary notwithstanding,
securities on loans and/or other accommodations granted by the Bank or its predecessor-in-interest shall

not be subject to attachment, execution or any other court process, nor shall they be included in the
property of insolvent persons or institutions, unless all debts and obligations of the Bank or its
predecessor-in-interest, penalties, collection of expenses, and other charges, subject to the provisions of
paragraphs (e) of Sec. 9 of this Charter.
In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive Trustee of the Asset Privatization
Trust, to the Office of the Clerk of Court of the Supreme Court, certified that the petitioner is covered by
Proclamation No. 50 issued on December 8, 1986 by President Corazon C. Aquino.
Quoted hereunder are the pertinent portions of the said letter:28
RE: BBGMI vs. Hon. dela Serna, GR No. 86963
Supreme Court Certiorari
SIR:
xxx

xxx

xxx

. . . all the assets (real and personal/chattel) of Batong Buhay Gold Mines, Inc. (BBGMI) have been transferred
and entrusted to the Asset Privatization Trust (APT) by virtue of Proclamation No. 50 dated December 8, 1986
of her Excellency, President Corazon C. Aquino. All the said assets of BBGMI are covered by real and chattel
mortgages executed in favor of the Philippine National Bank ("PNB"), the Development Bank of the
Philippines ("DBP") and the National Investment and Development Corporation ("NIDC").
xxx

xxx

xxx

xxx

xxx

xxx

Sec. 14, Executive Order No. 81:

Pursuant to the above-quoted provision of law, you are hereby warned that all the assets (real and
personal/chattel) of BBGMI are exempted from writs of execution, attachment, or any other lien or court
processes. The Government, through APT, shall initiate any administrative measures and remedies against you
for any violation of the vested rights of PNB, DBP and APT.
xxx

xxx

xxx

(sgd).
JOSE C. SISON
The exemption referred to in the aforecited letter is one of the circumstances contemplated by Rule 39 of the
Revised Rules of Court, to wit:
Sec. 13. Property exempt from execution. Except as otherwise expressly provided by law, the
following properties, and no other, shall be exempt from execution:
xxx

xxx

xxx

xxx

xxx

(m) Properties specially exempted by law.

xxx

Private respondents contend that even if subject properties were mortgaged to DBP (now under Asset
Privatization Trust), Article 11029 of the Labor Code, as amended by RA 6715, applies just the same. According

to them, the said provision of law grants preference to money claims of workers over and above all credits of
the petitioner. This contention is untenable. In the case of DBP vs. NLRC,30 the Supreme Court held that the
workers preference regarding wages and other monetary claims under Article 110 of the Labor Code, as
amended, contemplates bankruptcy or liquidation proceedings of the employer's business. What is more, it does
not disregard the preferential lien of mortgagees considered as preferred credits under the provisions of the New
Civil Code on the classification, concurrence and preference of credits.
We now come to the issue with respect to the second Order, dated December 14, 1988, which declared as valid
the auction sale conducted on October 29, 1987 by Special Sheriff John Ramos. Public respondent had no
authority to validate the said auction sale on the ground that the intervenors, MFT Corporation and Salter
Holdings Pty., Ltd., as purchasers for value, acquired legal title over subject properties.
It is well to remember that the said properties were transferred to the intervenors, when Fidel Bermudez, the
highest bidder at the auction sale, sold the properties to MFT Corporation which, in turn, sold the same
properties to Salter Holdings Pty., Ltd. Public respondent opined that the contract of sale between the
intervenors and the highest bidder should be respected as these sales took place during the interregnum after the
auction sale was conducted on October 29, 1987 and before the issuance of the first disputed Order declaring all
the auction sales null and void.
On this issue, the Court rules otherwise.
As regards personal properties, the general rule is that title, like a stream, cannot rise higher than its
source.31Consequently, a seller without title cannot transfer a title better than what he holds. MFT Corporation
and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest bidder of a void
auction sale over properties exempt from execution. Such being the case, the subsequent sale made by him
(Fidel Bermudez) is incapable of vesting title or ownership in the vendee.
The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as valid, was issued with
grave abuse of discretion amounting to lack or excess of jurisdiction.
WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated December 14, 1988 of
Undersecretary Dionisio dela Serna is concerned, which Order is SET ASIDE. The Order of September 16,
1988, upholding the jurisdiction of the Regional Director, is AFFIRMED. No pronouncement as to
costs.1wphi1.nt
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION

G.R. No. 119205 April 15, 1998

SIME DARBY PILIPINAS, INC. petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY SALARIED
EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.

BELLOSILLO, J.:

Is the act of management in revising the work schedule of its employees and discarding their paid lunch break
constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other rubber
products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association of
monthly salaried employees of petitioner at its Marikina factory. Prior to the present controversy, all company
factory workers in Marikina including members of private respondent union worked from 7:45 a.m. to 3:45 p.m.
with a 30-minute paid "on call" lunch break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its monthly
salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality Assurance Department
working on shifts, a change in work schedule effective 14 September 1992 thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 A.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their
work and break time schedules will be maintained as it is now. 1
Since private respondent felt affected adversely by the change in the work schedule and discontinuance of the
30-minute paid "on call" lunch break, it filed on behalf of its members a complaint with the Labor Arbiter for
unfair labor practice, discrimination and evasion of liability pursuant to the resolution of this Court in Sime
Darby International Tire Co., Inc. v.NLRC. 2 However, the Labor Arbiter dismissed the complaint on the ground
that the change in the work schedule and the elimination of the 30-minute paid lunch break of the factory
workers constituted a valid exercise of management prerogative and that the new work schedule, break time and
one-hour lunch break did not have the effect of diminishing the benefits granted to factory workers as the
working time did not exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to be paid
during their lunch break even if they were no longer "on call" or required to work during the break. He also
ruled that the decision in the earlier Sime Darby case 3 was not applicable to the instant case because the former
involved discrimination of certain employees who were not paid for their 30-minute lunch break while the rest
of the factory workers were paid; hence, this Court ordered that the discriminated employees be similarly paid
the additional compensation for their lunch break.
Private respondent appealed to respondent National Labor Relations Commission (NLRC) which sustained the
Labor Arbiter and dismissed the appeal. 4 However, upon motion for reconsideration by private respondent, the
NLRC, this time with two (2) new commissioners replacing those who earlier retired, reversed its earlier
decision of 20 April 1994 as well as the decision of the Labor Arbiter. 5 The NLRC considered the decision of

this Court in the Sime Darby case of 1990 as the law of the case wherein petitioner was ordered to pay "the
money value of these covered employees deprived of lunch and/or working time breaks." The public respondent
declared that the new work schedule deprived the employees of the benefits of a time-honored company
practice of providing its employees a 30-minute paid lunch break resulting in an unjust diminution of company
privileges prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition alleging that public
respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a) in ruling that
petitioner committed unfair labor practice in the implementation of the change in the work schedule of its
employees from 7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to
1:00 p.m.; (b) in holding that there was diminution of benefits when the 30-minute paid lunch break was
eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming the decision of the NLRC,
petitioner was authorized to discontinue the practice of having a 30-minute paid lunch break should it decide to
do so; and, (d) in ignoring petitioner's inherent management prerogative of determining and fixing the work
schedule of its employees which is expressly recognized in the collective bargaining agreement between
petitioner and private respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and motion recommending that
the petitioner be granted, alleging that the 14 August 1992 memorandum which contained the new work
schedule was not discriminatory of the union members nor did it constitute unfair labor practice on the part of
petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests principally on
their employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the efficient
conduct of its business operations and its improved production. 6 It rationalizes that while the old work schedule
included a 30-minute paid lunch break, the employees could be called upon to do jobs during that period as they
were "on call." Even if denominated as lunch break, this period could very well be considered as working time
because the factory employees were required to work if necessary and were paid accordingly for working. With
the new work schedule, the employees are now given a one-hour lunch break without any interruption from
their employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively use this
hour not only for eating but also for their rest and comfort which are conducive to more efficiency and better
performance in their work. Since the employees are no longer required to work during this one-hour lunch
break, there is no more need for them to be compensated for this period. We agree with the Labor Arbiter that
the new work schedule fully complies with the daily work period of eight (8) hours without violating the Labor
Code. 7 Besides, the new schedule applies to all employees in the factory similarly situated whether they are
union members or not. 8
Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby
case 9 with the facts obtaining in this case. That ruling in the former case is not applicable here. The issue in that
case involved the matter of granting lunch breaks to certain employees while depriving the other employees of
such breaks. This Court affirmed in that case the NLRC's finding that such act of management was
discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of employees but only the issue
of whether the change of work schedule, which management deems necessary to increase production,
constitutes unfair labor practice. As shown by the records, the change effected by management with regard to
working time is made to apply to all factory employees engaged in the same line of work whether or not they
are members of private respondent union. Hence, it cannot be said that the new scheme adopted by management
prejudices the right of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that
goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer
to exercise what are clearly management prerogatives. 10 Thus, management is free to regulate, according to its
own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods,
time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer
of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. 11 Further,
management retains the prerogative, whenever exigencies of the service so require, to change the working hours

of its employees. So long as such prerogative is exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements, this Court will uphold such exercise.12
While the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every dispute will be automatically decided in favor of labor. Management also has
rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Although this
Court has inclined more often than not toward the worker and has upheld his cause in his conflicts with the
employer, such favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and the applicable law and doctrine. 13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission dated
29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993 dismissing
the complaint against petitioner for unfair labor practice is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 148415

July 14, 2008

RICARDO G. PALOMA, Petitioner,

vs.
PHILIPPINE AIRLINES, INC. and THE NATIONAL LABOR RELATIONS
COMMISSION, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 156764
PHILIPPINE AIRLINES, INC., Petitioner,
vs.
RICARDO G. PALOMA, Respondent.
DECISION
VELASCO, JR., J.:
The Case
Before us are these two consolidated petitions for review under Rule 45 separately interposed by Ricardo G.
Paloma and Philippine Airlines, Inc. (PAL) to nullify and set aside the Amended Decision1 dated May 31, 2001
of the Court of Appeals (CA) in CA-G.R. SP No. 56429, as effectively reiterated in its Resolution2 of January
14, 2003.
The Facts
Paloma worked with PAL from September 1957, rising from the ranks to retire, after 35 years of continuous
service, as senior vice president for finance. In March 1992, or some nine (9) months before Paloma retired on
November 30, 1992, PAL was privatized.

By way of post-employment benefits, PAL paid Paloma the total amount of PhP 5,163,325.64 which
represented his separation/retirement gratuity and accrued vacation leave pay. For the benefits thus received,
Paloma signed a document denominated Release and Quitclaim3 but inscribed the following reservation therein:
"Without prejudice to my claim for further leave benefits embodied in my aide memoire transmitted to Mr.
Roberto Anonas covered by my 27 Nov. 1992 letter x x x."
The leave benefits Paloma claimed being entitled to refer to his 450-day accrued sick leave credits which PAL
allegedly only paid the equivalent of 18 days. He anchored his entitlement on Executive Order No. (EO)
10774dated January 9, 1986, and his having accumulated a certain number of days of sick leave credits, as
acknowledged in a letter of Alvia R. Leao, then an administrative assistant in PAL. Leaos letter dated
November 12, 1992 pertinently reads:
At your request, we are pleased to confirm herewith the balance of your sick leave credits as they appear in our
records: 230 days.
According to our existing policy, an employee is entitled to accumulate sick leave with pay only up to a
maximum of 230 days.
Had there been no ceiling as mandated by Company policy, your sick leave credits would have totaled 450 days
to date.5
Answering Palomas written demands for conversion to cash of his accrued sick leave credits, PAL asserted
having paid all of Palomas commutable sick leave credits due him pursuant to company policy made applicable
to PAL officers starting 1990.
The company leave policy adverted to grants PALs regular ground personnel a graduated sick leave benefits,
those having rendered at least 25 years of service being entitled to 20 days of sick leave for every year of
service. An employee, under the policy, may accumulate sick leaves with pay up to 230 days. Subject to defined
qualifications, sick leave credits in excess of 230 days shall be commutable to cash at the employees option and
shall be paid in lump sum on or before May 31st of the following year they were earned.6 Per PALs records,
Paloma appears to have, for the period from 1990 to 1992, commuted 58 days of his sick leave credits, broken
down as follows: 20 days each in 1990 and 1991 and 18 days in 1992.
Subsequently, Paloma filed before the Arbitration Branch of the National Labor Relations Commission (NLRC)
a Complaint7 for Commutation of Accrued Sick Leaves Totaling 392 days. In the complaint, docketed as NLRCNCR-Case No. 00-08-05792-94, Paloma alleged having accrued sick leave credits of 450 days commutable
upon his retirement pursuant to EO 1077 which allows retiring government employees to commute, without
limit, all his accrued vacation and sick leave credits. And of the 450-day credit, Paloma added, he had
commuted only 58 days, leaving him a balance of 392 days of accrued sick leave credits for commutation.
Ruling of the Labor Arbiter
Issues having been joined with the filing by the parties of their respective position papers,8 the labor arbiter
rendered on June 30, 1995 a Decision9 dispositively reading:
WHEREFORE, premises considered, respondent PHILIPPINE AIRLINE[S], INC. is hereby ordered to pay
within ten (10) days from receipt hereof herein complainant Ricardo G. Paloma, the sum of Six Hundred
Seventy Five Thousand Pesos (P675,000.00) representing his one Hundred sixty two days [162] accumulated
sick leave credits, plus ten (10%) percent attorneys fees of P67,500.00, or a total sum of P742,500.00.
SO ORDERED.
The labor arbiter held that PAL is not covered by the civil service system and, accordingly, its employees, like
Paloma, cannot avail themselves of the beneficent provision of EO 1077. This executive issuance, per the labor
arbiters decision, applies only to government officers and employees covered by the civil service, exclusive of
the members of the judiciary whose leave and retirement system is covered by a special law.

However, the labor arbiter ruled that Paloma is entitled to a commutation of his alternative claim for 202
accrued sick leave credits less 40 days for 1990 and 1991. Thus, the grant of commutation for 162 accrued leave
credits.
Both parties appealed10 the decision of the labor arbiter to the NLRC.
Ruling of the NLRC in NLRC NCR CA No. 009652-95
(NLRC-NCR-Case No. 00-08-05792-94)
On November 26, 1997, the First Division of the NLRC rendered a Decision affirming that of the labor arbiter,
thus:
WHEREFORE, as recommended, both appeals are DISMISSED. The decision of Labor Arbiter Felipe T.
Garduque II dated June 30, 1995 is AFFIRMED.
SO ORDERED.11
Both parties moved for reconsideration. In its Resolution of November 10, 1999, the NLRC, finding Paloma to
have, upon his retirement, commutable accumulated sick leave credits of 230 days, modified its earlier decision,
disposing as follows:
In view of all the foregoing, our decision dated November 26, 1997, be modified by increasing the sick leave
benefits of complainant to be commuted to cash from 162 days to 230 days.
SO ORDERED.12
From the above modificatory resolution of the NLRC, PAL went to the CA on a petition for certiorari under
Rule 65, the recourse docketed as CA-G.R. SP No. 56429.
Ruling of the CA in its April 28, 2000 Decision
By a Decision dated April 28, 2000, the CA found for PAL, thus:
WHEREFORE, the petition is granted. Public respondents November 10, 1999 Resolution is set aside. And the
complaint of Ricardo Paloma is hereby DISMISSED. Without costs.
SO ORDERED.13
In time, Paloma sought reconsideration.14
The May 31, 2001 Amended Decision
On May 31, 2001, the CA issued the assailed Amended Decision reversing its April 28, 2000 Decision.
The fallo of the Amended Decision reads:
WHEREFORE, premises considered, our Judgment, dated 28 April 2000 is hereby vacated and, set aside, and
another one entered reinstating the Resolution, dated 10 November 1999, issued by the public respondent
National Labor Relations Commission in NLRC NCR Case No. 00-08-05792-94 [NLRC NCR CA No. 00965295], entitled Ricardo G. Paloma v. Philippine Airlines, Incorporated, with the only modification that the total
sums granted by Labor Arbiter Felipe T. Garduque II (P742,500.00, inclusive of the ten percent (10%)
attorneys fees), as affirmed by public respondent National Labor Relations Commission, First Division, in said
NLRC Case No. 00-08-05792-94, shall earn legal interest from the date of the institution of the complaint until
fully paid/discharged. (Art. 2212, New Civil Code).
SO ORDERED.15

Justifying its amendatory action, the CA stated that EO 1077 applies to PAL and necessarily to Paloma on the
following rationale: Section 2(1) of Article IX(B) of the 1987 Constitution applies prospectively and, thus, the
expressed limitation therein on the applicability of the civil service law only to government-owned and
controlled corporations (GOCCs) with original charters does not preclude the applicability of EO 1077 to PAL
and its then employees. This conclusion, the CA added, becomes all the more pressing considering that PAL, at
the time of the issuance of EO 1077, was still a GOCC and that Paloma had already 29 years of service at that
time. The appellate court also stated that since PAL had then no existing retirement program, the provisions of
EO 1077 shall serve as a retirement program for Paloma who had meanwhile acquired vested rights under the
EO pursuant to Arts. 10016 and 28717 of the Labor Code.
Significantly, despite affirmatively positing the applicability of EO 1077, the Amended Decision still deferred to
PALs existing policy on the 230-day limit for accrued sick leave with pay that may be credited to its
employees. Incongruously, while the CA reinstated the November 10, 1999 Resolution of the NLRC, it decreed
the implementation of the labor arbiters Decision dated June 30, 1995. As may be recalled, the NLRC, in its
November 10, 1999 Resolution, allowed a 230-day sick leave commutation, up from the 162 days granted under
the June 30, 1995 Decision of the labor arbiter.
Paloma immediately appealed the CAs Amended Decision via a Petition for Review on Certiorari under Rule
45, docketed as G.R. No. 148415. On the other hand, PAL first sought reconsideration of the Amended
Decision, coming to us after the CA, per its January 14, 2003 Resolution, denied the desired reconsideration. In
net effect then, PALs Petition for Review on Certiorari, docketed as G.R. No. 156764, assails both the
Amended Decision and Resolution of the CA.
The Issues
In G.R. No. 148415, Paloma raises the sole issue of:
WHETHER OR NOT THE [CA], IN HOLDING THAT E.O. NO. 1077 IS APPLICABLE TO PETITIONER
AND YET APPLYING COMPANY POLICY BY AWARDING THE CASH EQUIVALENT OF ONLY 162
DAYS SICK LEAVE CREDITS INSTEAD OF THE 450 DAYS SICK LEAVE CREDITS PETITIONER IS
ENTITLED TO UNDER E.O. NO. 1077, DECIDED A QUESTION OF SUBSTANCE IN A MANNER
CONTRARY TO LAW AND APPLICABLE JURISPRUDENCE.18
In G.R. No. 156764, PAL raises the following issues for our consideration:
1. May an employee of a non-government corporation [invoke EO] 1077 which the then President
Ferdinand E. Marcos issued on January 9, 1986, solely for the benefit of government officers and
employees covered by the civil service?
2. Can a judicial body modify or alter a company policy by ordering the commutation of sick leave
credits which, under company policy is non-commutable?19
The issues submitted boil down to the question of whether or not EO 1077, before PALs privatization, applies
to its employees, and corollarily, whether or not Paloma is entitled to a commutation of his accrued sick leave
credits. Subsumed to the main issue because EO 1077 applies only to government employees subject to civil
service law is the question of whether or not PALwhich, as early as 1960 until its privatization, had been
considered as a government-controlled corporationis covered by and subject to the limitations peculiar under
the civil service system.
There can be no quibbling, as a preliminary consideration, about PAL having been incorporated as a private
corporation whose controlling stocks were later acquired by the GSIS, which is wholly owned by the
government. Through the years before GSIS divested itself of its controlling interests over the airline, PAL was
considered a government-controlled corporation, as we said as much in Phil. Air Lines Employees Assn. v.
Phil. Air Lines, Inc.,20 a case commenced in August 1958 and finally resolved by the Court in 1964. The late
Blas Ople, former Labor Secretary and a member of the 1986 Constitutional Commission, described PAL and

other like entities spun off from the GSIS as "second generation corporations functioning as private
subsidiaries."21 Before the coming into force of the 1973 Constitution, a subsidiary of a wholly governmentowned corporation or a government corporation with original charter was covered by the Labor Code.
Following the ratification of the 1973 Constitution, these subsidiaries theoretically came within the pale of the
civil service on the strength of this provision: "[T]he civil service embraces every branch, agency, subdivision
and instrumentality of the Government, including every [GOCC] x x x."22 Then came the 1987 Constitution
which contextually delimited the coverage of the civil service only to a GOCC "with original charter."23
The Courts Ruling
Considering the applicable law and jurisprudence in the light of the undisputed factual milieu of the instant
case, the setting aside of the assailed amended decision and resolution of the CA is indicated.
Core Issue: Applicability of EO 1077
Insofar as relevant, EO 1077 dated January 9, 1986, entitled Revising the Computation of Creditable Vacation
and Sick Leaves of Government Officers and Employees, provides:
WHEREAS, under existing law and civil service regulations, the number of days of vacation and sick leaves
creditable to a government officer or employee is limited to 300 days;
WHEREAS, by special law, members of the judiciary are not subject to such restriction;
WHEREAS, it is the continuing policy of the government to institute to the extent possible a uniform and
equitable system of compensation and benefits and to enhance the morale and performance in the civil service.
xxxx
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers
vested in me by the Constitution, do hereby order and direct the following:
Section 1. Any officer [or] employee of the government who retires or voluntary resigns or is separated from the
service through no fault of his own and whose leave benefits are not covered by special law, shall be entitled to
the commutation of all the accumulated vacation and/or sick leaves to his credit, exclusive of Saturdays,
Sundays, and holidays, without limitation as to the number of days of vacation and sick leaves that he may
accumulate. (Emphasis supplied.)
Paloma maintains that he comes within the coverage of EO 1077, the same having been issued in 1986, before
he severed official relations with PAL, and at a time when the applicable constitutional provision on the
coverage of the civil service made no distinction between GOCCs with original charters and those without, like
PAL which was incorporated under the Corporation Code. Implicit in Palomas contention is the submission that
he earned the bulk of his sick leave credits under the aegis of the 1973 Constitution when PAL, being then a
government-controlled corporation, was under civil service coverage.
The contention is without merit.
PAL never ceased to be operated as a private corporation, and was not subjected to the Civil Service Law
The Court can allow that PAL, during the period material, was a government-controlled corporation in the sense
that the GSIS owned a controlling interest over its stocks. One stubborn fact, however, remains: Through the
years, PAL functioned as a private corporation and managed as such for profit. Their personnel were never
considered government employees. It may perhaps not be amiss for the Court to take judicial notice of the fact
that the civil service law and rules and regulations have not actually been made to apply to PAL and its
employees. Of governing application to them was the Labor Code. Consider: (a) Even during the effectivity of
the 1973 Constitution but prior to the promulgation on January 17, 1985 of the decision in No. L-64313 entitled
National Housing Corporation v. Juco,24 the Court no less recognized the applicability of the Labor Code to, and

the authority of the NLRC to exercise jurisdiction over, disputes involving discipline, personnel movements,
and dismissal in GOCCs, among them PAL;25 (b) Company policy and collective bargaining agreements
(CBAs), instead of the civil service law and rules, govern the terms and conditions of employment in PAL. In
fact, Ople rhetorically asked how PAL can be covered by the civil service law when, at one time, there were
three (3) CBAs in PAL, one for the ground crew, one for the flight attendants, and one for the pilots;26 and (c)
When public sector unionism was just an abstract concept, labor unions in PAL with the right to engage in strike
and other concerted activities were already active.27
Not to be overlooked of course is the 1964 case of Phil. Air Lines Employees Assn., wherein the Court stated
that "the Civil Service Law has not been actually applied to PAL."28
Given the foregoing considerations, Paloma cannot plausibly be accorded the benefits of EO 1077 which, to
stress, was issued to narrow the gap between the leave privileges between the members of the judiciary, on one
hand, and other government officers and employees in the civil service, on the other. That PAL and Paloma may
have, at a time, come within the embrace of the civil service by virtue of the 1973 Constitution is of little
moment at this juncture. As held in National Service Corporation v. National Labor Relations Commission
(NASECO),29 the issue of whether or not a given GOCC falls within the ambit of the civil service subject, vis-vis disputes respecting terms and conditions of employment, to the jurisdiction of the Civil Service Commission
or the NLRC, as the case may be, resolves itself into the question of which between the 1973 Constitution,
which does not distinguish between a GOCC with or without an original charter, and the 1987 Constitution,
which does, is in place. To borrow from the 1988 NASECO ruling, it is the 1987 Constitution, which delimits
the coverage of the civil service, that should govern this case because it is the Constitution in place at the time
the case was decided, even if, incidentally, the cause of action accrued during the effectivity of the 1973
Constitution. This has been the consistent holding of the Court in subsequent cases involving GOCCs without
original charters.30
It cannot be overemphasized that when Paloma filed his complaint for commutation of sick leave credits,
private interests already controlled, if not owned, PAL. Be this as it may, Paloma, when he filed said complaint,
cannot even assert being covered by the civil service and, hence, entitled to the benefits attached to civil service
employment, such as the right under EO 1077 to accumulate and commute leave credits without limit. In all,
then, Paloma, while with PAL, was never a government employee covered by the civil service law. As such, he
did not acquire any vested rights on the retirement benefits accorded by EO 1077.
Paloma not entitled to the benefits granted in EO 1077; existing company policy on the matter applies
What governs Palomas entitlement to sick leave benefits and the computation and commutation of creditable
benefits is not EO 1077, as the labor arbiter and originally the NLRC correctly held, but PALs company policy
on the matter which, as found below, took effect in 1990. The text of the policy is reproduced in the CAs April
28, 2000 Decision and sets out the following pertinent rules:
POLICY
Regular employees shall be entitled to a yearly period of sick leave with pay, the exact number of days to be
determined on the basis of the employees category and length of service in the company.
RULES
A. For ground personnel
2. Sick leave shall be granted only upon certification by a company physician that an employee is incapable of
discharging his duties due to illness or injury x x x.
xxxx
3. Sick leave entitlement accrues from the date of an employees regular employment x x x.

In case of direct conversion from temporary/daily/project/contract to regular status, regular employment shall be
deemed to have begun on the date of the employees conversion as a regular employee.
xxxx
4. An employee may accumulate sick leave with pay up to Two Hundred Thirty (230) days;
An employee who has accumulated seventy-five (75) days sick leave credit at the end of each year may, at his
option, commute seventy-five percent (75%) of his current sick leave entitlement to cash and the other twentyfive percent (25%) to be added to his accrued sick leave credits up to two hundred thirty (230) calendar days.
The seventy-five percent (75%) commutable to cash as above provided, shall be paid up in lump sum on or
before May 31st of the following year.
Sick leave credits in excess of two hundred thirty (230) days shall be commutable to cash at the
employees option, and shall be paid in lump sum on or before May 31st of the following year it was
earned.31 (Emphasis ours.)
As may be gathered from the records, accrued sick leave credits in excess of 230 days were not, if earned before
1990 when the above policy took effect, commutable to cash; they were simply forfeited. Those earned after
1990, but still subject to the 230-day threshold rule, were commutable to cash to the extent of 75% of the
employees current entitlement, and payable on or before May 31st of the following year, necessarily implying
that the privilege to commute is time-bound.
It appears that Paloma had, as of 1990, more than 230 days of accrued sick leave credits. Following company
policy, Paloma was deemed to have forfeited the monetary value of his leave credits in excess of the 230-day
ceiling. Now, then, it is undisputed that he earned additional accrued sick leave credits of 20 days in 1990 and
1991 and 18 days in 1992, which he duly commuted pursuant to company policy and received with the
corresponding cash value. Therefore, PAL is correct in contending that Paloma had received whatever was due
on the commutation of his accrued sick leave credits in excess of the 230 days limit, specifically the 58 days
commutation for 1990, 1991, and 1992.
No commutation of 230 days accrued sick leave credits
The query that comes next is how the 230 days accrued sick leave credits Paloma undoubtedly had when he
retired are to be treated. Is this otherwise earned credits commutable to cash? These should be answered in the
negative.
The labor arbiter granted 162 days commutation, while the NLRC allowed the commutation of the maximum
230 days. The CA, while seemingly affirming the NLRCs grant of 230 days commutation, actually decreed a
162-day commutation. We cannot sustain any of the dispositions thus reached for lack of legal basis, for PALs
company policy upon which either disposition was predicated did not provide for a commutation of the first 230
days accrued sick leave credits employees may have upon their retirement. Hence, the NLRC and the CA, by
their act of allowing commutation to cash, erred as they virtually read in the policy something not written or
intended therein. Indeed, no law provides for commutation of unused or accrued sick leave credits in the private
sector. Commutation is allowed by way of voluntary endowment by an employer through a company policy or
by a CBA. None of such medium presently obtains and it would be incongruous if the Court fills up the
vacuum.
Confronted with a similar situation as depicted above, the Court, in Baltazar v. San Miguel Brewery, Inc.,
declared as follows:
In connection with the question of whether or not appellee is entitled to the cash value of six months
accumulated sick leave, it appears that while under the last paragraph of Article 5 of appellants Rules and
Regulations of the Health, Welfare and Retirement Plan (Exhibit 3), unused sick leave may be accumulated up
to a maximum of six months, the same is not commutable or payable in cash upon the employees option.

In our view, the only meaning and import of said rule and regulation is that if an employee does not choose to
enjoy his yearly sick leave of thirty days, he may accumulate such sick leave up to a maximum of six months
and enjoy this six months sick leave at the end of the sixth year but may not commute it to cash.321avvphi1
In fine, absent any provision in the applicable company policy authorizing the commutation of the 230 days
accrued sick leave credits existing upon retirement, Paloma may not, as a matter of enforceable right, insist on
the commutation of his sick leave credits to cash.
As PALs senior vice-president for finance upon his retirement, Paloma knew or at least ought to have known
the company policy on accrued sick leave credits and how it was being implemented. Had he acted on that
knowledge in utmost good faith, these proceedings would have not come to pass.
WHEREFORE, the petition under G.R. No. 148415 is hereby DISMISSED for lack of merit, while the petition
underG.R. No. 156764 is hereby GIVEN DUE COURSE. The Amended Decision dated May 31, 2001 of the
CA in CA-G.R. SP No. 56429 and its Resolution of January 14, 2003 are hereby ANNULLED and SET ASIDE,
and the CA Decision dated April 28, 2000 is accordingly REINSTATED.
Costs against Ricardo G. Paloma.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 201298

February 5, 2014

RAUL C. COSARE, Petitioner,

vs.
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. Cosare's (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 the-table 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 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 letter9dated 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 memo10 signed by Arevalo, charging him of serious misconduct and willful breach of trust,
and providing in part:
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.11
Cosare was given forty-eight (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.
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 Memo14 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 co-employees.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 show-cause memo, giving him a chance to present his side on the charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents action regarding the charges leveled against him in
the show-cause memo. What he did was to pre-empt 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.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations of illegal suspension
and non-payment 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 Decision21 reversing the Decision of LA Menese. The dispositive
portion of the NLRC Decision reads:
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 P1,915,458.33, per
attached Computation.
SO ORDERED.22
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 for certiorari 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 intra-corporate 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 Decision26 granting the respondents petition. It agreed
with the respondents contention that the case involved an intra-corporate controversy which, pursuant to
Presidential Decree No. 902-A, as amended, was within the exclusive jurisdiction of the RTC. It reasoned:
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, vice-president, 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] By-Laws
provides:
Article IV
Officer
Section 1. Election / Appointment Immediately after their election, the Board of Directors shall formally
organize by electing the President, the Vice-President, 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
xx
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)
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 intra-corporate 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 intra-corporate

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 intracorporate dispute.
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 intra-corporate controversy. Citing Garcia v. Eastern
Telecommunications Philippines, Inc.,33 we held:
" Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who
are given that character by the Corporation Code or by the corporations by-laws. 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 by-laws like, but not limited to, the vice-president, cashier, auditor
or general manager. The number of corporate officers is thus limited by law and by the corporations bylaws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate offices:
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)
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 by-laws; and (2) the election 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 intra-corporate 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 by-laws, 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 Vice-President, 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.
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)
This was also the CAs main basis in ruling that the matter was an intra-corporate 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 by-laws 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 by-laws 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 by-laws 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 by-laws of an enabling clause empowering the
board of directors to do so can result in the circumvention of that constitutionally well-protected right [of every
employee to security of tenure]."40
The CAs heavy reliance on the contents of the General Information Sheets41, 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. "Not 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 intra-corporate controversies."42 Time and again, the Court has
ruled that in determining the existence of an intra-corporate 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 deemed intra-corporate. This is
consistent with the "controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142,44 to wit:
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 intra-corporate controversy
exists.45 (Citation omitted)
It bears mentioning that even the CAs finding46 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 him via 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 48-hour 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:
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)
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 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:
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)
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 48-hour 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)
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, 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:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April 1, 2009.
However[,] the show-cause 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.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify the NLRC's monetary
awards in Cosare's 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 NLRC's 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 CA-G.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.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 154213

August 23, 2012

EASTERN MEDITERRANEAN MARITIME LTD. AND AGEMAR MANNING AGENCY,

INC., Petitioners,
vs.
EST ANISLAO SURIO, FREDDIE PALGUIRAN, GRACIANO MORALES, HENRY CASTILLO,
ARISTOTLE ARREOLA, ALEXANDER YGOT, ANRIQUE BA TTUNG, GREGORIO ALDOVINO,
NARCISO FRIAS, VICTOR FLORES, SAMUEL MARCIAL, CARLITO PALGUIRAN, DUQUE
VINLUAN, .JESUS MENDEGORIN, NEIL FLORES, ROMEO MANGALIAG, JOE GARFIN and
SALESTINO SUSA, Respondents.
*

PEREZ
DECISION

BERSAMIN, J.:
On appeal is the decision the Court of Appeals (CA) promulgated on December 21, 2001 affirming the
resolution of the National Labor Relations Commission (NLRC) declaring itself to be without appellate
jurisdiction to review the decision of the Philippine Overseas Employment Administration (POEA) involving
petitioners complaint for disciplinary action against respondents.1
Respondents were former crewmembers of MT Seadance, a vessel owned by petitioner Eastern Mediterranean
Maritime Ltd. and manned and operated by petitioner Agemar Manning Agency, Inc. While respondents were
still on board the vessel, they experienced delays in the payment of their wages and in the remittance of
allotments, and were not paid for extra work and extra overtime work. They complained about the vessels
inadequate equipment, and about the failure of the petitioners to heed their repeated requests for the
improvement of their working conditions. On December 19, 1993, when MT Seadance docked at the port of
Brofjorden, Sweden to discharge oil, representatives of the International Transport Federation (ITF) boarded the
vessel and found the wages of the respondents to be below the prevailing rates. The ensuing negotiations
between the ITF and the vessel owner on the increase in respondents wages resulted in the payment by the
vessel owner of wage differentials and the immediate repatriation of respondents to the Philippines.
Subsequently, on December 23, 1993, the petitioners filed against the newly-repatriated respondents a
complaint for disciplinary action based on breach of discipline and for the reimbursement of the wage increases
in the Workers Assistance and Adjudication Office of the POEA.
During the pendency of the administrative complaint in the POEA, Republic Act No. 8042 (Migrant Workers
and Overseas Filipinos Act of 1995) took effect on July 15, 1995. Section 10 of Republic Act No. 8042 vested
original and exclusive jurisdiction over all money claims arising out of employer-employee relationships
involving overseas Filipino workers in the Labor Arbiters, to wit:
Section 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 the 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.
The jurisdiction over such claims was previously exercised by the POEA under the POEA Rules and
Regulations of 1991 (1991 POEA Rules).
On May 23, 1996, the POEA dismissed the complaint for disciplinary action. Petitioners received the order of
dismissal on July 24, 1996.2
Relying on Section 1, Rule V, Book VII of the 1991 POEA Rules, petitioners filed a partial appeal on August 2,
1996 in the NLRC, still maintaining that respondents should be administratively sanctioned for their conduct
while they were on board MT Seadance.
On March 21, 1997, the NLRC dismissed petitioners appeal for lack of jurisdiction,3 thus:
We dismiss the partial appeal.
The Commission has no jurisdiction to review cases decided by the POEA Administrator involving disciplinary
actions. Under the Migrant Workers and Overseas Filipinos Act of 1995, the Labor Arbiter shall have
jurisdiction over money claims involving employer-employee relationship (sec. 10, R.A. 8042). Said law does
not provide that appeals from decisions arising from complaint for disciplinary action rest in the Commission.
PREMISES CONSIDERED, instant appeal from the Order of May 23, 1996 is hereby DISMISSED for lack of
jurisdiction.
SO ORDERED.
Not satisfied, petitioners moved for reconsideration, but the NLRC denied their motion. They received the
denial on July 8, 1997.4
Petitioners then commenced in this Court a special civil action for certiorari and mandamus. Citing St. Martin
Funeral Homes v. National Labor Relations Commission,5 however, the Court referred the petition to the CA on
November 25, 1998.
Petitioners contended in their petition that:
THE NLRC GRAVELY ABUSED ITS DISCRETION AND/OR GRAVELY ERRED IN DISMISSING
PETITIONERS APPEAL AND MOTION FOR RECONSIDERATION WHEN IT REFUSED TO TAKE
COGNIZANCE OF PETITIONERS APPEAL DESPITE BEING EMPOWERED TO DO SO UNDER THE
LAW.6
On December 21, 2001, the CA dismissed the petition for certiorari and mandamus, holding that the inclusion
and deletion of overseas contract workers from the POEA blacklist/watchlist were within the exclusive
jurisdiction of the POEA to the exclusion of the NLRC, and that the NLRC had no appellate jurisdiction to
review the matter, viz:
Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, provides
that:
"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 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.
xxxx

Likewise, the Rules and Regulations implementing RA 8042 reiterate the jurisdiction of POEA, thus:
"Section 28. Jurisdiction of the POEA. The POEA shall exercise original and exclusive jurisdiction to hear
and decide:
a) All cases, which are administrative in character, involving or arising out of violations of rules and regulations
relating to licensing and registration of recruitment and employment agencies or entities; and
b) Disciplinary action cases and other special cases, which are administrative in character, involving employers,
principals, contracting partners and Filipino migrant workers."
Further, Sections 6 and 7 Rule VII, Book VII of the POEA Rules & Regulations (1991) provide:
"Sec. 6. Disqualification of Contract Workers. Contract workers, including seamen, against whom have been
imposed or with pending obligations imposed upon them through an order, decision or resolution shall be
included in the POEA Blacklist Workers shall be disqualified from overseas employment unless properly
cleared by the Administration or until their suspension is served or lifted.
Sec. 7. Delisting of the Contract Workers Name from the POEA Watchlist. The name of an overseas worker
may be excluded, deleted and removed from the POEA Watchlist only after disposition of the case by the
Administration."
Thus, it can be concluded from the afore-quoted law and rules that, public respondent has no jurisdiction to
review disciplinary cases decided by the POEA involving contract workers. Clearly, the matter of inclusion and
deletion of overseas contract workers in the POEA Blacklist/Watchlist is within the exclusive jurisdiction of the
POEA to the exclusion of the public respondent. Nor has the latter appellate jurisdiction to review the findings
of the POEA involving such cases.
xxx
In fine, we find and so hold, that, no grave abuse of discretion can be imputed to the public respondent when it
issued the assailed Decision and Order, dated March 21, 1997 and June 13, 1997, respectively, dismissing
petitioners appeal from the decision of the POEA.
WHEREFORE, finding the instant petition not impressed with merit, the same is hereby DENIED DUE
COURSE. Costs against petitioners.
SO ORDERED.7
Issue
Petitioners still appeal, submitting to the Court the sole issue of:
WHETHER OR NOT THE NLRC HAS JURISDICTION TO REVIEW ON APPEAL CASES DECIDED BY
THE POEA ON MATTERS PERTAINING TO DISCIPLINARY ACTIONS AGAINST PRIVATE
RESPONDENTS.
They contend that both the CA and the NLRC had no basis to rule that the NLRC had no jurisdiction to
entertain the appeal only because Republic Act No. 8042 had not provided for its retroactive application.
Respondents counter that the appeal should have been filed with the Secretary of Labor who had exclusive
jurisdiction to review cases involving administrative matters decided by the POEA.
Ruling
The petition for review lacks merit.

Petitioners adamant insistence that the NLRC should have appellate authority over the POEAs decision in the
disciplinary action because their complaint against respondents was filed in 1993 was unwarranted. Although
Republic Act No. 8042, through its Section 10, transferred the original and exclusive jurisdiction to hear and
decide money claims involving overseas Filipino workers from the POEA to the Labor Arbiters, the law did not
remove from the POEA the original and exclusive jurisdiction to hear and decide all disciplinary action cases
and other special cases administrative in character involving such workers. The obvious intent of Republic Act
No. 8042 was to have the POEA focus its efforts in resolving all administrative matters affecting and involving
such workers. This intent was even expressly recognized in the Omnibus Rules and Regulations Implementing
the Migrant Workers and Overseas Filipinos Act of 1995 promulgated on February 29, 1996, viz:
Section 28. Jurisdiction of the POEA. The POEA shall exercise original and exclusive jurisdiction to hear and
decide:
(a) all cases, which are administrative in character, involving or arising out of violations or rules and regulations
relating to licensing and registration of recruitment and employment agencies or entities; and
(b) disciplinary action cases and other special cases, which are administrative in character, involving employers,
principals, contracting partners and Filipino migrant workers.
Section 29. Venue The cases mentioned in Section 28(a) of this Rule, may be filed with the POEA
Adjudication Office or the DOLE/POEA regional office of the place where the complainant applied or was
recruited, at the option of the complainant. The office with which the complaint was first filed shall take
cognizance of the case.
Disciplinary action cases and other special cases, as mentioned in the preceding Section, shall be filed with the
POEA Adjudication Office.
It is clear to us, therefore, that the NLRC had no appellate jurisdiction to review the decision of the POEA in
disciplinary cases involving overseas contract workers.
Petitioners position that Republic Act No. 8042 should not be applied retroactively to the review of the POEAs
decision dismissing their complaint against respondents has no support in jurisprudence. Although, as a rule, all
laws are prospective in application unless the contrary is expressly provided,8 or unless the law is procedural or
curative in nature,9 there is no serious question about the retroactive applicability of Republic Act No. 8042 to
the appeal of the POEAs decision on petitioners disciplinary action against respondents. In a way, Republic
Act No. 8042 was a procedural law due to its providing or omitting guidelines on appeal. A law is procedural,
according to De Los Santos v. Vda. De Mangubat,10 when it
Refers to the adjective law which prescribes rules and forms of procedure in order that courts may be able to
administer justice. Procedural laws do not come within the legal conception of a retroactive law, or the general
rule against the retroactive operation of statues they may be given retroactive effect on actions pending and
undetermined at the time of their passage and this will not violate any right of a person who may feel that he is
adversely affected, insomuch as there are no vested rights in rules of procedure.
Republic Act No. 8042 applies to petitioners complaint by virtue of the case being then still pending or
undetermined at the time of the laws passage, there being no vested rights in rules of procedure.11 They could
not validly insist that the reckoning period to ascertain which law or rule should apply was the time when the
disciplinary complaint was originally filed in the POEA in 1993. Moreover, Republic Act No. 8042 and its
implementing rules and regulations were already in effect when petitioners took their appeal. A statute that
eliminates the right to appeal and considers the judgment rendered final and unappealable only destroys the
right to appeal, but not the right to prosecute an appeal that has been perfected prior to its passage, for, at that
stage, the right to appeal has already vested and cannot be impaired.12 Conversely and by analogy, an appeal that
is perfected when a new statute affecting appellate jurisdiction comes into effect should comply with the
provisions of the new law, unless otherwise provided by the new law. Relevantly, petitioners need to be
reminded that the right to appeal from a decision is a privilege established by positive laws, which, upon

authorizing the taking of the appeal, point out the cases in which it is proper to present the appeal, the procedure
to be observed, and the courts by which the appeal is to be proceeded with and resolved.13 This is why we
consistently hold that the right to appeal is statutory in character, and is available only if granted by law or
statute.14
When Republic Act No. 8042 withheld the appellate jurisdiction of the NLRC in respect of cases decided by the
POEA, the appellate jurisdiction was vested in the Secretary of Labor in accordance with his power of
supervision and control under Section 38(1), Chapter 7, Title II, Book III of the Revised Administrative Code of
1987, to wit:
Section 38. Definition of Administrative Relationship. Unless otherwise expressly stated in the Code or in
other laws defining the special relationships of particular agencies, administrative relationships shall be
categorized and defined as follows:
Supervision and Control. Supervision and control shall include authority to act directly whenever a specific
function is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain the
commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or units;
determine priorities in the execution of plans and programs. Unless a different meaning is explicitly provided in
the specific law governing the relationship of particular agencies, the word "control" shall encompass
supervision and control as defined in this paragraph. xxx.
Thus, Section 1, Part VII, Rule V of the 2003 POEA Rules and Regulations specifically provides, as follows:
Section 1. Jurisdiction. The Secretary shall have the exclusive and original jurisdiction to act on appeals or
petition for review of disciplinary action cases decided by the Administration.
In conclusion, we hold that petitioners should have appealed the adverse decision of the POEA to the Secretary
of Labor instead of to the NLRC. Consequently, the CA, being correct on its conclusions, committed no error in
upholding the NLRC.
WHEREFORE, we AFFIRM the decision promulgated on December 21, 2001 by the Court of Appeals;
andORDER the petitioners to pay the costs of suit.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 109583 September 5, 1997

TRANS ACTION OVERSEAS CORPORATION, petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR, ROSELLE CASTIGADOR, JOSEFINA MAMON,
JENELYN CASA, PEACHY LANIOG, VERDELINA BELGIRA, ELMA FLORES, RAMONA
LITURCO, GRACE SABANDO, GLORIA PALMA, AVELYN ALVAREZ, CANDELARIA NONO, NITA
BUSTAMANTE, CYNTHIA ARANDILLO, SANDIE AGUILAR, DIGNA PANAGUITON, VERONICA
BAYOGOS, JULIANITA ARANADOR, LEONORA CABALLERO, NANCY BOLIVAR, NIMFA
BUCOL, ZITA GALINDO, ESTELITA BIOCOS, MARJORIE MACATE, RUBY SEPULVIDA,
ROSALIE SONDIA, NORA MAQUILING, PAULINA CORDERO, LENIROSE ABANGAN, SELFA
PALMA, ANTONIA NAVARRO, ELSIE PENARUBIA, IRMA SOBREQUIL, SONY JAMUAT, CLETA
MAYO,respondents.

ROMERO, J.:
The issue presented in the case at bar is whether or not the Secretary of Labor and Employment has jurisdiction
to cancel or revoke the license of a private fee-charging employment agency.
From July 24 to September 9, 1987, petitioner Trans Action Overseas Corporation, a private fee-charging
employment agency, scoured Iloilo City for possible recruits for alleged job vacancies in Hongkong. Private
respondents sought employment as domestic helpers through petitioner's employees, Luzviminda Aragon, Ben
Hur Domincil and his wife Cecille. The applicants paid placement fees ranging from P1,000.00 to P14,000.00,
but petitioner failed to deploy them. Their demands for refund proved unavailing; thus, they were constrained to
institute complaints against petitioner for violation of Articles 32 and 34(a) 1 of the Labor Code, as amended.
Petitioner denied having received the amounts allegedly collected from respondents, and averred that Aragon,
whose only duty was to pre-screen and interview applicants, and the spouses Domincil were not authorized to
collect fees from the applicants. Accordingly, it cannot be held liable for the money claimed by respondents.
Petitioner maintains that it even warned respondents not to give any money to unauthorized individuals.
POEA Regional Extension Unit Coordinator Edgar Somes testified that although he was aware that petitioner
collected fees from respondents, the latter insisted that they be allowed to make the payments on the assumption
that it could hasten their deployment abroad. He added that Mrs. Honorata Manliclic, a representative of
petitioner tasked to oversee the conduct of the interviews, told him that she was leaving behind presigned
receipts to Aragon as she cannot stay in Iloilo City for the screening of the applicants. Manliclic, however,
denied this version and argued that it was Somes who instructed her to leave the receipts behind as it was
perfectly alright to collect fees.
On April 5, 1991, then Labor Undersecretary Nieves R. Confesor rendered the assailed order, the dispositive
portion of which reads:
WHEREFORE, respondents are hereby ordered to pay, jointly and severally, the following
claims:
1. Rosele Castigador P14,000.00
2. Josefina Mamon 3,000.00
3. Jenelyn Casa 3,000.00
4. Peachy Laniog 13,500.00
5. Verdelina Belgira 2,000.00
6. Elma Flores 2,500.00
7. Ramona Liturco 2,500.00
8. Grace Sabando 3,500.00
9. Gloria Palma 1,500.00
10. Avelyn Alvarez 1,500.00
11. Candelaria Nono 1,000.00
12. Nita Bustamante 5,000.00
13. Cynthia Arandillo 1,000.00

14. Sandie Aguilar 3,000.00

15. Digna Panaguiton 2,500.00
16. Veronica Bayogos 2,000.00
17. Sony Jamuat 4,500.00
18. Irma Sobrequil 2,000.00
19. Elsie Penarubia 2,000.00
20. Antonia Navarro 2,000.00
21. Selfa Palma 3,000.00
22. Lenirose Abangan 13,300.00
23. Paulina Cordero 1,400.00
24. Nora Maquiling 2,000.00
25. Rosalie Sondia 2,000.00
26. Ruby Sepulvida 3,500.00
27. Marjorie Macate 1,500.00
28. Estelita Biocos 3,000.00
29. Zita Galindo 3,500.00
30. Nimfa Bucol 1,000.00
31. Nancy Bolivar 2,000.00
32. Leonora Caballero 13,900.00
33. Julianita Aranador 14,000.00
The complaints of Ma. Luz Alingasa, Nimfa Perez, and Cleta Mayo are hereby dismissed in view
of their desistance.
The following complaints are hereby dismissed for failure to appear/prosecute:
1. Jiyasmin Bantillo 6. Edna Salvante
2. Rosa de Luna Senail 7. Thelma Beltiar
3. Elnor Bandojo 8. Cynthia Cepe
4. Teresa Caldeo 9. Rosie Pavillon
5. Virginia Castroverde
The complaints filed by the following are hereby dismissed for lack of evidence:

1. Aleth Palomaria 5. Mary Ann Beboso

2. Emely Padrones 6. Josefina Tejero
3. Marybeth Aparri 7. Bernadita Aprong
4. Lenia Biona 8. Joji Lull
Respondent agency is liable for twenty eight (28) counts of violation of Article 32 and five (5)
counts of Article 34 (a) with a corresponding suspension in the aggregate period of sixty six (66)
months. Considering however, that under the schedule of penalties, any suspension amounting to
a period of 12 months merits the imposition of the penalty of cancellation, the license of
respondent TRANS ACTION OVERSEAS CORPORATION to participate in the overseas
placement and recruitment of workers is hereby ordered CANCELLED, effective immediately.
SO ORDERED. 2 (Emphasis supplied)
On April 29, 1991, petitioner filed its Motion for Temporary Lifting of Order of Cancellation alleging, among
other things, that to deny it the authority to engage in placement and recruitment activities would jeopardize not
only its contractual relations with its foreign principals, but also the welfare, interests, and livelihood of
recruited workers scheduled to leave for their respective assignments. Finally, it manifested its willingness to
post a bond to insure payment of the claims to be awarded, should its appeal or motion be denied.
Finding the motion to be well taken, Undersecretary Confesor provisionally lifted the cancellation of petitioner's
license pending resolution of its Motion for Reconsideration filed on May 6, 1991. On January 30, 1992,
however, petitioner's motion for reconsideration was eventually denied for lack of merit, and the April 5, 1991,
order revoking its license was reinstated.
Petitioner contends that Secretary; Confesor acted with grave abuse of discretion in rendering the assailed
orders on alternative grounds, viz.: (1) it is the Philippine Overseas Employment Administration (POEA) which
has the exclusive and original jurisdiction to hear and decide illegal recruitment cases, including the authority to
cancel recruitment licenses, or (2) the cancellation order based on the 1987 POEA Schedule of Penalties is not
valid for non-compliance with the Revised Administrative Code of 1987 regarding its registration with the U.P.
Law Center.
Under Executive Order No. 797 3 (E.O. No. 797) and Executive Order No. 247 (E.O. No. 247), 4 the POEA was
established and mandated to assume the functions of the Overseas Employment Development Board (OEDB),
the National Seamen Board (NSB), and the overseas employment function of the Bureau of Employment
Services (BES). Petitioner theorizes that when POEA absorbed the powers of these agencies, Article 35 of the
Labor Code, as amended, was rendered ineffective.
The power to suspend or cancel any license or authority to recruit employees for overseas employment is vested
upon the Secretary of Labor and Employment. Article 35 of the Labor Code, as amended, which provides:
Art. 5. Suspension and/or Cancellation of License or Authority The Minister of Labor shall
have the power to suspend or cancel any license or authority to recruit employees for overseas
employment for violation of rules and regulations issued by the Ministry of Labor, the Overseas
Employment Development Board, and the National Seamen Board, or for violation of the
provisions of this and other applicable laws, General Orders and Letters of Instructions.
In the case of Eastern Assurance and Surety Corp. v. Secretary of
Labor, 5 we held that:
The penalties of suspension and cancellation of license or authority are prescribed for violations
of the above quoted provisions, among others. And the Secretary of Labor has the power under
Section 35 of the law to apply these sanctions, as well as the authority, conferred by Section 36,

not only to "restrict and regulate the recruitment and placement activities of all agencies," but
also to "promulgate rules and regulations to carry out the objectives and implement the
provisions" governing said activities. Pursuant to this rule-making power thus granted, the
Secretary of Labor gave the POEA, 6"on its own initiative or upon filing of a complaint or report
or upon request for investigation by any aggrieved person, . . (authority to) conduct the necessary
proceedings for the suspension or cancellation of the license or authority of any agency or entity"
for certain enumerated offenses including
1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or
services, or any fee or bond in excess of what is prescribed by the Administration, and
2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules
and regulations. 7
The Administrator was also given the power to "order the dismissal of the case of the suspension
of the license or authority of the respondent agency or contractor or recommend to the Minister
the cancellation thereof." 8(Emphasis supplied)
This power conferred upon the Secretary of Labor and Employment was echoed in People v. Diaz, 9 viz.:
A non-licensee or non-holder of authority means any person, corporation or entity which has not
been issued a valid license or authority to engage in recruitment and placement by the Secretary
of Labor, or whose license or authority has been suspended, revoked or cancelled by the POEA
or the Secretary. (Emphasis supplied)
In view of the Court's disposition on the matter, we rule that the power to suspend or cancel any license or
authority to recruit employees for overseas employment is concurrently vested with the POEA and the Secretary
of Labor.
As regards petitioner's alternative argument that the non-filing of the 1987 POEA Schedule of Penalties with the
UP Law Center rendered it ineffective and, hence, cannot be utilized as basis for penalizing them, we agree with
Secretary Confesor's explanation, to wit:
On the other hand, the POEA Revised Rules on the Schedule of Penalties was issued pursuant to
Article 34 of the Labor Code, as amended. The same merely amplified and particularized the
various violations of the rules and regulations of the POEA and clarified and specified the
penalties therefore (sic). Indeed, the questioned schedule of penalties contains only a listing of
offenses. It does not prescribe additional rules and regulations governing overseas employment
but only detailed the administrative sanctions imposable by this Office for some enumerated
prohibited acts.
Under the circumstances, the license of the respondent agency was cancelled on the authority of
Article 35 of the Labor Code, as amended, and not pursuant to the 1987 POEA Revised Rules on
Schedule of Penalties. 10
WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. Accordingly, the decision
of the Secretary of Labor dated April 5, 1991, is AFFIRMED. No costs.
SO ORDERED
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 170454

October 11, 2012

CECILIA T. MANESE, JULIETES E. CRUZ, and EUFEMIO PENANO II, Petitioners,

vs.
JOLLIBEE FOODS CORPORATION, TONY TAN CAKTIONG, ELIZABETH DELA CRUZ, DIVINA
EVANGELISTA, and SYLVIA M. MARIANO, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari1 of the Decision2 of the Court of Appeals, dated August 30, 2005, in
CA-G.R. SP No. 88223, and its Resolution3 dated November 16, 2005 denying petitioners' motion for
reconsideration.
The Decision of the Court of Appeals at1irmed the Resolution4 of the National Labor Relations Commission
(NLRC) dated June 30, 2004, with the following modifications: (1) declaring petitioner Julietes Cruz as legally
dismissed in accordance with Article 282, paragraph (c) of the Labor Code, and (2) holding respondent Jollibee
Foods Corporation liable for the payment of the unpaid salary of petitioner Cecilia Manese from June 1 to 15,
2001; the payment of sick leave from May 16 to 31, 2001; and the payment of cooperative savings. It also
directed the Labor Arbiter to compute the monetary claims.
The facts, culled from the decisions of the Court of Appeals and the Labor Arbiter, are as follows:
Petitioners were employees of respondent Jollibee Foods Corporation (Jollibee). At the time of their
termination, petitioner Cecilia T. Manese (Manese), hired on September 16, 1996, was First Assistant Store
Manager Trainee with the latest monthly salary of P21,040.00; petitioner Julietes E. Cruz (Cruz), hired on May
7, 1996, was Second Assistant Store Manager with the latest monthly salary of P16,729.00; and Eufemio M.
Peano II (Peano), hired on June 22, 1998, was Shift Manager, who functioned as Assistant Store Manager
Trainee (equivalent to Kitchen Manager), with the latest monthly salary of P10,330.00.
Petitioners were part of the team tasked to open a new Jollibee branch at Festival Mall, Level 4, in Alabang,
Muntinlupa City on December 12, 2000. In preparation for the opening of the new branch, petitioner Cruz
requested the Commissary Warehouse and Distribution (commissary) for the delivery of wet and frozen goods
on December 9, 2000 to comply with the 30-day thawing process of the wet goods, particularly the Jollibee
product called "Chickenjoy."
However, the opening of the store was postponed thrice. When the opening was rescheduled to December 24,
2000, petitioner Cruz made another requisition for the delivery of the food on December 23, 2000, but the
opening date was again postponed. Thereafter, Jollibee's Engineering Team assured the operations manager,
respondent Elizabeth dela Cruz, that the new store could proceed to open on December 28, 2000. Petitioner
Cruz, upon the advice of their Opening Team Manager Jun Reonal, did not cancel the request for delivery of the
products.
On December 23, 2000, 450 packs of Chickenjoy were delivered and petitioners placed them in the freezer. On
December 26, 2000, petitioner Cruz thawed the 450 packs of Chickenjoy (ten pieces in each pack), or 4,500
pieces of Chickenjoy, in time for the branch opening on December 28, 2000. The shelf life of the Chickenjoy is
25 days from the time it is marinated; and, once thawed, it should be served on the third day. Its shelf life cannot
go beyond three days from thawing. After that, the remaining Chickenjoy products are no longer served, and
they are packed in plastic, ten pieces in each pack, and placed in a garbage bag to be stored in the freezer.
Within the period provided for in the company policy, valid Chickenjoy rejects are usually returned to the
commissary, while rejects which are unreturnable are wasted and disposed of properly.
Despite postponements of the store's opening, the store's sales targets for December 28 and 29, 2000, considered
peak times, were not revised by the operations manager. The sales targets of P200,000.00 for the first day and

P225,000.00 for the second day were not reached, as the store's actual sales were only P164,000.00 and
P159,000.00, respectively.
Sometime in January 2001, petitioner Cruz attempted to return 150 pieces of Chickenjoy rejects to the
commissary, but the driver of the commissary refused to accept them due to the discoloration and deteriorated
condition of the Chickenjoy rejects, and for fear that the rejects may be charged against him. Thus, the
Chickenjoy rejects were returned to the freezer.
On February 13, 2001, the area manager conducted a store audit in all departments. The audit's results, which
included food stocks and safety, were fair and satisfactory for petitioners' branch.
During the first week of March 2001, the team of petitioners had a meeting on what to do with the stored
Chickenjoy rejects. They decided to soak and clean the Chickenjoy rejects in soda water and segregate the valid
rejects from the wastes.
On April 2, 2001, petitioner Cruz was transferred to Jollibee Shell South Luzon Tollway branch in Alabang,
Muntinlupa. She estimated that the total undisposed Chickenjoy rejects from the 450 packs (4,500 pieces of
Chickenjoy) delivered on December 23, 2000 was only about 1,140 pieces as of January 2001. She failed to
make the proper indorsement as the area manager directed her to report immediately to her new assignment.
On May 3, 2001, the area manager, Divina Evangelista, visited four stores, including the subject Jollibee branch
at Festival Mall, Level 4. When Evangelista arrived at the subject Jollibee branch, she saw petitioner Peano
cleaning the Chickenjoy rejects. Evangelista told petitioner Manese to dispose of the Chickenjoy rejects, but
Manese replied that they be allowed to find a way to return them to the Commissary.5
On May 8, 2001, Evangelista required petitioners Cruz and Manese to submit an incident report on the
Chickenjoy rejects. On May 10, 2001, a corporate audit was conducted to spot check the waste products.
According to the audit, 2,130 pieces of Chickenjoy rejects were declared wastage.
On May 15, 2001, Evangelista issued a memorandum with a charge sheet,6 requiring petitioners to explain in
writing within 48 hours from receipt why they should not be meted the appropriate penalty under the respondent
company's Code of Discipline for extremely serious misconduct, gross negligence, product tampering, fraud or
falsification of company records and insubordination in connection with their findings that 2,130 pieces of
Chickenjoy rejects were kept inside the walk-in freezer, which could cause product contamination and threat to
food safety.
The petitioners and other store managers submitted their respective letters of explanation.
In her letter7 of explanation dated May 20, 2001, petitioner Manese said that the foul smell and discoloration of
the Chickenjoy rejects were due to the breakdown of the walk-in facilities prior to the stores grand opening.
During that time, the store was using temporary power supply, so that it could open during Christmas Day and
the Metro Manila Film Festival. She admitted that she was not able to immediately inform Area Manager
Divina Evangelista about it. She appealed that they be not accused of gross negligence, because they did their
best, but they were not able to save a bulk of the said Chickenjoy due to the holiday season. Manese explained
that petitioner Peano, the kitchen manager at that time, asked for assistance from other stores, but they could
only accommodate a few stocks, as most of their storage areas were filled with their own stocks. She said that
they did not immediately dispose of the Chickenjoy rejects out of fear of being reprimanded and it would add to
the existing problems of the branch regarding low sales and profit. She explained that the Chickenjoy rejects
were not disposed immediately, as instructed by Evangelista on May 3, out of desperation and fear. She
admitted that this was wrong, but wasting such a big amount made her so worried, considering that the store
was already suffering from cost problems. Manese pleaded with respondent corporation to try to understand
their situation, and that they did their best for the sake of Jollibee; that they did not intend to hide something or
neglect their respective jobs; that some things were just beyond their control; that some of them were not well
trained in the kitchen and that she tried training them, but she could only do so much.

In his letter8 of explanation dated May 20, 2001, petitioner Peano said that in December 2000, he was the
Service Manager of Jollibee Festival Mall branch and was transferred from Level 1 to Level 4. One of his key
responsibility areas was service, which included hiring and scheduling of the crew members. According to him,
he was not familiar with the duties pertaining to the management of the kitchen area, as he had no proper
training, and that Lee Macayana failed to make an indorsement when he was transferred to Level 4 branch and
designated as kitchen manager from April 2 to 19, 2001. He was aware that there were Chickenjoy rejects, but
he did not know that they were so many (2,130 pieces). Since he had no training in the kitchen, he merely
followed Maneses instructions.
In her letter9 of explanation dated May 21, 2001, petitioner Cruz stated that before her transfer to the Jollibee
Shell branch on April 2, 2001, the Chickenjoy rejects were only about 1,200 pieces. Some of those were valid
rejects scheduled for pull-out until April 8, 2001, while some could no longer be pulled out because they were
already greenish, as they were the Chickenjoy products delivered when the store first opened. The Chickenjoy
products turned greenish or quickly deteriorated because those were the ones delivered when the walk-in
freezers were still on pre-setting temperature and were operating on temporary power. She tried reporting them
as rejects, but the driver would not accept them because of their condition. She decided that it was not practical
to report the rejects in one month as it would hurt the newly-opened store. They could not just throw the rejects,
as they were also considering proper waste disposal. She denied any involvement in the alleged product
tampering, since it happened after she was already assigned to the Jollibee Shell branch on April 2, 2001.
Thereafter, respondents Human Resource Manager Sylvia Mariano, Operations Manager Elizabeth dela Cruz,
and Atty. Rey Montoya, lawyer for corporate affairs, conducted an administrative hearing on the incident.
On June 11, 2001, the Investigating Committee sent petitioner Cruz a Memorandum10 on its administrative
findings and decision, and the said memorandum notified her that she was terminated from employment due to
loss of trust and confidence.
On June 13, 2001, petitioners Manese and Peano each received a similar Memorandum11 on the administrative
findings and decision of the Investigating Committee, and the said Memoranda also notified them that they
were terminated from employment due to loss of trust and confidence.
Thereafter, petitioners Manese and Cruz filed a Complaint12 against respondents for illegal dismissal with a
claim for separation pay, retirement benefits, illegal deduction, unfair labor practice, damages, non-payment of
maternity leave, non-payment of last salary, non-payment of sick leave and release of cooperative contributions
and damages and attorney's fees. Petitioner Peano also filed a complaint13 for illegal dismissal, non-payment of
13th month pay, damages and attorney's fees. These complaints were consolidated.
Petitioners contended that they did not waste the Chickenjoy rejects, because there were so many rejects since
the opening of the store. Hence, they planned to report the Chickenjoy rejects to the commissary on a staggered
basis, but the driver of the commissary refused to accept the rejects. They tried to find some solutions so that
they could convince the driver of the commissary to accept their rejects, and they were able to return some 400
pieces of Chickenjoy rejects. They emphasized that their food cost was relatively high and the profit margins
were low, so they could not declare the rejects as wastes and charge it to the store. Their purpose was salutary,
and they even decided to pay for the rejects themselves if the same would no longer be accepted by the
commissary.
Petitioners further argued that there was no product contamination, as the rejects were packed by tens and
wrapped in plastic, placed in garbage bags, then placed in a crate before being stored in the freezer. From the
opening of the store until their dismissal, they had not experienced any wastage of other wet and frozen items.
In addition, they claimed that there was no insubordination, considering that the last word of Area Manager
Evangelista on the wastage was "sige kung gusto niyong remedyuhan at makapagsasauli kayo." She allegedly
did not direct petitioner Manese to waste the Chickenjoy. Her parting words to Manese were considered the
green light to their attempts to find a solution for the proper disposal of the rejects.

In its Position Paper,14 respondent Jollibee replied that as a policy, a store can request for the return of the
ordered products to the commissary for re-delivery on another date, especially if there are reasons to return
them like postponement of the store opening or defective storage freezers. A store can also request other nearby
Jollibee stores to accommodate wet products in their walk-in freezers and even allow the use of these products.
Petitioner Cruz failed to resort to these remedies. All 450 packs of Chickenjoy were thawed for the store
opening on December 28, 2000, and since not all were consumed, she allowed the same to be served beyond
their shelf life until December 31. When the area manager visited the store on May 6, 2001 to make sure that
her instruction on May 3, 2001 to dispose of the greenish Chickenjoy products was carried out, she found out
that the greenish Chickenjoy products were still in the store. Hence, respondent Jollibee contended that there
was no illegal dismissal, as petitioners were dismissed for gross negligence and/or incompetence, and for breach
of trust and confidence reposed in them as managerial employees.
On July 31, 2003, the Labor Arbiter rendered a Decision,15 the dispositive portion of which reads:
WHEREFORE, premises considered, the complaints for illegal dismissal of complainants Cecilia T. Manese
and Eufemio M. Peano II, are hereby dismissed for want of merit. Cecilia A. Manese's money claims further,
are likewise dismissed for similar reason.
The complaint for illegal dismissal filed by complainant Julietes E. Cruz is resolved in her favor, against
respondent herein. On ground of strained relationship, respondent Jollibee, Inc. is hereby held liable for the
payment of her separation pay computed at one (1) month pay for every year of service, or the amount of
P59,530.00 instead of reinstatement. The payment of backwages is ruled out as an equitable solution to the
losses sustained by the respondent.
SO ORDERED.16
The Labor Arbiter stated that the charges against petitioners of having caused possible product contamination
and endangering public health should not be collective, because at the time the incident was discovered on May
3, 2001, petitioner Cruz was no longer working at Jollibee Festival Mall, Level 4, as she was already transferred
to Jollibee Shell South Luzon Tollway, Alabang, Muntinlupa on April 2, 2001. Thus, the Labor Arbiter held that
Cruz could not be held liable therefor; hence, her dismissal was illegal. The Labor Arbiter also found no
sufficient basis for the other charges foisted on Cruz. However, the Labor Arbiter awarded separation pay to
Cruz, considering the strained relationship between the parties. Moreover, on the basis of equitable
consideration for the losses sustained by the company on account of some errors of judgment, the Labor Arbiter
resolved not to award backwages to Cruz.
Further, the Labor Arbiter held that petitioner Manese was not entitled to her money claims, particularly unpaid
salary, sick leave for the period from May 16-31, 2001, cooperative savings, maternity benefit, mid-year bonus
and retirement pay, because she was either not entitled thereto by reason of company policy and practice, or her
accountabilities to the company/cooperative far exceed that which may be due her. The Labor Arbiter took note
of respondents' argument in their Position Paper as follows:
x x x Cecilia's payroll for June 1-15 and coop savings together with other benefits due her like 13th month and
encashment were not yet given to her because she has in her position the case (car plan given by the company)
still with outstanding balance of P70,266.67. Even after computing the amount due her vis-a-vis the car loan
balance she still has a negative balance of P14,262.76. She was informed of this amount and she promised to
pay but has not settled to date. We asked her to surrender the car first but she gave excuses.17
Petitioners appealed the Decision of the Labor Arbiter to the NLRC. Respondents filed an Opposition to
Appeal18on October 10, 2003.
On June 30, 2004, the NLRC issued a Resolution,19 the dispositive portion of which reads:
WHEREFORE, premises considered, respondents' appeal is hereby ordered DISMISSED and the assailed
Decision is hereby AFFIRMED in toto.20

However, the NLRC held that the Labor Arbiter erred in ruling that petitioner Cruz was illegally dismissed as it
found that she committed the offenses enumerated in paragraphs 1.1 to 1.5 and paragraph 2 of the
Memorandum21 sent to her. Nevertheless, since respondents failed to interpose a timely appeal, the NLRC stated
that it was constrained to affirm the findings and award of separation pay granted to petitioner Cruz by the
Labor Arbiter.
Petitioners' motion for reconsideration was denied by the NLRC in a Resolution22 dated October 29, 2004.
Petitioners appealed the Resolutions dated June 30, 2004 and October 29, 2004 of the NLRC to the Court of
Appeals via a petition for certiorari under Rule 65 of the Rules of Court.
Before the Court of Appeals, petitioners raised the following issues: (1) the NLRC acted with grave abuse of
discretion in sustaining the findings of the Labor Arbiter that petitioners Manese and Peano were responsible
for the charges of having caused possible product contamination and endangered public health, and in
concluding that their dismissal was due to a valid cause; (2) the NLRC acted with grave abuse of discretion in
sustaining the Labor Arbiter's ruling denying petitioner Cruzs reinstatement with full backwages after declaring
her dismissal illegal; and (3) the NLRC acted with grave abuse of discretion in sustaining the Labor Arbiters
ruling denying outright the money claims of petitioners.23
On August 30, 2005, the Court of Appeals rendered a Decision affirming the Resolutions of the NLRC with
modification. The dispositive portion of the decision reads:
WHEREFORE, the resolution dated June 30, 2004 of public respondent NLRC is hereby AFFIRMED with the
following modifications:
(1) Petitioner Julietes Cruz is declared legally dismissed in accordance with Article 282, par. (c) of the
Labor Code; and
(2) Private respondent Jollibee Foods Corporation is liable for the payment of petitioner Cecilia
Manese's unpaid salary for the period of June 1-15, 2001, sick leave for the period of May 16-31, 2001,
and cooperative savings. The Labor Arbiter is hereby directed to compute the said monetary claims.24
The Court of Appeals found that petitioners were terminated based on the result of the clarificatory hearing and
administrative findings of respondent company. The Court held that since petitioners were managerial
employees, the mere existence of a basis for believing that they have breached the trust of their employer would
suffice for their dismissal. It held that it cannot fault the respondent corporation for terminating petitioners,
considering their acts and omissions, enumerated in their respective notices of termination, constituting the
breach. Hence, the Court of Appeals held that the NLRC did not commit grave abuse of discretion in issuing the
assailed resolutions.
However, the Court of Appeals declared that the Labor Arbiter erred in adjudging that petitioner Cruz was
illegally dismissed and in denying petitioner Manese's money claims.
The Court of Appeals stated that it is not disputed that petitioner Manese had already earned her monetary
claims; hence, she is entitled to the same, except for the maternity benefit claimed by her. As the maternity
benefit is usually given two weeks before the delivery date, Manese is not entitled to the same. Moreover, the
Court of Appeals held that the Labor Arbiter cannot offset Manese's remaining balance on the car loan with her
monetary claims, because the balance on the car loan does not come within the scope of jurisdiction of the
Labor Arbiter. The respondent corporation's demand for payment of Maneses balance on the car loan or the
demand for the return of the car is not a labor dispute, but a civil dispute. It involves debtor-creditor relations,
rather than employer-employee relations.
Petitioners' motion for reconsideration was denied by the Court of Appeals in a Resolution25 dated November
16, 2005.
Hence, petitioners filed this petition raising the following issues:

I
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN PASSING UPON
THE LEGALITY OF THE DISMISSAL OF PETITIONER JULIETES CRUZ, CONSIDERING THAT
THE RESOLUTION OF THE HONORABLE LABOR ARBITER A QUO HAD BECOME FINAL
AND EXECUTORY WHEN NO TIMELY APPEAL WAS FILED BY THE PRIVATE RESPONDENT
AS FAR AS THE LEGALITY OF HER DISMISSAL IS CONCERNED.
II
THE COURT OF APPEALS GRAVELY ERRED IN PATENTLY DEVIATING IN THE
APPRECIATION OF FACTS AND ISSUES ANCHORING THE DISMISSAL OF THE
PETITIONERS BASED ON LOSS OF TRUST AND CONFIDENCE BEING MANAGERIAL
EMPLOYEES.
III.
THE COURT OF APPEALS GRAVELY ERRED IN ITS FINDINGS OF FACTS WHEN IT HELD
THAT PETITIONERS HAD SERVED THE CHICKENJOYS BEYOND THE THREE-DAY SERVING
PERIOD, THUS EXPOSING THE PUBLIC HEALTH IN JEOPARDY.26
Petitioners contend that the Court of Appeals exceeded its jurisdiction in dismissing petitioner Cruz as
the decision of the Labor Arbiter that the dismissal of petitioner Cruz was illegal had become final and
executory, considering that respondents failed to file a timely appeal from the said ruling. Although
petitioner Cruz filed a partial appeal, the issues raised were limited to reinstatement and backwages.
The contention is meritorious.
SMI Fish Industries, Inc. v. NLRC27 held:
It is a well-settled procedural rule in this jurisdiction, and we see no reason why it should not apply in this case,
that an appellee who has not himself appealed cannot obtain from the appellate court any affirmative relief other
than those granted in the decision of the court below. The appellee can only advance any argument that he may
deem necessary to defeat the appellant's claim or to uphold the decision that is being disputed. He can assign
errors on appeal if such is required to strengthen the views expressed by the court a quo. Such assigned errors,
in turn, may be considered by the appellate court solely to maintain the appealed decision on other grounds, but
not for the purpose of modifying the judgment in the appellee's favor and giving him other affirmative reliefs.28
In this case, respondents did not appeal from the decision of the Labor Arbiter who ruled that the dismissal of
petitioner Cruz was illegal. Respondents only filed an Opposition to Appeal, which prayed for the reversal of
the Labor Arbiters orders declaring as illegal the dismissal of Cruz and directing payment of her separation pay.
The NLRC stated that the registry return receipt showed that respondents' counsel received a copy of the Labor
Arbiter's decision on August 28, 2003, and had ten days or up to September 8, 2003 within which to file an
appeal. However, instead of filing an appeal, respondent filed an Opposition to complainants'/petitioners'
appeal. The NLRC stated that respondents' opposition could have been treated as an appeal, but it was filed only
in October, way beyond the ten-day reglementary period within which an appeal may be filed. Although the
NLRC found that Cruz was legally dismissed, it stated that it was constrained to affirm the findings and award
of separation pay granted to Cruz by the Labor Arbiter, since respondents failed to interpose a timely appeal.
Hence, the NLRC affirmed the decision of the Labor Arbiter in toto.
In view of the foregoing, the Court holds that the Court of Appeals exceeded its jurisdiction when it adjudged
that petitioner Cruz was legally dismissed, as respondents did not appeal from the decision of the Labor Arbiter
who ruled that Cruz was illegally dismissed. Respondents' failure to appeal from the decision of the Labor
Arbiter renders the decision on the illegal dismissal of Cruz final and executory.

Moreover, petitioners, particularly Manese and Peano, contend that the Court of Appeals erred in its
appreciation of facts when it affirmed their legal dismissal, albeit on the ground of loss of trust and confidence,
being managerial employees, when the records show that they were dismissed based on the allegation of
causing product contamination that would endanger public health and based on alleged gross negligence, as
petitioners allegedly incurred excessive Chickenjoy rejects and failed to dispose of the same. They assert that
the favorable finding of the area manager in the store audit, conducted on February 13, 2001, where the result in
all departments, including food stock and food safety, was fair and satisfactory negated the charge of loss of
trust and confidence.
The contention is unmeritorious.
The respective memorandum with a notice of termination given by respondent company to each of the
petitioners clearly expressed that their respective acts and omissions enumerated in the said memoranda made
respondent company lose its trust and confidence in petitioners, who were managerial employees; hence, they
were terminated from employment.
The mere existence of a basis for the loss of trust and confidence justifies the dismissal of the managerial
employee because when an employee accepts a promotion to a managerial position or to an office requiring full
trust and confidence, such employee gives up some of the rigid guaranties available to ordinary
workers.29Infractions, which if committed by others would be overlooked or condoned or penalties mitigated,
may be visited with more severe disciplinary action.30 Proof beyond reasonable doubt is not required provided
there is a valid reason for the loss of trust and confidence, such as when the employer has a reasonable ground
to believe that the managerial employee concerned is responsible for the purported misconduct and the nature of
his participation renders him unworthy of the trust and confidence demanded by his position.31
However, the right of the management to dismiss must be balanced against the managerial employees right to
security of tenure which is not one of the guaranties he gives up.32 This Court has consistently ruled that
managerial employees enjoy security of tenure and, although the standards for their dismissal are less stringent,
the loss of trust and confidence must be substantial and founded on clearly established facts sufficient to warrant
the managerial employees separation from the company.33 Substantial evidence is of critical importance and the
burden rests on the employer to prove it.34
In this case, the acts and omissions enumerated in the respective memorandum with notice of termination of
petitioners Cruz and Peano were valid bases for their termination, which was grounded on gross negligence
and/or loss of trust and confidence. The Labor Arbiter, the NLRC and the Court of Appeals all found that the
dismissal of petitioners Manese and Peano from employment was justified. The findings of fact of the Court of
Appeals, where there is absolute agreement with those of the NLRC, are accorded not only respect but even
finality and are deemed binding upon this Court so long as they are supported by substantial evidence.35 The
Court has carefully reviewed the records of this case and finds no reason to disturb the findings of the Court of
Appeals that the dismissal of petitioners Manese and Peano from employment due to loss of trust and
confidence is valid.
Lastly, petitioners contend that the Court of Appeals erred in finding that they served the Chickenjoy beyond the
three-day serving period, thus, exposing the public health to jeopardy.
The last issue raised by petitioners questions a factual finding of the Court of Appeals. Under Section 1, Rule
45, providing for appeals by certiorari before the Supreme Court, it is clearly enunciated that only questions of
law may be set forth.36 The Court may resolve questions of fact only in exceptional cases,37 which do not apply
to this case.
In regard to petitioner Cruz, the Court upholds the decision of the Labor Arbiter in ordering the payment of
separation pay to Cruz due to the strained relationship between the parties.
As regards the monetary claims of petitioner Manese, the Court of Appeals found that petitioner Manese had
already earned the same, except for the maternity leave. The Position Paper of respondents even stated

Maneses unpaid salary for the period of June 1-15, 2001, sick leave from May 16-31, 2001 and her cooperative
savings. As the said monetary claims, except the maternity leave, have been earned by Manese, the Court agrees
with the Court of Appeals that respondent Jollibee should pay her the said monetary claims.1wphi1
Moreover, the Court upholds the ruling of the Court of Appeals that petitioner Manese's unpaid balance on her
car loan cannot be set off against the monetary benefits due her. The Court has held in Nestl Philippines, Inc. v.
NLRC38 that the employer's demand for payment of the employees' amortization on their car loans, or, in the
alternative, the return of the cars to the employer, is not a labor, but a civil, dispute. It involves debtor-creditor
relations, rather than employee-employer relations.39
In this case, petitioner Manese has an obligation to pay the balance on the car loan to respondent Jollibee. If she
cannot afford to pay the balance, she can return the car to Jollibee. Otherwise, Jollibee can file a civil case for
the payment of the balance on the car loan or for the return of the car. The legal remedy of respondent company
is civil in nature, arising from a contractual obligation.40
WHEREFORE, the Decision of the Court of Appeals, dated August 30, 2005, in CA-G.R. SP No. 88223, and its
Resolution dated November 16, 2005 are AFFIRMED with MODIFICATION as follows:
1. Paragraph (1) of the dispositive portion of the Decision of the Court of Appeals is DELETED, as the
Decision of the Labor Arbiter holding petitioner Julietes E. Cruz illegally dismissed is final and
executory;
2. Petitioners Cecilia T. Manese and Eufemio M. Peano II are declared legally dismissed for loss of
trust and confidence under Article 282, paragraph (c) of the Labor Code;
3. Respondent Jollibee Foods Corporation is ORDERED to pay petitioner Julietes E. Cruz separation
pay at the rate of one (1) month pay for every year of service, or the amount of Fifty-Nine Thousand
Five Hundred Thirty Pesos (P59,530.00).
4. Respondent Jollibee roods Corporation is ORDERED to pay the monetary claims of petitioner Cecilia
T. Manese, particularly her unpaid salary for the period of June 1-15, 2001; sick leave for the period of
May 16-31, 2001 and other leave credits due her, if any; and her cooperative savings. The Labor Arbiter
is hereby DIRECTED to compute the monetary claims of Cecilia T. Manese.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157802

October 13, 2010

MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER,

CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:

This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is cognizable by the
Labor Arbiter (LA) or by the Regional Trial Court (RTC). The determination of whether the dismissed officer
was a regular employee or a corporate officer unravels the conundrum. In the case of the regular employee, the
LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the decision dated September 13,
20021 and the resolution dated April 2, 2003,2 both promulgated in C.A.-G.R. SP No. 65714 entitled Matling
Industrial and Commercial Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission,
whereby by the Court of Appeals (CA) sustained the ruling of the National Labor Relations Commission
(NLRC) to the effect that the LA had jurisdiction because the respondent was not a corporate officer of
petitioner Matling Industrial and Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on
August 10, 2000 a complaint for illegal suspension and illegal dismissal against Matling and some of its
corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground, among others, that the complaint pertained
to the jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being intracorporate inasmuch as the respondent was a member of Matlings Board of Directors aside from being its VicePresident for Finance and Administration prior to his termination.
The respondent opposed the petitioners motion to dismiss,5 insisting that his status as a member of Matlings
Board of Directors was doubtful, considering that he had not been formally elected as such; that he did not own
a single share of stock in Matling, considering that he had been made to sign in blank an undated indorsement
of the certificate of stock he had been given in 1992; that Matling had taken back and retained the certificate of
stock in its custody; and that even assuming that he had been a Director of Matling, he had been removed as the
Vice President for Finance and Administration, not as a Director, a fact that the notice of his termination dated
April 10, 2000 showed.
On October 16, 2000, the LA granted the petitioners motion to dismiss,6 ruling that the respondent was a
corporate officer because he was occupying the position of Vice President for Finance and Administration and at
the same time was a Member of the Board of Directors of Matling; and that, consequently, his removal was a
corporate act of Matling and the controversy resulting from such removal was under the jurisdiction of the SEC,
pursuant to Section 5, paragraph (c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING
APPELLEES MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO
FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR
LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondents complaint for illegal
dismissal was properly cognizable by the LA, not by the SEC, because he was not a corporate officer by virtue
of his position in Matling, albeit high ranking and managerial, not being among the positions listed in Matlings
Constitution and By-Laws.8 The NLRC disposed thuswise:

WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the
case at bench does not involve any intracorporate matter. Hence, jurisdiction to hear and act on said case is
vested with the Labor Arbiter, not the SEC, considering that the position of Vice-President for Finance and
Administration being held by complainant-appellant is not listed as among respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the
Labor Arbiter below could act on the case at bench, hear both parties, receive their respective evidence and
position papers fully observing the requirements of due process, and resolve the same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the respondent, being a member of the Board of
Directors, was a corporate officer whose removal was not within the LAs jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified machine
copies of Matlings Amended Articles of Incorporation and By Laws to prove that the President of Matling was
thereby granted "full power to create new offices and appoint the officers thereto, and the minutes of special
meeting held on June 7, 1999 by Matlings Board of Directors to prove that the respondent was, indeed, a
Member of the Board of Directors.10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP 65714,
contending that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing
the correct decision of the LA.
In its assailed decision promulgated on September 13, 2002,12 the CA dismissed the petition for certiorari,
explaining:
For a position to be considered as a corporate office, or, for that matter, for one to be considered as a corporate
officer, the position must, if not listed in the by-laws, have been created by the corporation's board of directors,
and the occupant thereof appointed or elected by the same board of directors or stockholders. This is the
implication of the ruling in Tabang v. National Labor Relations Commission, which reads:
"The president, vice president, secretary and 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, other offices are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to create additional offices as may be
necessary.
It has been held that an 'office' is created by the charter of the corporation and the officer is elected by the
directors or 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."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations
Commission and De Rossi v. National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to hold in the corporation, was
not created by the corporations board of directors but only by its president or executive vice-president pursuant
to the by-laws of the corporation. Moreover, Coros appointment to said position was not made through any act
of the board of directors or stockholders of the corporation. Consequently, the position to which Coros was
appointed and later on removed from, is not a corporate office despite its nomenclature, but an ordinary office
in the corporation.

Coros alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners motion for reconsideration on April 2, 2003.13
Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent was a
stockholder/member of the Matlings Board of Directors as well as its Vice President for Finance and
Administration; and that the CA consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or not. The resolution of the
issue determines whether the LA or the RTC had jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by
the LA. This is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which provides as follows:
Article 217. Jurisdiction of the 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 extension, even in the absence
of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(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 of

by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may
be provided in said agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the
jurisdiction of the Securities and Exchange Commission (SEC), because the controversy arises out of intracorporate or partnership relations between and among stockholders, members, or associates, or between any or
all of them and the corporation, partnership, or association of which they are stockholders, members, or
associates, respectively; and between such corporation, partnership, or association and the State insofar as the
controversy concerns their individual franchise or right to exist as such entity; or because the controversy
involves the election or appointment of a director, trustee, officer, or manager of such corporation, partnership,
or association.14 Such controversy, among others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799,15 otherwise known as The Securities
Regulation Code, the SECs jurisdiction over all intra-corporate disputes was transferred to the RTC, pursuant
to Section 5.2 of RA No. 8799, to wit:
5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided,
that the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that
shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases
involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year
from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
Considering that the respondents complaint for illegal dismissal was commenced on August 10, 2000, it might
come under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that the respondent was a
corporate, not a regular, officer of Matling.
II
Was the Respondents Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondents position as Vice President for Finance and Administration
was a corporate office. If it was, his dismissal by the Board of Directors rendered the matter an intra-corporate
dispute cognizable by the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and Administration was a corporate
office, having been created by Matlings President pursuant to By-Law No. V, as amended,16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over the meetings of the stockholders
and directors; shall countersign all certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors; shall have full power to hire and discharge any or all employees of the corporation;
shall have full power to create new offices and to appoint the officers thereto as he may deem proper and
necessary in the operations of the corporation and as the progress of the business and welfare of the corporation
may demand; shall make reports to the directors and stockholders and perform all such other duties and
functions as are incident to his office or are properly required of him by the Board of Directors. In case of the
absence or disability of the President, the Executive Vice President shall have the power to exercise his
functions.
The petitioners argue that the power to create corporate offices and to appoint the individuals to assume the
offices was delegated by Matlings Board of Directors to its President through By-Law No. V, as amended; and

that any office the President created, like the position of the respondent, was as valid and effective a creation as
that made by the Board of Directors, making the office a corporate office. In justification, they cite Tabang v.
National Labor Relations Commission,17 which held that "other offices are sometimes created by the charter or
by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to
create additional officers as may be necessary."
The respondent counters that Matlings By-Laws did not list his position as Vice President for Finance and
Administration as one of the corporate offices; that Matlings By-Law No. III listed only four corporate officers,
namely: President, Executive Vice President, Secretary, and Treasurer; 18 that the corporate offices contemplated
in the phrase "and such other officers as may be provided for in the by-laws" found in Section 25 of the
Corporation Code should be clearly and expressly stated in the By-Laws; that the fact that Matlings By-Law
No. III dealt with Directors & Officers while its By-Law No. V dealt with Officers proved that there was a
differentiation between the officers mentioned in the two provisions, with those classified under By-Law No. V
being ordinary or non-corporate officers; and that the officer, to be considered as a corporate officer, must be
elected by the Board of Directors or the stockholders, for the President could only appoint an employee to a
position pursuant to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a corporation must
formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a
director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be
provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person,
except that no one shall act as president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the bylaws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a
majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum
for the transaction of corporate business, and every decision of at least a majority of the directors or trustees
present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of
officers which shall require the vote of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered
as a corporate office. Thus, the creation of an office pursuant to or under a By-Law enabling provision is not
enough to make a position a corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held that the
only officers of a corporation were those given that character either by the Corporation Code or by the ByLaws; the rest of the corporate officers could be considered only as employees or subordinate officials. Thus, it
was held inEasycall Communications Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders.
On the other hand, an employee occupies no office and generally is employed not by the 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.
In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner's
general manager, not by the board of directors of petitioner. It was also Malonzo who determined the
compensation package of respondent. Thus, respondent was an employee, not a "corporate officer." The CA
was therefore correct in ruling that jurisdiction over the case was properly with the NLRC, not the SEC (now
the RTC).

This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the
corporate officers are the President, Secretary, Treasurer and such other officers as may be provided for in the
By-Laws. Accordingly, the corporate officers in the context of PD No. 902-A are exclusively those who are
given that character either by the Corporation Code or by the corporations By-Laws.
A different interpretation can easily leave the way open for the Board of Directors to circumvent the
constitutionally guaranteed security of tenure of the employee by the expedient inclusion in the By-Laws of an
enabling clause on the creation of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code,
adopted a similar interpretation of Section 25 of the Corporation Code in its Opinion dated November 25,
1993,21to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers
enumerated in the by-laws are the exclusive Officers of the corporation and the Board has no power to create
other Offices without amending first the corporate By-laws. However, the Board may create appointive
positions other than the positions of corporate Officers, but the persons occupying such positions are not
considered as corporate officers within the meaning of Section 25 of the Corporation Code and are not
empowered to exercise the functions of the corporate Officers, except those functions lawfully delegated to
them. Their functions and duties are to be determined by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to
the President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the
corporate officers. Verily, the power to elect the corporate officers was a discretionary power that the law
exclusively vested in the Board of Directors, and could not be delegated to subordinate officers or agents.22 The
office of Vice President for Finance and Administration created by Matlings President pursuant to By Law No.
V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by
By-Law No. V merely allowed Matlings President to create non-corporate offices to be occupied by ordinary
employees of Matling. Such powers were incidental to the Presidents duties as the executive head of Matling to
assist him in the daily operations of the business.
The petitioners reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that offices not
expressly mentioned in the By-Laws but were created pursuant to a By-Law enabling provision were also
considered corporate offices, was plainly obiter dictum due to the position subject of the controversy being
mentioned in the By-Laws. Thus, the Court held therein that the position was a corporate office, and that the
determination of the rights and liabilities arising from the ouster from the position was an intra-corporate
controversy within the SECs jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more appropriate ruling, the
position subject of the controversy was not expressly mentioned in the By-Laws, but was created pursuant to a
By-Law enabling provision authorizing the Board of Directors to create other offices that the Board of Directors
might see fit to create. The Court held there that the position was a corporate office, relying on the obiter
dictum in Tabang.
Considering that the observations earlier made herein show that the soundness of their dicta is not
unassailable,Tabang and Nacpil should no longer be controlling.
III
Did Respondents Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?

Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and relying
onPaguio v. National Labor Relations Commission24 and Ongkingko v. National Labor Relations
Commission,25 the NLRC had no jurisdiction over his complaint, considering that any case for illegal dismissal
brought by a stockholder/officer against the corporation was an intra-corporate matter that must fall under the
jurisdiction of the SEC conformably with the context of PD No. 902-A.
The petitioners insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants were
undeniably corporate officers due to their positions being expressly mentioned in the By-Laws, aside from the
fact that both of them had been duly elected by the respective Boards of Directors. But the herein respondents
position of Vice President for Finance and Administration was not expressly mentioned in the By-Laws; neither
was the position of Vice President for Finance and Administration created by Matlings Board of Directors.
Lastly, the President, not the Board of Directors, appointed him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no
distinction, qualification or any exemption whatsoever. The provision is broad and covers all kinds of
controversies between stockholders and corporations.26
However, the Tabang pronouncement is not controlling because it is too sweeping and does not accord with
reason, justice, and fair play. In order to determine whether a dispute constitutes an intra-corporate controversy
or not, the Court considers two elements instead, namely: (a) the status or relationship of the parties; and (b) the
nature of the question that is the subject of their controversy. This was our thrust in Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above will not necessarily always confer jurisdiction
over the dispute on the SEC to the exclusion of regular courts. The statement made in one case that the rule
admits of no exceptions or distinctions is not that absolute. The better policy in determining which body has
jurisdiction over a case would be to consider not only the status or relationship of the parties but also the nature
of the question that is the subject of their controversy.
Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can
resolve in the exercise of its adjudicatory or quasi-judicial powers. If, for example, a person leases an apartment
owned by a corporation of which he is a stockholder, there should be no question that a complaint for his
ejectment for non-payment of rentals would still come under the jurisdiction of the regular courts and not of the
SEC. By the same token, if one person injures another in a vehicular accident, the complaint for damages filed
by the victim will not come under the jurisdiction of the SEC simply because of the happenstance that both
parties are stockholders of the same corporation. A contrary interpretation would dissipate the powers of the
regular courts and distort the meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to
any of the following relationships:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners, members or
officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or
license to operate is concerned; and
d) among the stockholders, partners or associates themselves.

The fact that the parties involved in the controversy are all stockholders or that the parties involved are the
stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of
SEC. The better policy to be followed in determining jurisdiction over a case should be to consider concurrent
factors such as the status or relationship of the parties or the nature of the question that is the subject of their
controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does
not necessarily follow that every conflict between the corporation and its stockholders would involve such
corporate matters as only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand,
and ordinary corporate employees who may only be terminated for just cause, on the other hand, do not depend
on the nature of the services performed, but on the manner of creation of the office. In the respondents case, he
was supposedly at once an employee, a stockholder, and a Director of Matling. The circumstances surrounding
his appointment to office must be fully considered to determine whether the dismissal constituted an intracorporate controversy or a labor termination dispute. We must also consider whether his status as Director and
stockholder had any relation at all to his appointment and subsequent dismissal as Vice President for Finance
and Administration.
Obviously enough, the respondent was not appointed as Vice President for Finance and Administration because
of his being a stockholder or Director of Matling. He had started working for Matling on September 8, 1966,
and had been employed continuously for 33 years until his termination on April 17, 2000, first as a bookkeeper,
and his climb in 1987 to his last position as Vice President for Finance and Administration had been gradual but
steady, as the following sequence indicates:
1966 Bookkeeper
1968 Senior Accountant
1969 Chief Accountant
1972 Office Supervisor
1973 Assistant Treasurer
1978 Special Assistant for Finance
1980 Assistant Comptroller
1983 Finance and Administrative Manager
1985 Asst. Vice President for Finance and Administration
1987 to April 17, 2000 Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his promotion to the position of Vice
President for Finance and Administration in 1987 was by virtue of the length of quality service he had rendered
as an employee of Matling. His subsequent acquisition of the status of Director/stockholder had no relation to
his promotion. Besides, his status of Director/stockholder was unaffected by his dismissal from employment as
Vice President for Finance and Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank manager who had risen from the
ranks but was dismissed, the Court held that her complaint for illegal dismissal was correctly brought to the
NLRC, because she was deemed a regular employee of the bank. The Court observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that
position she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she
occupied until her illegal dismissal on July 19, 1991. The banks contention that she merely holds an elective

position and that in effect she is not a regular employee is belied by the nature of her work and her length
of service with the Bank. As earlier stated, she rose from the ranks and has been employed with the Bank since
1963 until the termination of her employment in 1991. As Assistant Vice President of the Foreign Department of
the Bank, she is tasked, among others, to collect checks drawn against overseas banks payable in foreign
currency and to ensure the collection of foreign bills or checks purchased, including the signing of transmittal
letters covering the same. It has been stated that "the primary standard 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. Additionally, "an employee is regular because of the nature of work and the length
of service, not because of the mode or even the reason for hiring them." As Assistant Vice-President of the
Foreign Department of the Bank she performs tasks integral to the operations of the bank and her length of
service with the bank totaling 28 years speaks volumes of her status as a regular employee of the bank. In fine,
as a regular employee, she is entitled to security of tenure; that is, her services may be terminated only for a just
or authorized cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank
endeavored to the very end to establish loss of trust and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 197528

September 5, 2012

PERT/CPM MANPOWER EXPONENT CO., INC., Petitioner,

vs.
ARMANDO A. VINUY A, LOUIE M. ORDOVEZ, ARSENIO S. LUMANTA,. JR., ROBELITO S.
ANIPAN, VIRGILIO R. ALCANTARA, MARINO M. ERA, SANDY 0. ENJAMBRE and NOEL T.
LADEA, Respondents.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 assailing the decision2 dated May 9, 2011 and the
resolution3dated June 23, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 114353.
The Antecedents
On March 5, 2008, respondents Armando A. Vinuya, Louie M. Ordovez, Arsenio S. Lumanta, Jr., Robelito S.
Anipan, Virgilio R. Alcantara, Marino M. Era, Sandy O. Enjambre and Noel T. Ladea (respondents) filed a
complaint for illegal dismissal against the petitioner Pert/CPM Manpower Exponent Co., Inc. (agency), and its
President Romeo P. Nacino.
The respondents alleged that the agency deployed them between March 29, 2007 and May 12, 2007 to work as
aluminum fabricator/installer for the agencys principal, Modern Metal Solution LLC/MMS Modern Metal
Solution LLC (Modern Metal) in Dubai, United Arab Emirates.
The respondents employment contracts,4 which were approved by the Philippine Overseas Employment
Administration (POEA), provided for a two-year employment, nine hours a day, salary of 1,350 AED with
overtime pay, food allowance, free and suitable housing (four to a room), free transportation, free laundry, and
free medical and dental services. They each paid a P 15,000.00 processing fee.5

On April 2, 2007, Modern Metal gave the respondents, except Era, appointment letters6 with terms different
from those in the employment contracts which they signed at the agencys office in the Philippines. Under the
letters of appointment, their employment was increased to three years at 1,000 to 1,200 AED and food
allowance of 200 AED.
The respondents claimed that they were shocked to find out what their working and living conditions were in
Dubai. They were required to work from 6:30 a.m. to 6:30 p.m., with a break of only one hour to one and a half
hours. When they rendered overtime work, they were most of the time either underpaid or not paid at all. Their
housing accommodations were cramped and were shared with 27 other occupants. The lodging house was in
Sharjah, which was far from their jobsite in Dubai, leaving them only three to four hours of sleep a day because
of the long hours of travel to and from their place of work; there was no potable water and the air was polluted.
When the respondents received their first salaries (at the rates provided in their appointment letters and with
deductions for placement fees) and because of their difficult living and working conditions, they called up the
agency and complained about their predicament. The agency assured them that their concerns would be
promptly addressed, but nothing happened.
On May 5, 2007, Modern Metal required the respondents to sign new employment contracts,7 except for Era
who was made to sign later. The contracts reflected the terms of their appointment letters. Burdened by all the
expenses and financial obligations they incurred for their deployment, they were left with no choice but to sign
the contracts. They raised the matter with the agency, which again took no action.
On August 5, 2007, despondent over their unbearable living and working conditions and by the agencys
inaction, the respondents expressed to Modern Metal their desire to resign. Out of fear, as they put it, that
Modern Metal would not give them their salaries and release papers, the respondents, except Era, cited
personal/family problems for their resignation.8 Era mentioned the real reason "because I dont (sic) want the
company policy"9 for his resignation.
It took the agency several weeks to repatriate the respondents to the Philippines. They all returned to Manila in
September 2007. Except for Ordovez and Enjambre, all the respondents shouldered their own airfare.
For its part, the agency countered that the respondents were not illegally dismissed; they voluntarily resigned
from their employment to seek a better paying job. It claimed that the respondents, while still working for
Modern Metal, applied with another company which offered them a higher pay. Unfortunately, their supposed
employment failed to materialize and they had to go home because they had already resigned from Modern
Metal.
The agency further alleged that the respondents even voluntarily signed affidavits of quitclaim and release after
they resigned. It thus argued that their claim for benefits, under Section 10 of Republic Act No. (R.A.) 8042,
damages and attorneys fees is unfounded.
The Compulsory Arbitration Rulings
On April 30, 2008, Labor Arbiter Ligerio V. Ancheta rendered a Decision10 dismissing the complaint, finding
that the respondents voluntarily resigned from their jobs. He also found that four of them Alcantara, Era,
Anipan and Lumanta even executed a compromise agreement (with quitclaim and release) before the POEA.
He considered the POEA recourse a case of forum shopping.
The respondents appealed to the National Labor Relations Commission (NLRC). They argued that the labor
arbiter committed serious errors in (1) admitting in evidence the quitclaims and releases they executed in Dubai,
which were mere photocopies of the originals and which failed to explain the circumstances behind their
execution; (2) failing to consider that the compromise agreements they signed before the POEA covered only
the refund of their airfare and not all their money claims; and (3) ruling that they violated the rule on non-forum
shopping.
On May 12, 2009, the NLRC granted the appeal.11 It ruled that the respondents had been illegally dismissed. It
anchored its ruling on the new employment contracts they were made to sign in Dubai. It stressed that it is
illegal for an employer to require its employees to execute new employment papers, especially those which
provide benefits that are inferior to the POEA-approved contracts.
The NLRC rejected the quitclaim and release executed by the respondents in Dubai. It believed that the
respondents executed the quitclaim documents under duress as they were afraid that they would not be allowed

to return to the Philippines if they did not sign the documents. Further, the labor tribunal disagreed with the
labor arbiters opinion that the compromise agreement they executed before the POEA had effectively
foreclosed the illegal dismissal complaint before the NLRC and that the respondents had been guilty of forum
shopping. It pointed out that the POEA case involved pre-deployment issues; whereas, the complaint before the
NLRC is one for illegal dismissal and money claims arising from employment.
Consequently, the NLRC ordered the agency, Nacino and Modern Metal to pay, jointly and severally, the
respondents, as follows:
WHEREFORE, the Decision dated 30 April 2008 is hereby REVERSED and SET ASIDE, a new Decision is
hereby issued ordering the respondents PERT/CPM MANPOWER EXPONENTS CO., INC., ROMEO
NACINO, and MODERN METAL SOLUTIONS, INC. to jointly and severally, pay the complainants the
following:

Underpaid
Salary

Placement
fee

Salary for
the
unexpired
portion of
the contract
(1350 x 6
months)

Vinuya,
ARMANDO

150 x 6 = 900 AED

USD 400

8100 AED

P 20,000.00

Alcantara
VIRGILIO

150 X 4 = 600 AED

USD 400

8100 AED

P 20,000.00

Era,
MARINO

350 x 4 = 1400 AED

USD 400

8100 AED

P 20,000.00

Ladea,
NOEL

150 x 5 = 750 AED

USD 400

8100 AED

P 20,000.00

Ordovez,
LOUIE

250 X 3 = 750 AED

USD 400

8100 AED

P 20,000.00

Anipan,
ROBELITO

150 x 4 = 600 AED

USD 400

8100 AED

P 20,000.00

Enjambre,
SANDY

150 x 4 = 600 AED

USD 400

8100 AED

P 20,000.00

Lumanta,
ARSENIO

250 x 5 = 1250 AED

USD 400

8100 AED

P 20,000.00

Employee

TOTAL:

6,850 AED

US$3,200

64,800 AED

Exemplary
Damages

P 400,000.00

or their peso equivalent at the time of actual payment plus attorneys fees equivalent to 10% of the judgment
award.12
The agency moved for reconsideration, contending that the appeal was never perfected and that the NLRC
gravely abused its discretion in reversing the labor arbiters decision.The respondents, on the other hand, moved
for partial reconsideration, maintaining that their salaries should have covered the unexpired portion of their
employment contracts, pursuant to the Courts ruling in Serrano v. Gallant Maritime Services, Inc.13
The NLRC denied the agencys motion for reconsideration, but granted the respondents motion.14 It sustained
the respondents argument that the award needed to be adjusted, particularly in relation to the payment of their
salaries, consistent with the Courts ruling in Serrano. The ruling declared unconstitutional the clause, "or for
three (3) months for every year of the unexpired term, whichever is less," in Section 10, paragraph 5, of R.A.
8042, limiting the entitlement of illegally dismissed overseas Filipino workers to their salaries for the unexpired

term of their contract or three months, whichever is less. Accordingly, it modified its earlier decision and
adjusted the respondents salary entitlement based on the following matrix:

Employee

Duration of
Contract

Departure date

Date dismissed

Unexpired
portion of
contract

Vinuya,
ARMANDO

2 years

29 March 2007

8 August 2007

19 months
and 21 days

Alcantara,
VIRGILIO

2 years

3 April 2007

8 August 2007

20 months
and 5 days

Era,
MARINO

2 years

12 May 2007

8 August 2007

21 months
and 4 days

Ladea,
NOEL

2 years

29 March 2007

8 August 2007

19 months
and 21 days

Ordovez,
LOUIE

2 years

3 April 2007

26 July 2007

21 months
and 23 days

Anipan,
ROBELITO

2 years

3 April 2007

8 August 2007

20 months
and 5 days

Enjambre,
SANDY

2 years

29 March 2007

26 July 2007

20 months
and 3 days

Lumanta,
ARSENIO

2 years

29 March 2007

8 August 2007

19 months
and 21 days15

Again, the agency moved for reconsideration, reiterating its earlier arguments and, additionally, questioning the
application of the Serrano ruling in the case because it was not yet final and executory. The NLRC denied the
motion, prompting the agency to seek recourse from the CA through a petition for certiorari.
The CA Decision
The CA dismissed the petition for lack of merit.16 It upheld the NLRC ruling that the respondents were illegally
dismissed. It found no grave abuse of discretion in the NLRCs rejection of the respondents resignation letters,
and the accompanying quitclaim and release affidavits, as proof of their voluntary termination of employment.
The CA stressed that the filing of a complaint for illegal dismissal is inconsistent with resignation. Moreover, it
found nothing in the records to substantiate the agencys contention that the respondents resignation was of
their own accord; on the contrary, it considered the resignation letters "dubious for having been lopsidedlyworded to ensure that the petitioners (employers) are free from any liability."17
The appellate court likewise refused to give credit to the compromise agreements that the respondents executed
before the POEA. It agreed with the NLRCs conclusion that the agreements pertain to the respondents charge
of recruitment violations against the agency distinct from their illegal dismissal complaint, thus negating forum
shopping by the respondents.

Lastly, the CA found nothing legally wrong in the NLRC correcting itself (upon being reminded by the
respondents), by adjusting the respondents salary award on the basis of the unexpired portion of their contracts,
as enunciated in the Serrano case.
The agency moved for, but failed to secure, a reconsideration of the CA decision.18
The Petition
The agency is now before the Court seeking a reversal of the CA dispositions, contending that the CA erred in:
1. affirming the NLRCs finding that the respondents were illegally dismissed;
2. holding that the compromise agreements before the POEA pertain only to the respondents charge of
recruitment violations against the agency; and
3. affirming the NLRCs award to the respondents of their salaries for the unexpired portion of their
employment contracts, pursuant to the Serrano ruling.
The agency insists that it is not liable for illegal dismissal, actual or constructive. It submits that as correctly
found by the labor arbiter, the respondents voluntarily resigned from their jobs, and even executed affidavits of
quitclaim and release; the respondents stated family concerns for their resignation. The agency posits that the
letters were duly proven as they were written unconditionally by the respondents. It, therefore, assails the
conclusion that the respondents resigned under duress or that the resignation letters were dubious.
The agency raises the same argument with respect to the compromise agreements, with quitclaim and release, it
entered into with Vinuya, Era, Ladea, Enjambre, Ordovez, Alcantara, Anipan and Lumanta before the POEA,
although it submitted evidence only for six of them. Anipan, Lumanta, Vinuya and Ladea signing one
document;19Era20 and Alcantara21 signing a document each. It points out that the agreement was prepared with
the assistance of POEA Conciliator Judy Santillan, and was duly and freely signed by the respondents;
moreover, the agreement is not conditional as it pertains to all issues involved in the dispute between the parties.
On the third issue, the agency posits that the Serrano ruling has no application in the present case for three
reasons. First, the respondents were not illegally dismissed and, therefore, were not entitled to their money
claims. Second, the respondents filed the complaint in 2007, while the Serrano ruling came out on March 24,
2009. The ruling cannot be given retroactive application. Third, R.A. 10022, which was enacted on March 8,
2010 and which amended R.A. 8042, restored the subject clause in Section 10 of R.A. 8042, declared
unconstitutional by the Court.
The Respondents Position
In their Comment (to the Petition) dated September 28, 2011,22 the respondents ask the Court to deny the
petition for lack of merit. They dispute the agencys insistence that they resigned voluntarily. They stand firm on
their submission that because of their unbearable living and working conditions in Dubai, they were left with no
choice but to resign. Also, the agency never refuted their detailed narration of the reasons for giving up their
employment.
The respondents maintain that the quitclaim and release affidavits,23 which the agency presented, betray its
desperate attempt to escape its liability to them. They point out that, as found by the NLRC, the affidavits are
ready-made documents; for instance, in Lumantas24 and Eras25 affidavits, they mentioned a certain G & A
International Manpower as the agency which recruited them a fact totally inapplicable to all the respondents.
They contend that they had no choice but to sign the documents; otherwise, their release papers and remaining
salaries would not be given to them, a submission which the agency never refuted.
On the agencys second line of defense, the compromise agreement (with quitclaim and release) between the
respondents and the agency before the POEA, the respondents argue that the agreements pertain only to their
charge of recruitment violations against the agency. They add that based on the agreements, read and considered
entirely, the agency was discharged only with respect to the recruitment and pre-deployment issues such as
excessive placement fees, non-issuance of receipts and placement misrepresentation, but not with respect to
post-deployment issues such as illegal dismissal, breach of contract, underpayment of salaries and
underpayment and nonpayment of overtime pay. The respondents stress that the agency failed to controvert their
contention that the agreements came about only to settle their claim for refund of their airfare which they paid
for when they were repatriated.

Lastly, the respondents maintain that since they were illegally dismissed, the CA was correct in upholding the
NLRCs award of their salaries for the unexpired portion of their employment contracts, as enunciated in
Serrano. They point out that the Serrano ruling is curative and remedial in nature and, as such, should be given
retroactive application as the Court declared in Yap v. Thenamaris Ships Management.26 Further, the
respondents take exception to the agencys contention that the Serrano ruling cannot, in any event, be applied in
the present case in view of the enactment of R.A. 10022 on March 8, 2010, amending Section 10 of R.A. 8042.
The amendment restored the subject clause in paragraph 5, Section 10 of R.A. 8042 which was struck down as
unconstitutional in Serrano.
The respondents maintain that the agency cannot raise the issue for the first time before this Court when it could
have raised it before the CA with its petition for certiorari which it filed on June 8, 2010;27 otherwise, their right
to due process will be violated. The agency, on the other hand, would later claim that it is not barred by estoppel
with respect to its reliance on R.A. 10022 as it raised it before the CA in CA-G.R. SP No. 114353.28 They
further argue that RA 10022 cannot be applied in their case, as the law is an amendatory statute which is, as a
rule, prospective in application, unless the contrary is provided.29 To put the issue to rest, the respondents ask
the Court to also declare unconstitutional Section 7 of R.A. 10022.
Finally, the respondents submit that the petition should be dismissed outright for raising only questions of fact,
rather than of law.
The Courts Ruling
The procedural question
We deem it proper to examine the facts of the case on account of the divergence in the factual conclusions of the
labor arbiter on the one hand, and, of the NLRC and the CA, on the other.30 The arbiter found no illegal
dismissal in the respondents loss of employment in Dubai because they voluntarily resigned; whereas, the
NLRC and the CA adjudged them to have been illegally dismissed because they were virtually forced to resign.
The merits of the case
We find no merit in the petition. The CA committed no reversible error and neither did it commit grave
abuse of discretion in affirming the NLRCs illegal dismissal ruling.
The agency and its principal, Modern Metal, committed flagrant violations of the law on overseas employment,
as well as basic norms of decency and fair play in an employment relationship, pushing the respondents to look
for a better employment and, ultimately, to resign from their jobs.
First. The agency and Modern Metal are guilty of contract substitution. The respondents entered into a POEAapproved two-year employment contract,31 with Modern Metal providing among others, as earlier discussed,
for a monthly salary of 1350 AED. On April 2, 2007, Modern Metal issued to them appointment
letters32 whereby the respondents were hired for a longer three-year period and a reduced salary, from 1,100
AED to 1,200 AED, among other provisions. Then, on May 5, 2007, they were required to sign new
employment contracts33 reflecting the same terms contained in their appointment letters, except that this time,
they were hired as "ordinary laborer," no longer aluminum fabricator/installer. The respondents complained with
the agency about the contract substitution, but the agency refused or failed to act on the matter.
The fact that the respondents contracts were altered or substituted at the workplace had never been denied by
the agency.1wphi1 On the contrary, it admitted that the contract substitution did happen when it argued, "as to
their claim for underpayment of salary, their original contract mentioned 1350 AED monthly salary, which
includes allowance while in their Appointment Letters, they were supposed to receive 1,300 AED. While there
was a difference of 50 AED monthly, the same could no longer be claimed by virtue of their Affidavits of
Quitclaims and Desistance."34
Clearly, the agency and Modern Metal committed a prohibited practice and engaged in illegal recruitment under
the law. Article 34 of the Labor Code provides:
Art. 34. Prohibited Practices. It shall be unlawful for any individual, entity, licensee, or holder of authority:
xxxx

(i) To substitute or alter employment contracts approved and verified by the Department of Labor from the time
of actual signing thereof by the parties up to and including the periods of expiration of the same without the
approval of the Secretary of Labor.
Further, Article 38 of the Labor Code, as amended by R.A. 8042,35 defined "illegal recruitment" to include the
following act:
(i) To substitute or alter to the prejudice of the worker, employment contracts approved and verified by the
Department of Labor and Employment from the time of actual signing thereof by the parties up to and including
the period of the expiration of the same without the approval of the Department of Labor and Employment.
Second. The agency and Modern Metal committed breach of contract. Aggravating the contract substitution
imposed upon them by their employer, the respondents were made to suffer substandard (shocking, as they put
it) working and living arrangements. Both the original contracts the respondents signed in the Philippines and
the appointment letters issued to them by Modern Metal in Dubai provided for free housing and transportation
to and from the jobsite. The original contract mentioned free and suitable housing.36 Although no description of
the housing was made in the letters of appointment except: "Accommodation: Provided by the company," it is
but reasonable to think that the housing or accommodation would be "suitable."
As earlier pointed out, the respondents were made to work from 6:30 a.m. to 6:30 p.m., with a meal break of
one to one and a half hours, and their overtime work was mostly not paid or underpaid. Their living quarters
were cramped as they shared them with 27 other workers. The lodging house was in Sharjah, far from the
jobsite in Dubai, leaving them only three to four hours of sleep every workday because of the long hours of
travel to and from their place of work, not to mention that there was no potable water in the lodging house
which was located in an area where the air was polluted. The respondents complained with the agency about the
hardships that they were suffering, but the agency failed to act on their reports. Significantly, the agency failed
to refute their claim, anchored on the ordeal that they went through while in Modern Metals employ.
Third. With their original contracts substituted and their oppressive working and living conditions unmitigated
or unresolved, the respondents decision to resign is not surprising. They were compelled by the dismal state of
their employment to give up their jobs; effectively, they were constructively dismissed. A constructive dismissal
or discharge is "a quitting because continued employment is rendered impossible, unreasonable or unlikely, as,
an offer involving a demotion in rank and a diminution in pay."37
Without doubt, the respondents continued employment with Modern Metal had become unreasonable. A
reasonable mind would not approve of a substituted contract that pays a diminished salary from 1350 AED a
month in the original contract to 1,000 AED to 1,200 AED in the appointment letters, a difference of 150 AED
to 250 AED (not just 50 AED as the agency claimed) or an extended employment (from 2 to 3 years) at such
inferior terms, or a "free and suitable" housing which is hours away from the job site, cramped and crowded,
without potable water and exposed to air pollution.
We thus cannot accept the agencys insistence that the respondents voluntarily resigned since they personally
prepared their resignation letters38 in their own handwriting, citing family problems as their common ground for
resigning. As the CA did, we find the resignation letters "dubious,"39 not only for having been lopsidedly
worded to ensure that the employer is rendered free from any liability, but also for the odd coincidence that all
the respondents had, at the same time, been confronted with urgent family problems so that they had to give up
their employment and go home. The truth, as the respondents maintain, is that they cited family problems as
reason out of fear that Modern Metal would not give them their salaries and their release papers. Only Era was
bold enough to say the real reason for his resignation to protest company policy.
We likewise find the affidavits40of quitclaim and release which the respondents executed suspect. Obviously, the
affidavits were prepared as a follow through of the respondents supposed voluntary resignation. Unlike the
resignation letters, the respondents had no hand in the preparation of the affidavits. They must have been
prepared by a representative of Modern Metal as they appear to come from a standard form and were apparently
introduced for only one purpose to lend credence to the resignation letters. In Modern Metals haste,
however, to secure the respondents affidavits, they did not check on the model they used. Thus, Lumantas
affidavit41mentioned a G & A International Manpower as his recruiting agency, an entity totally unknown to the
respondents; the same thing is true for Eras affidavit.42 This confusion is an indication of the employers
hurried attempt to avoid liability to the respondents.
The respondents position is well-founded. The NLRC itself had the same impression, which we find in order
and hereunder quote:

The acts of respondents of requiring the signing of new contracts upon reaching the place of work and requiring
employees to sign quitclaims before they are paid and repatriated to the Philippines are all too familiar stories of
despicable labor practices which our employees are subjected to abroad. While it is true that quitclaims are
generally given weight, however, given the facts of the case, We are of the opinion that the complainantsappellants executed the same under duress and fear that they will not be allowed to return to the Philippines.43
Fourth. The compromise agreements (with quitclaim and release)44 between the respondents and the agency
before the POEA did not foreclose their employer-employee relationship claims before the NLRC. The
respondents, except Ordovez and Enjambre, aver in this respect that they all paid for their own airfare when
they returned home45 and that the compromise agreements settled only their claim for refund of their airfare, but
not their other claims.46 Again, this submission has not been refuted or denied by the agency.
On the surface, the compromise agreements appear to confirm the agencys position, yet a closer examination of
the documents would reveal their true nature. Copy of the compromise agreement is a standard POEA
document, prepared in advance and readily made available to parties who are involved in disputes before the
agency, such as what the respondents filed with the POEA ahead (filed in 2007) of the illegal dismissal
complaint before the NLRC (filed on March 5, 2008).
Under the heading "Post-Deployment," the agency agreed to pay Era47 and Alcantara48 P 12,000.00 each,
purportedly in satisfaction of the respondents claims arising from overseas employment, consisting of unpaid
salaries, salary differentials and other benefits, including money claims with the NLRC. The last document was
signed by (1) Anipan, (2) Lumanta, (3) Ladea, (4) Vinuya, (5) Jonathan Nangolinola, and (6) Zosimo Gatchalian
(the last four signing on the left hand side of the document; the last two were not among those who filed the
illegal dismissal complaint).49
The agency agreed to pay them a total of P 72,000.00. Although there was no breakdown of the entitlement for
each of the six, but guided by the compromise agreement signed by Era and Alcantara, we believe that the
agency paid them P 12,000.00 each, just like Era and Alcantara.
The uniform insubstantial amount for each of the signatories to the agreement lends credence to their contention
that the settlement pertained only to their claim for refund of the airfare which they shouldered when they
returned to the Philippines. The compromise agreement, apparently, was intended by the agency as a settlement
with the respondents and others with similar claims, which explains the inclusion of the two (Nangolinola and
Gatchalian) who were not involved in the case with the NLRC. Under the circumstances, we cannot see how the
compromise agreements can be considered to have fully settled the respondents claims before the NLRC
illegal dismissal and monetary benefits arising from employment. We thus find no reversible error nor grave
abuse of discretion in the rejection by the NLRC and the CA of said agreements.
Fifth. The agencys objection to the application of the Serrano ruling in the present case is of no moment. Its
argument that the ruling cannot be given retroactive effect, because it is curative and remedial, is untenable. It
points out, in this respect, that the respondents filed the complaint in 2007, while the Serrano ruling was handed
down in March 2009. The issue, as the respondents correctly argue, has been resolved in Yap v. Thenamaris
Ships Management,50 where the Court sustained the retroactive application of the Serrano ruling which
declared unconstitutional the subject clause in Section 10, paragraph 5 of R.A. 8042, limiting to three months
the payment of salaries to illegally dismissed Overseas Filipino Workers.
Undaunted, the agency posits that in any event, the Serrano ruling has been nullified by R.A. No. 10022,
entitled "An Act Amending Republic Act No. 8042, Otherwise Known as the Migrant Workers and Overseas
Filipinos Act of 1995, As Amended, Further Improving the Standard of Protection and Promotion of the Welfare
of Migrant Workers, Their Families and Overseas Filipinos in Distress, and For Other Purposes."51 It argues that
R.A. 10022, which lapsed into law (without the Signature of the President) on March 8, 2010, restored the
subject clause in the 5th paragraph, Section 10 of R.A. 8042. The amendment, contained in Section 7 of R.A.
10022, reads as follows:
In case of termination of overseas employment without just, valid or authorized cause as defined by law or
contract, or any unauthorized deductions from the migrant workers salary, the worker shall be entitled to the
full reimbursement "of" his placement fee and the deductions made with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.52 (emphasis ours)
This argument fails to persuade us. Laws shall have no retroactive effect, unless the contrary is provided.53 By
its very nature, the amendment introduced by R.A. 10022 restoring a provision of R.A. 8042 declared

unconstitutional cannot be given retroactive effect, not only because there is no express declaration of
retroactivity in the law, but because retroactive application will result in an impairment of a right that had
accrued to the respondents by virtue of the Serrano ruling - entitlement to their salaries for the unexpired portion
of their employment contracts.
All statutes are to be construed as having only a prospective application, unless the purpose and intention of the
legislature to give them a retrospective effect are expressly declared or are necessarily implied from the
language used.54 We thus see no reason to nullity the application of the Serrano ruling in the present case.
Whether or not R.A. 1 0022 is constitutional is not for us to rule upon in the present case as this is an issue that
is not squarely before us. In other words, this is an issue that awaits its proper day in court; in the meanwhile,
we make no pronouncement on it.
WHEREFORE, premises considered, the petition is DENIED. The assailed Decision dated May 9, 2011 and
the Resolution dated June 23, 2011 of the Court of Appeals in CA-G.R. SP No. 114353 are AFFIRMED. Let
this Decision be brought to the attention of the Honorable Secretary of Labor and Employment and the
Administrator of the Philippine Overseas Employment Administration as a black mark in the deployment record
of petitioner Pert/CPM Manpower Exponent Co., Inc., and as a record that should be considered in any similar
future violations.
Costs against the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 127195

August 25, 1999

MARSAMAN MANNING AGENCY, INC. and DIAMANTIDES MARITIME, INC., petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and WILFREDO T. CAJERAS, respondents.
BELLOSILLO, J.:
MARSAMAN MANNING AGENCY, INC. (MARSAMAN) and its foreign principal DIAMANTIDES
MARITIME, INC. (DIAMANTIDES) assail the Decision of public respondent National Labor Relations
Commission dated 16 September 1996 as well as its Resolution dated 12 November 1996 affirming the Labor
Arbiter's decision finding them guilty of illegal dismissal and ordering them to pay respondent Wilfredo T.
Cajeras salaries corresponding to the unexpired portion of his employment contract, plus attorney's fees.
Private respondent Wilfredo T. Cajeras was hired by petitioner MARSAMAN, the local manning agent of
petitioner DIAMANTIDES, as Chief Cook Steward on the MV Prigipos, owned and operated by
DIAMANTIDES, for a contract period of ten (10) months with a monthly salary of US$600.00, evidenced by a
contract between the parties dated 15 June 1995. Cajeras started work on 8 August 1995 but less than two (2)
months later, or on 28 September 1995, he was repatriated to the Philippines allegedly by "mutual consent."
On 17 November 1995 private respondent Cajeras filed a complaint for illegal dismissal against petitioners with
the NLRC National Capital Region Arbitration Branch alleging that he was dismissed illegally, denying that his
repatriation was by mutual consent, and asking for his unpaid wages, overtime pay, damages, and attorney's
fees.1 Cajeras alleged that he was assigned not only as Chief Cook Steward but also as assistant cook and
messman in addition to performing various inventory and requisition jobs. Because of his additional
assignments he began to feel sick just a little over a month on the job constraining him to request for medical
attention. He was refused at first by Capt. Kouvakas Alekos, master of the MV Prigipos, who just ordered him
to continue working. However a day after the ship's arrival at the port of Rotterdam, Holland, on 26 September
1995 Capt. Alekos relented and had him examined at the Medical Center for Seamen. However, the examining

physician, Dr. Wden Hoed, neither apprised private respondent about the diagnosis nor issued the requested
medical certificate allegedly because he himself would forward the results to private respondent's superiors.
Upon returning to the vessel, private respondent was unceremoniously ordered to prepare for immediate
repatriation the following day as he was said to be suffering from a disease of unknown origin.1wphi1.nt
On 28 September 1995 he was handed his Seaman's Service Record Book with the following entry: "Cause of
discharge Mutual Consent."2 Private respondent promptly objected to the entry but was not able to do
anything more as he was immediately ushered to a waiting taxi which transported him to the Amsterdam Airport
for the return flight to Manila. After his arrival in Manila on 29 September 1995. Cajeras complained to
MARSAMAN but to no avail.3
MARSAMAN and DIAMANTIDES, on the other hand, denied the imputation of illegal dismissal. They alleged
that Cajeras approached Capt. Alekos on 26 September 1995 and informed the latter that he could not sleep at
night because he felt something crawling over his body. Furthermore, Cajeras reportedly declared that he could
no longer perform his duties and requested for repatriation. The following paragraph in the vessel's Deck Log
was allegedly entered by Capt. Alekos, to wit:
Cajeras approached me and he told me that he cannot sleep at night and that he feels something crawling
on his body and he declared that he can no longer perform his duties and he must be repatriated.4
Private respondent was then sent to the Medical Center for Seamen at Rotterdam where he was examined by Dr.
Wden Hoed whose diagnosis appeared in a Medical Report as "paranoia" and "other mental
problems."5Consequently, upon Dr. Hoed's recommendation, Cajeras was repatriated to the Philippines on 28
September 1995.
On 29 January 1996 Labor Arbiter Ernesto S. Dinopol resolved the dispute in favor of private respondent
Cajeras ruling that the latter's discharge from the MV Prigipos allegedly by "mutual consent" was not proved by
convincing evidence. The entry made by Capt. Alekos in the Deck Log was dismissed as of little probative
value because it was a mere unilateral act unsupported by any document showing mutual consent of Capt.
Alekos, as master of theMV Prigipos, and Cajeras to the premature termination of the overseas employment
contract as required by Sec. H of the Standard Employment Contract Governing the Employment of all Filipino
Seamen on Board Ocean-Going Vessels. Dr. Hoed's diagnosis that private respondent was suffering from
"paranoia" and "other mental problems" was likewise dismissed as being of little evidentiary value because it
was not supported by evidence on how the paranoia was contracted, in what stage it was, and how it affected
respondent's functions as Chief Cook Steward which, on the contrary, was even rated "Very Good" in
respondent's Service Record Book. Thus, the Labor Arbiter disposed of the case as follows:
WHEREFORE, judgment is hereby rendered declaring the repatriation and dismissal of complaint
Wilfredo T. Cajeras as illegal and ordering respondents Marsaman Manning Agency, Inc. and
Diamantides Maritime, Inc. to jointly and severally pay complainant the sum of USD 5,100.00 or its
peso equivalent at the time of payment plus USD 510.00 as 10% attorney's fees it appearing that
complainant had to engage the service of counsel to protect his interest in the prosecution of this case.
The claims for nonpayment of wages and overtime pay are dismissed for having been withdrawn
(Minutes, December 18, 1995). The claims for damages are likewise dismissed for lack of merit, since
no evidence was presented to show that bad faith characterized the dismissal.6
Petitioners appealed to the NLRC.7 On 16 September 1996 the NLRC affirmed the appealed findings and
conclusions of the Labor Arbiter.8 The NLRC subscribed to the view that Cajeras' repatriation by alleged mutual
consent was not proved by petitioners, especially after noting that private respondent did not actually sign his
Seaman's Service Record Book to signify his assent to the repatriation as alleged by petitioners. The entry made
by Capt. Alekos in the Deck Log was not considered reliable proof that private respondent agreed to his
repatriation because no opportunity was given the latter to contest the entry which was against his interest.
Similarly, the Medical Report issued by Dr. Hoed of Holland was dismissed as being of dubious value since it

contained only a sweeping statement of the supposed ailment of Cajeras without any elaboration on the factual
basis thereof.
Petitioners' motion for reconsideration was denied by the NLRC in its Resolution dated 12 November
1996.9Hence, this petition contending that the NLRC committed grave abuse of discretion: (a) in not according
full faith and credit to the official entry by Capt. Alekos in the vessel's Deck Log conformably with the rulings
in Haverton Shipping Ltd. v. NLRC 10 and Wallem Maritime Services, Inc. v. NLRC;11 (b) in not appreciating the
Medical Report issued by Dr. Wden Hoed as conclusive evidence that respondent Cajeras was suffering from
paranoia and other mental problems; (c) in affirming the award of attorney's fees despite the fact that Cajeras'
claim for exemplary damages was denied for lack of merit; and, (d) in ordering a monetary award beyond the
maximum of three (3) months' salary for every year of service set by RA 8042.
We deny the petition. In the Contract of Employment12 entered into with private respondent, petitioners
convenanted strict and faithful compliance with the terms and conditions of the Standard Employment Contract
approved by the POEA/DOLE13 which provides:
1. The employment of the seaman shall cease upon expiration of the contract period indicated in the
Crew Contract unless the Master and the Seaman, by mutual consent, in writing agree to an early
termination . . . . (emphasis our).
Clearly, under the foregoing, the employment of a Filipino seaman may be terminated prior to the expiration of
the stipulated period provided that the master and the seaman (a) mutually consent thereto and (b) reduce their
consent in writing.
In the instant case, petitioners do not deny the fact that they have fallen short of the requirement. No document
exists whereby Capt. Alekos and private respondent reduced to writing their alleged "mutual consent" to the
termination of their employment contract. Instead, petitioners presented the vessel's Deck Log wherein an
entryunilaterally made by Capt. Alekos purported to show that private respondent himself asked for his
repatriation. However, the NLRC correctly dismissed its evidentiary value. For one thing, it is a unilateral act
which is vehemently denied by private respondent. Secondly, the entry in no way satisfies the requirement of a
bilateral documentation to prove early termination of an overseas employment contract by mutual consent
required by the Standard Employment Contract. Hence, since the latter sets the minimum terms and conditions
of employment for the protection of Filipino seamen subject only to the adoption of better terms and
conditions over and above the minimum standards,14 the NLRC could not be accused of grave abuse of
discretion in not accepting any thing less.
However petitioners contend that the entry should be considered prima facie evidence that respondent himself
requested his repatriation conformably with the rulings in Haverton Shipping Ltd. v. NLRC 15 and Abacast
Shipping and Management Agency, Inc. v. NLRC.16 Indeed, Haverton says that a vessel's log book is prima
facie evidence of the facts stated therein as they are official entries made by a person in the performance of a
duty required by law. However, this jurisprudential principle does not apply to win the case for petitioners.
In Wallem Maritime Services, Inc. v. NLRC 17 the Haverton ruling was not given unqualified application because
the log book presented therein was a mere typewritten collation of excerpts from what could be the log
book.18 The Court reasoned that since the log book was the only piece of evidence presented to prove just cause
for the termination of respondent therein, the log book had to be duly identified and authenticated lest an
injustice would result from a blind adoption of its contents which were but prima facie evidence of the incidents
stated therein.
In the instant case, the disputed entry in the Deck Log was neither authenticated nor supported by credible
evidence. Although petitioners claim that Cajeras signed his Seaman's Service Record Book to signify his
conformity to the repatriation, the NLRC found the allegation to be actually untrue since no signature of private
respondent appeared in the Record Book.
Neither could the "Medical Report" prepared by Dr. Hoed be considered corroborative and conclusive evidence
that private respondent was suffering from "paranoia" and "other mental problems," supposedly just causes for

his repatriation. Firstly, absolutely no evidence, not even an allegation, was offered to enlighten the NLRC or
this Court as to Dr. Hoed's qualifications to diagnose mental illnesses. It is a matter of judicial notice that there
are various specializations in medical science and that a general practitioner is not competent to diagnose any
and all kinds of illnesses and diseases. Hence, the findings of doctors who are not proven experts are not
binding on this Court.19 Secondly, the Medical Report prepared by Dr. Hoed contained only a general statement
that private respondent was suffering from "paranoia" and "other mental problems" without providing the
details on how the diagnosis was arrived at or in what stage the illness was. If Dr. Hoed indeed competently
examined private respondent then he would have been able to discuss at length the circumstances and
precedents of his diagnosis. Petitioners cannot rely on the presumption of regularity in the performance of
official duties to make the Medical Report acceptable because the presumption applies only to public officers
from the highest to the lowest in the service of the Government, departments, bureaus, offices, and/or its
political subdivisions,20 which Dr. Wden Hoed was not shown to be. Furthermore, neither did petitioners prove
that private respondent was incompetent or continuously incapacitated for the duties for which he was
employed by reason of his alleged mental state. On the contrary his ability as Chief Cook Steward, up to the
very moment of his repatriation, was rated "Very Good" in his Seaman's Service Record Book as correctly
observed by public respondent.
Considering all the foregoing we cannot ascribe grave abuse of discretion on the part of the NLRC in ruling that
petitioners failed to prove just cause for the termination of private respondent's overseas employment. Grave
abuse of discretion is committed only when the judgment is rendered in a capricious, whimsical, arbitrary or
despotic manner, which is not true in the present case.21
With respect to attorney's fees, suffice it to say 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 award of ten percent
(10%) of the monetary award by way of attorney's fees is legally and morally justifiable under Art. 111 of the
Labor Code,22 Sec. 8, Rule VIII, Book III of its Implementing Rules,23 and par. 7, Art. 220824 of the Civil
Code.25 The case of Albenson Enterprises Corporation v. Court of Appeals26 cited by petitioners in arguing
against the award of attorney's fees is clearly not applicable, being a civil action for damages which deals with
only one of the eleven (11) instances when attorney's fees could be recovered under Art. 2208 of the Civil Code.
Lastly, on the amount of salaries due private respondent, the rule has always been that an illegally dismissed
worker whose employment is for a fixed period is entitled to payment of his salaries corresponding to the
unexpired portion of his employment.27 However on 15 July 1995, RA 8042 otherwise known as the "Migrant
Workers and Overseas Filipinos Act of 1995" took effect, Sec. 10 of which provides:
Sec. 10. In case of termination of overseas employment without just, valid or authorized cause as
defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee
with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of the
employment contract or for three (3) months for every year of the unexpired term whichever is
less (emphasis ours).
The Labor Arbiter, rationalizing that the aforesaid law did not apply since it became effective only one (1)
month after respondent's overseas employment contract was entered into on 15 June 1995, simply awarded
private respondent his salaries corresponding to the unexpired portion of his employment contract, i.e., for 8.6
months. The NLRC affirmed the award and the Office of the Solicitor General (OSG) fully agreed. But
petitioners now insist that Sec. 10, RA 8042 is applicable because although private respondent's contract of
employment was entered into before the law became effective his alleged cause of action, i.e., his repatriation
on 28 September 1995 without just, valid or authorized cause, occurred when the law was already in effect.
Petitioners' purpose in so arguing is to invoke the law in justifying a lesser monetary award to private
respondent, i.e., salaries for three (3) months only pursuant to the last portion of Sec. 10 as opposed to the
salaries for 8.6 months awarded by the Labor Arbiter and affirmed by the NLRC.
We agree with petitioners that Sec. 10, RA 8042, applies in the case of private respondent and to all overseas
contract workers dismissed on or after its effectivity on 15 July 1995 in the same way that Sec. 34,28 RA
6715,29 is made applicable to locally employed workers dismissed on or after 21 March 1989.30 However, we

cannot subscribe to the view that private respondent is entitled to three (3) months' salary only. A plain reading
of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas contract
worker, i.e., whether his salaries for the unexpired portion of his employment contract or three (3) months'
salary for every year of the unexpired term, whichever is less, comes into play only when the employment
contract concerned has a term of at least one (1) year or more. This is evident from the words "for every year of
the unexpired term" which follows the words "salaries . . . for three months." To follow petitioners' thinking that
private respondent is entitled to three (3) months salary only simply because it is the lesser amount is to
completely disregard and overlook some words used in the statute while giving effect to some. This is contrary
to the well-established rule in legal hermeneutics that in interpreting a statute, care should be taken that every
part or word thereof be given effect31since the law-making body is presumed to know the meaning of the words
employed in the statue and to have used them advisedly.32 Ut res magis valeat quam pereat.33
WHEREFORE, the questioned Decision and Resolution dated 16 September 1996 and 12 November 1996,
respectively, of public respondent National Labor Relations Commission are AFFIRMED. Petitioners
MARSAMAN MANNING AGENCY, INC., and DIAMANTIDES MARITIME, INC., are ordered, jointly and
severally, to pay private respondent WILFREDO T. CAJERAS his salaries for the unexpired portion of his
employment contract or USD$5,100.00, reimburse the latter's placement fee with twelve percent (12%)
interest per annum conformably with Sec. 10 of RA 8042, as well as attorney's fees of ten percent (10%) of the
total monetary award. Costs against petitioners.1wphi1.nt
SO ORDERED.
Republic of the Philippines
SUPREME COURT
FIRST DIVISION
G.R. No. 168445 November 11, 2005
PEOPLE OF THE PHILIPPINES, Appellee,
vs.
CAPT. FLORENCIO O. GASACAO, Appellant.
DECISION
YNARES-SANTIAGO, J.:
This is an appeal from the May 18, 2005 Decision1 of the Court of Appeals in CA-G.R. CR No. 00800
dismissing the appeal of appellant, Florencio O. Gasacao and affirming the March 5, 2001 Joint Decision2 of the
Regional Trial Court (RTC) of Quezon City, Branch 218, finding appellant guilty beyond reasonable doubt of
Large Scale Illegal Recruitment in Crim. Case No. Q-00-94240 and acquitting him of the charge in Crim. Case
No. Q-00-94241.
The factual antecedents are as follows:
Appellant was the Crewing Manager of Great Eastern Shipping Agency Inc., a licensed local manning agency,
while his nephew and co-accused, Jose Gasacao, was the President. As the crewing manager, appellants duties
included receiving job applications, interviewing the applicants and informing them of the agencys requirement
of payment of performance or cash bond prior to deployment.
On August 4, 2000, appellant and Jose Gasacao were charged with Large Scale Illegal Recruitment defined
under Section 6, paragraphs (a), (l) and (m) of Republic Act (RA) No. 8042 or the Migrant Workers and
Overseas Filipinos Act of 1995, and penalized under Section 7 (b) of the same law, before the RTC of Quezon
City.
The informations read:

In Criminal Case No. Q-00-94240

That sometime in the months of May to December, 1999 or thereabout, in Quezon City, Metro Manila,
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, conspiring,
confederating and mutually helping one another, did then and there willfully, unlawfully and criminally recruit,
enlist and promise overseas employment to the private complainants, namely, Lindy M. Villamor, Dennis
Cabangahan, Erencio C. Alaba, Victorino U. Caderao, Rommel B. Patolen, Joseph A. Demetria and Louie A.
Arca, as overseas seamen/seafarers, the said accused thereby charging, exacting and collecting from the said
private complainants cash bonds and/or performance bonds in amounts ranging from P10,000.00 to P20,000.00
without any authority to do so and despite the fact that the same is prohibited by the POEA Rules and
Regulations, which amount is greater than that specified in the schedule of allowable fees prescribed by the
Secretary of Labor and Employment, and despite the payment of the said fees, the said accused failed to
actually deploy the private complainants without valid reasons as determined by the Department of Labor and
Employment and despite the failure of deployment, the said accused failed to reimburse the expenses incurred
by the said private complainants in connection with their documentation and processing for the purpose of their
supposed deployment.
CONTRARY TO LAW.3
In Criminal Case No. Q-00-94241
That sometime in the months of September to November 1999 or thereabout, in Quezon City, Metro Manila,
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, conspiring,
confederating and mutually helping one another, did then and there willfully, unlawfully and criminally recruit,
enlist and promise overseas employment to the private complainants, namely, Melvin I. Yadao, Frederick
Calambro and Andy Bandiola, as overseas seamen/seafarers, the said accused thereby charging, exacting and
collecting from the said private complainants cash bonds and/or performance bonds in amounts ranging from
P10,000.00 to P20,000.00 without any authority to do so and despite the fact that the same is prohibited by the
POEA Rules and Regulations, which amount is greater that that specified in the schedule of allowable fees
prescribed by the Secretary Labor and Employment, and despite the payment of said fees, the said accused
failed to actually deploy the private complainants without valid reasons as determined by the Department of
Labor and Employment and despite the failure of deployment, the said accused failed to reimburse the expenses
incurred by the said private complainants in connection with their documentation and processing for the
purpose of their supposed deployment.
SO ORDERED.4
Only the appellant was arrested while Jose Gasacao remained at large. When arraigned, appellant pleaded not
guilty to the offense charged. Thereafter, trial on the merits ensued. On March 5, 2001, the RTC of Quezon City,
Branch 218, rendered its Joint Decision convicting appellant of Large Scale Illegal Recruitment in Crim. Case
No. Q-00-94240 and acquitting him of the charge in Crim. Case No. Q-00-94241. The dispositive portion of the
joint decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. In Crim. Case No. Q-00-94240, the prosecution having established the guilt of the accused beyond reasonable
doubt, the Court finds Florencio O. Gasacao GUILTY of Large Scale Illegal Recruitment punishable under
Section 7, (b) of R.A. 8042. He is sentenced to suffer life imprisonment and a fine of P500,000.00. He shall also
indemnify Dennis C. Cabangahan in the amount of P8,750.00; Lindy M. Villamor for P20,000.00; Victorino U.
Caderao for P20,000.00; Rommel B. Patolen for P20,000.00; and Erencio C. Alaba for P20,000.00.
Complainants Louie A. Arca and Joseph A. Demetria did not testify.
2. In Crim. Case No. Q-00-94241, complainants Melvin I. Yadao, Frederick Calambro and Andy Bandiola did
not testify. Moreover, the Court believes all these complainants should have been grouped in just one (1)

information. Hence, for failure of the prosecution to prove the guilt of the accused beyond reasonable doubt, the
Court finds Florencio O. Gasacao NOT GUILTY of the offense charged.
SO ORDERED.5
Conformably with our pronouncement in People v. Mateo,6 which modified pertinent provisions of the Rules of
Court insofar as they provide for direct appeals from the RTC to the Supreme Court in cases where the penalty
imposed is death, reclusion perpetua or life imprisonment, as in this case, as well as this Courts Resolution
dated September 19, 1995, we resolved on February 2, 2005 to transfer the case to the Court of Appeals for
appropriate action and disposition.7
On May 18, 2005, the Court of Appeals promulgated the assailed Decision, the dispositive portion of which
reads:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack of merit. The appealed
Joint Decision dated March 5, 2001 of the trial court in Criminal Case No. Q-00-94240 is hereby AFFIRMED
and UPHELD.
With costs against the accused-appellant.
SO ORDERED.8
Hence, this appeal.
The core issue for resolution is whether error attended the trial courts findings, as affirmed by the Court of
Appeals, that appellant was guilty beyond reasonable doubt of the crime of large scale illegal recruitment.
RA No. 8042 defines illegal recruitment as follows:
II. ILLEGAL RECRUITMENT
Sec. 6. DEFINITIONS. For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract services,
promising or advertising for employment abroad, whether for profit or not, when undertaken by a non-licensee
or non-holder of authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended,
otherwise known as the Labor Code of the Philippines: Provided, that such non-licensee or non-holder who, in
any manner, offers or promises for a fee employment abroad to two or more persons shall be deemed so
engaged. It shall likewise include the following acts, whether committed by any persons, whether a nonlicensee, non-holder, licensee or holder of authority.
(a) To charge or accept directly or indirectly any amount greater than the specified in the schedule of allowable
fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than
that actually received by him as a loan or advance;
....
(l) Failure to actually deploy without valid reason as determined by the Department of Labor and Employment;
and
(m) Failure to reimburse expenses incurred by the workers in connection with his documentation and processing
for purposes of deployment, in cases where the deployment does not actually take place without the worker's
fault. Illegal recruitment when committed by a syndicate or in large scale shall be considered as offense
involving economic sabotage.

Illegal recruitment is deemed committed by a syndicate carried out by a group of three (3) or more persons
conspiring or confederating with one another. It is deemed committed in large scale if committed against three
(3) or more persons individually or as a group.
A license is a document issued by the Department of Labor and Employment (DOLE) authorizing a person or
entity to operate a private employment agency, while an authority is a document issued by the DOLE
authorizing a person or association to engage in recruitment and placement activities as a private recruitment
entity. However, it appears that even licensees or holders of authority can be held liable for illegal recruitment
should they commit any of the above-enumerated acts.
Thus, it is inconsequential that appellant committed large scale illegal recruitment while Great Eastern Shipping
Agency, Inc. was holding a valid authority. We thus find that the court below committed no reversible error in
not appreciating that the manning agency was a holder of a valid authority when appellant recruited the private
complainants.
There is no merit in appellants contention that he could not be held liable for illegal recruitment since he was a
mere employee of the manning agency, pursuant to Section 6 of RA No. 8042 which provides:
The persons criminally liable for the above offenses are the principals, accomplices and accessories. In case of
juridical persons, the officers having control, management or direction of their business shall be liable.
Contrary to appellants claim, he is not a mere employee of the manning agency but the crewing manager. As
such, he receives job applications, interviews applicants and informs them of the agencys requirement of
payment of performance or cash bond prior to the applicants deployment. As the crewing manager, he was at
the forefront of the companys recruitment activities.
Private complainant Lindy Villamor testified that it was appellant who informed him that if he will give a cash
bond of P20,000.00, he will be included in the first batch of applicants to be deployed. Notwithstanding the
payment of the cash bond as evidenced by a receipt dated December 15, 1999 and issued by the appellant,
Villamor was not deployed overseas. He further testified that when he found out that appellant was no longer
connected with Great Eastern Shipping Agency Inc., he confronted Jose Gasacao and showed to him a
photocopy of the receipt. Jose Gasacao gave him the address of the appellant but he failed to recover the amount
from the latter.
Another private complainant, Erencio C. Alaba testified that he applied as a seaman with Great Eastern
Shipping Agency Inc. in May 1999 and submitted all the requirements to appellant. The latter told Alaba that
after payment of a cash bond, he will be deployed within three months. On June 3, 1999, Alaba gave
P10,000.00 to the appellant as evidenced by a cash voucher which was approved and signed by the appellant in
the presence of Alaba.
Afterwards, appellant asked Alaba to have his medical examination. He was also informed that those who had
completed paying the P20,000.00 cash bond will have priority in deployment. Thus, Alaba gave another
P10,000.00 to appellant on August 2, 1999 and was again informed that he will be deployed in a dredging or
supply boat within three months from August 1999. Despite appellants representations, Alaba was never
deployed and was also unable to recover the amount of the cash bond that he paid.
Private complainant Dennis Cabangahan testified that he applied as a seaman with Great Eastern Shipping
Agency Inc. on July 27, 1999 and paid the cash bond of P19,000.00 as evidenced by a receipt issued by
appellant. The latter informed him that he will be deployed abroad within three months. As what had happened
to the other complainants, Cabangahan was never deployed overseas nor did he recover his money.
Victoriano Cadirao9 also testified that on August 1, 1999, he applied with the manning agency for the position of
mess man. He submitted his application to appellant who told him to come back when he has the money to
cover the cash bond of P20,000.00. Appellant told him that the payment of the cash bond is optional, but that his
deployment will be fast-tracked if he pays the cash bond. On August 10, 1999, he gave P20,000.00 to appellant

who issued a receipt. When the promised employment failed to materialize, the appellant told Cadirao to wait
for another dredging vessel. In December 1999, he found out that appellant was no longer connected with Great
Eastern Shipping Agency Inc. so he went to his residence and demanded the return of his money. Appellant
however refused to return the amount of the cash bond.
On the other hand, Rommel B. Patolen testified that he applied with Great Eastern Shipping Agency Inc. as an
ordinary seaman in May 1999. After complying with the requirements, appellant told him to report to the
agency thrice a week. From May to December 1999, Patolen reported to the agency as instructed. On December
11, 1999, he gave P20,000.00 to appellant who acknowledged its receipt. Patolen further testified that he paid
the cash bond because appellant told him that his prospective employer will arrive in December 1999 from
Saudi Arabia with a vessel to accommodate him. He was further advised that he could leave within three
months if he paid the cash bond. However, Patolen was never deployed and when he found out that appellant
was no longer connected with Great Eastern Shipping Agency Inc., he went to the house of the latter and
informed him that he was withdrawing his application. Appellant asked him to wait for his new agency, Ocean
Grandeur, which has no license yet.
The foregoing testimonies of the private complainants clearly established that appellant is not a mere employee
of Great Eastern Shipping Agency Inc. As the crewing manager, it was appellant who made representations with
the private complainants that he can secure overseas employment for them upon payment of the cash bond.
It is well settled that to prove illegal recruitment, it must be shown that appellant gave complainants the distinct
impression that he had the power or ability to send complainants abroad for work such that the latter were
convinced to part with their money in order to be employed.10 Appellants act of promising the private
complainants that they will be deployed abroad within three months after they have paid the cash bond clearly
shows that he is engaged in illegal recruitment.
The trial courts appreciation of the complainants testimonies deserves the highest respect since it was in a
better position to asses their credibility.
Even assuming that appellant was a mere employee, such fact is not a shield against his conviction for large
scale illegal recruitment. In the case of People v. Cabais,11 we have held that an employee of a company or
corporation engaged in illegal recruitment may be held liable as principal, together with his employer, if it is
shown that he actively and consciously participated in the recruitment process. We further stated that:
In this case, evidence showed that accused-appellant was the one who informed complainant of job prospects in
Korea and the requirements for deployment. She also received money from them as placement fees. All of the
complainants testified that they personally met the accused-appellant and transacted with her regarding the
overseas job placement offers. Complainants parted with their money, evidenced by receipts signed by accused
Cabais and accused Forneas. Thus, accused-appellant actively participated in the recruitment of the
complainants.12
Clearly, the acts of appellant vis--vis the private complainants, either as the crewing manager of Great Eastern
Shipping Agency Inc. or as a mere employee of the same, constitute acts of large scale illegal recruitment which
should not be countenanced.
We find no reason to deviate from the findings of the trial court that appellant is guilty beyond reasonable doubt
of large scale illegal recruitment. It was established that he promised overseas employment to five applicants,
herein private complainants. He interviewed and required them to complete and submit documents purportedly
needed for their employment. Although he informed them that it is optional, he collected cash bonds and
promised their deployment notwithstanding the proscription against its collection under Section 60 of the
Omnibus Rules and Regulations Implementing R.A. No. 804213 which state that:
SEC. 60. Prohibition on Bonds and Deposits. In no case shall an employment agency require any bond or
cash deposit from the worker to guarantee performance under the contract or his/her repatriation.

We find as flimsy and self serving appellants assertion that he was unaware of the prohibition against the
collection of bonds or cash deposits from applicants. It is an established dictum that ignorance of the law
excuses no one from compliance therewith.14 The defense of good faith is neither available.
It is also undisputed that appellant failed to deploy the private complainants without any valid reason, this
notwithstanding his promise to them that those who can pay the cash bond will be deployed within three months
from payment of the same. Such failure to deploy constitutes a violation of Section 6 (l) of RA No. 8042.
Worse, when it became clear that appellant cannot deploy the private complainants without their fault, he failed
to return the amount of the cash bond paid by them.
Illegal recruitment is deemed committed in large scale if committed against three or more persons individually
or as a group. In this case, five complainants testified against appellants acts of illegal recruitment, thereby
rendering his acts tantamount to economic sabotage. Under Section 7 (b) of RA No. 8042, the penalty of life
imprisonment and a fine of not less than P500,000.00 nor more than P1,000.000.00 shall be imposed if illegal
recruitment constitutes economic sabotage.
Verily, the trial court and the Court of Appeals correctly found appellant guilty beyond reasonable of large scale
illegal recruitment.
WHEREFORE, the May 18, 2005 Decision of the Court of Appeals in CA-G.R. CR No. 00800
is AFFIRMED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 125044 July 13, 1998
IMELDA DARVIN, petitioner,
vs.
HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

ROMERO, J.:
Before us is a petition for review of the decision of the Court of Appeals in C.A.-G.R. No. 15624 dated January
31, 1996, 1 which affirmed in toto the judgment of the Regional Trial Court, Branch 19, Bacoor, Cavite,
convicting accused-appellant, Imelda Darvin for simple illegal recruitment under Article 38 and Article 39, in
relation to Article 13 (b) and (c), of the Labor Code as amended.
Accused-appellant was charged under the following information:
That on our about the 13th day of April 1992, in the Municipality of Bacoor, Province of Cavite,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused,
through fraudulent representation to one Macaria Toledo to the effect that she has the authority to
recruit workers and employees for abroad and can facilitate the necessary papers in connection
thereof, did, then and there, wilfully, unlawfully and feloniously, hire, recruit and promise a job
abroad to one Macaria Toledo, without first securing the necessary license and permit from the
Philippine Overseas Employment Administration to do so, thereby causing damage and prejudice
to the aforesaid Macaria Toledo.

Contrary to law. 2
The evidence for the prosecution, based on the testimony of private respondent, Macaria Toledo, shows that
sometime in March, 1992, she met accused-appellant Darvin in the latter's residence at Dimasalang, Imus,
Cavite, through the introduction of their common friends, Florencio Jake Rivera and Leonila Rivera. In said
meeting, accused-appellant allegedly convinced Toledo that by giving her P150,000.00, the latter can
immediately leave for the United States without any appearance before the U.S. embassy. 3 Thus, on April 13,
1992, Toledo gave Darvin the amount of P150,000.00, as evidenced by a receipt stating that the "amount of
P150,000.00 was for U.S. Visa and Air fare." 4After receiving the money, Darvin assured Toledo that she can
leave within one week. However, when after a week, there was no word from Darvin, Toledo went to her
residence to inquire about any development, but could not find Darvin. Thereafter, on May 7, 1992, Toledo filed
a complaint with the Bacoor Police Station against Imelda Darvin. Upon further investigation, a certification
was issued by the Philippine Overseas Employment Administration (POEA) stating that Imelda Darvin is
neither licensed nor authorized to recruit workers for overseas employment. 5 Accused-appellant was then
charged for estafa and illegal recruitment by the Office of the Provincial Prosecutor of Cavite.
Accused-appellant, on the other hand, testified that she used to be connected with Dale Travel Agency and that
in 1992, or thereabouts, she was assisting individuals in securing passports, visa, and airline tickets. She came to
know Toledo through Florencio Jake Rivera, Jr. and Leonila Rivera, alleging that Toledo sought her help to
secure a passport, US visa and airline tickets to the States. She claims that she did not promise any employment
in the U.S. to Toledo. She, however, admits receiving the amount of P150,000.00 from the latter on April 13,
1992 but contends that it was used for necessary expenses of an intended trip to the United States of Toledo and
her friend, Florencio Rivera 6 as follows. P45,000.00 for plane fare for one person; P1,500.00 for passport,
documentation and other incidental expenses for each person; P20,000.00 for visa application cost for each
person; and P17,000.00 for services.7 After receiving the money, she allegedly told Toledo that the papers will
be released within 45 days. She likewise testified that she was able to secure Toledo's passport on April 20, 1992
and even set up a date for an interview with the US embassy. Accused alleged that she was not engaged in
illegal recruitment but merely acted as a travel agent in assisting individuals to secure passports and visa.
In its judgment rendered on June 17, 1993, the Bacoor, Cavite RTC found accused-appellant guilty of the crime
of simple illegal recruitment but acquitted her of the crime of estafa. The dispositive portion of the judgment
reads as follows:
WHEREFORE, premises considered, accused Imelda Darvin is hereby found guilty beyond
reasonable doubt of the crime of Simple Illegal Recruitment for having committed the prohibited
practice as defined by paragraph (b) of Article 34 and punished by paragraph (c) of Article 39 of
the Labor Code, as amended by PD 2018.
Accused Imelda Darvin is hereby ordered to suffer the prison term of Four (4) years, as
minimum, to Eight (8) years, as maximum; and to pay the fine of P25,000.00.
Regarding her civil liability, she is hereby ordered to reimburse the private complainant the sum
of P150,000.00 and attorney's fees of P10,000.00.
She is hereby acquitted of the crime of Estafa.
SO ORDERED. 8
On appeal, the Court of Appeals affirmed the decision of the trial court in toto, hence this petition.
Before this Court, accused-appellant assails the decision of the trial and appellate courts in convicting her of the
crime of simple illegal recruitment. She contends that based on the evidence presented by the prosecution, her
guilt was not proven beyond reasonable doubt.
We find the appeal impressed with merit.

Art. 13 of the Labor Code, as amended, provides the definition of recruitment and placement as:
. . .; b) any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring
workers, and includes referrals, contract services, promising or advertising for employment
locally or abroad, whether for profit or not: Provided, that any person or entity which, in any
manner, offers or promises for a fee employment to two or more persons shall be deemed
engaged in recruitment and placement.
On the other hand, Article 38 of the Labor Code provides:
a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of
this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal
and punishable under Article 39 of this Code. The Ministry of Labor and Employment or any law
enforcement officer may initiate complaints under this Article.
xxx xxx xxx
Applied to the present case, to uphold the conviction of accused-appellant, two elements need to be shown: (1)
the person charged with the crime must have undertaken recruitment activities; and (2) the said person does not
have a license or authority to do so. 9
In this case, private respondent, Macaria Toledo alleged that she was offered a job in the United States as
nursing aide 10 by accused-appellant. In her direct examination, she testified as follows:
Atty. Alejandro:
Q : How did you come to know the accused?
Witness : I was introduced by my two friends. One of whom is my best friend.
That according to them, this accused has connections and authorizations, that she
can make people leave for abroad, sir.
Court : What connections?
Witness : That she has connections with the Embassy and with people whom she
can approach regarding work abroad, your Honor.
xxx xxx xxx
Q : When you came to meet for the first time in Imus, Cavite, what transpired in
that meeting of yours?
A : When I came to her house, the accused convinced me that by means of
P150,000.00, I will be able to leave immediately without any appearance to any
embassy, non-appearance, Sir.
Q : When you mentioned non-appearance, as told to you by the accused,
precisely, what do you mean by that?
A : I was told by the accused that non-appearance, means without working
personally for my papers and through her efforts considering that she is
capacitated as according to her I will be able to leave the country, Sir.
xxx xxx xxx

Atty. Alejandro : What transpired after the accused told you all these things that
you will be able to secure all the documents without appearing to anybody or to
any embassy and that you will be able to work abroad?
Witness : She told me to get ready with my P150,000.00, that is if I want to leave
immediately, Sir.
Atty. Alejandro : When you mentioned kaagad, how many days or week?
Witness : She said that if I will able to part with my P150,000.00. I will be able to
leave in just one week time, Sir.
xxx xxx xxx 11
The prosecution, as evidence, presented the certification issued by the POEA that accused-appellant Imelda
Darvin is not licensed to recruit workers abroad.
It is not disputed that accused-appellant does not have a license or authority to engage in recruitment activities.
The pivotal issue to be determined, therefore, is whether the accused-appellant indeed engaged in recruitment
activities, as defined under the Labor Code. Applying the rule laid down in the case of People v. Goce, 12 to
prove that accused-appellant was engaged in recruitment activities as to commit the crime of illegal recruitment,
it must be shown that the accused appellant gave private respondent the distinct impression that she had the
power or ability to send the private respondent abroad for work such that the latter was convinced to part with
her money in order to be so employed.
In this case, we find no sufficient evidence to prove that accused-ppellant offered a job to private respondent. It
is not clear that accused gave the impression that she was capable of providing the private respondent work
abroad. What is established, however, is that the private respondent gave accused-appellant P150,000.00. The
claim of the accused that the P150,000.00 was for payment of private respondent's air fare and US visa and
other expenses cannot be ignored because the receipt for the P150,000.00, which was presented by both parties
during the trial of the case, stated that it was "for Air Fare and Visa to USA." 13 Had the amount been for
something else in addition to air fare and visa expenses, such as work placement abroad, the receipt should have
so stated.
By themselves, procuring a passport, airline tickets and foreign visa for another individual, without more, can
hardly qualify as recruitment activities. Aside from the testimony of private respondent, there is nothing to show
that accused-appellant engaged in recruitment activities. We also note that the prosecution did not present the
testimonies of witnesses who could have corroborated the charge of illegal recruitment, such as Florencio
Rivera, and Leonila Rivera, when it had the opportunity to do so. As it stands, the claim of private respondent
that accused-appellant promised her employment abroad is uncorroborated. All these, taken collectively, cast
reasonable doubt on the guilt of the accused.
This Court can hardly rely on the bare allegations of private respondent that she was offered by accusedappellant employment abroad, nor on mere presumptions and conjectures, to convict the latter. No sufficient
evidence was shown to sustain the conviction, as the burden of proof lies with the prosecution to establish that
accused-appellant indeed engaged in recruitment activities, thus committing the crime of illegal recruitment.
In criminal cases, the burden is on the prosecution to prove, beyond reasonable doubt, the essential elements of
the offense with which the accused is charged; and if the proof fails to establish any of the essential elements
necessary to constitute a crime, the defendant is entitled to an acquittal. Proof beyond reasonable doubt does not
mean such a degree of proof as, excluding the possibility of error, produces absolute certainty. Moral certainty
only is required, or that degree of proof which produces conviction in an unprejudiced mind. 14
At best, the evidence proffered by the prosecution only goes so far as to create a suspicion that accusedappellant probably perpetrated the crime charged. But suspicion alone is insufficient, the required quantum of

evidence being proof beyond reasonable doubt. When the People's evidence fail to indubitably prove the
accused' s authorship of the crime of which he stands accused, then it is the Court's duty, and the accused's right,
to proclaim his innocence. Acquittal, therefore, is in order. 15
WHEREFORE, the appeal is hereby GRANTED and the decision of the Court of Appeals in CA-G.R. CR No.
15624 dated January 31, 1996, is REVERSED and SET ASIDE. Accused-appellant Imelda Darvin is hereby
ACQUITTED on ground of reasonable doubt. Accordingly, let the accused be immediately released from her
place of confinement unless there is reason to detain her further for any other legal or valid cause. No
pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 93666

April 22, 1991

GENERAL MILLING CORPORATION and EARL TIMOTHY CONE, petitioners,

vs.
HON. RUBEN D. TORRES, in his capacity as Secretary of Labor and Employment, HON.
BIENVENIDO E. LAGUESMA, in his capacity as Acting Secretary of Labor and Employment, and
BASKETBALL COACHES ASSOCIATION OF THE PHILIPPINES, respondents.
Sobrevinas, Diaz, Hayudini & Bodegon Law Office for petitioners.
Rodrigo, Cuevas & De Borja for respondent BCAP.

RESOLUTION
FELICIANO, J.:
On 1 May 1989, the National Capital Region of the Department of Labor and Employment issued Alien
Employment Permit No. M-0689-3-535 in favor of petitioner Earl Timothy Cone, a United States citizen, as
sports consultant and assistant coach for petitioner General Milling Corporation ("GMC").
On 27 December 1989, petitioners GMC and Cone entered into a contract of employment whereby the latter
undertook to coach GMC's basketball team.
On 15 January 1990, the Board of Special Inquiry of the Commission on Immigration and Deportation
approved petitioner Cone's application for a change of admission status from temporary visitor to pre-arranged
employee.
On 9 February 1990, petitioner GMC requested renewal of petitioner Cone's alien employment permit. GMC
also requested that it be allowed to employ Cone as full-fledged coach. The DOLE Regional Director, Luna
Piezas, granted the request on 15 February 1990.
On 18 February 1990, Alien Employment Permit No. M-02903-881, valid until 25 December 1990, was issued.
Private respondent Basketball Coaches Association of the Philippines ("BCAP") appealed the issuance of said
alien employment permit to the respondent Secretary of Labor who, on 23 April 1990, issued a decision
ordering cancellation of petitioner Cone's employment permit on the ground that there was no showing that
there is no person in the Philippines who is competent, able and willing to perform the services required nor that
the hiring of petitioner Cone would redound to the national interest.

Petitioner GMC filed a Motion for Reconsideration and two (2) Supplemental Motions for Reconsideration but
said Motions were denied by Acting Secretary of Labor Bienvenido E. Laguesma in an Order dated 8 June
1990.
Petitioners are now before the Court on a Petition for Certiorari, dated 14 June 1990, alleging that:
1. respondent Secretary of Labor gravely abused his discretion when he revoked petitioner Cone's alien
employment permit; and
2. Section 6 (c), Rule XIV, Book I of the Omnibus Rules Implementing the Labor Code is null and void
as it is in violation of the enabling law as the Labor Code does not empower respondent Secretary to
determine if the employment of an alien would redound to national interest.
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 respondent Secretary of
Labor in rendering his decision, dated 23 April 1990, revoking petitioner Cone's Alien Employment Permit.
The alleged failure to notify petitioners of the appeal filed by private respondent BCAP was cured when
petitioners were allowed to file their Motion for Reconsideration before respondent Secretary of Labor.1
Petitioner GMC's claim that hiring of a foreign coach is an employer's prerogative has no legal basis at all.
Under Article 40 of the Labor Code, an employer seeking employment of an alien must first obtain an
employment permit from the Department of Labor. Petitioner GMC's right to choose whom to employ is, of
course, limited by the statutory requirement of an alien employment permit.
Petitioners will not find solace in the equal protection clause of the Constitution. As pointed out by the SolicitorGeneral, no comparison can be made between petitioner Cone and Mr. Norman Black as the latter is "a long
time resident of the country," and thus, not subject to the provisions of Article 40 of the Labor Code which
apply only to "non-resident aliens." In any case, the term "non-resident alien" and its obverse "resident alien,"
here must be given their technical connotation under our law on immigration.
Neither can petitioners validly claim that implementation of respondent Secretary's decision would amount to an
impairment of the obligations of contracts. The provisions of the Labor Code and its Implementing Rules and
Regulations requiring alien employment permits were in existence long before petitioners entered into their
contract of employment. It is firmly settled that provisions of applicable laws, especially provisions relating to
matters affected with public policy, are deemed written into contracts.2 Private parties cannot constitutionally
contract away the otherwise applicable provisions of law.
Petitioners' contention that respondent Secretary of Labor should have deferred to the findings of Commission
on Immigration and Deportation as to the necessity of employing petitioner Cone, is, again, bereft of legal basis.
The Labor Code itself specifically empowers respondent Secretary to make a determination as to the availability
of the services of a "person in the Philippines who is competent, able and willing at the time of application to
perform the services for which an alien is desired."3
In short, the Department of Labor is the agency vested with jurisdiction to determine the question of availability
of local workers. The constitutional validity of legal provisions granting such jurisdiction and authority and
requiring proof of non-availability of local nationals able to carry out the duties of the position involved, cannot
be seriously questioned.
Petitioners apparently also question the validity of the Implementing Rules and Regulations, specifically
Section 6 (c), Rule XIV, Book I of the Implementing Rules, as imposing a condition not found in the Labor
Code itself. Section 6 (c), Rule XIV, Book I of the Implementing Rules, provides as follows:
Section 6. Issuance of Employment Permit the Secretary of Labor may issue an employment permit
to the applicant based on:
a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;
b) Report of the Bureau Director as to the availability or non-availability of any person in the
Philippines who is competent and willing to do the job for which the services of the applicant are
desired.

(c) His assessment as to whether or not the employment of the applicant will redound to the national
interest;
(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;
(e) The recommendation of the Board of Investments or other appropriate government agencies if the
applicant will be employed in preferred areas of investments or in accordance with the imperative of
economic development;
xxx

xxx

xxx

(Emphasis supplied)
Article 40 of the Labor Code reads as follows:
Art. 40. Employment per unit of non-resident aliens. Any alien seeking admission to the Philippines
for employment purposes and any domestic or foreign employer who desires to engage an alien for
employment in the Philippines shall obtain an employment permit from the Department of Labor.
The employment permit may be issued to a non-resident alien or to the applicant employer after a
determination of the non-availability of a person in the Philippines who is competent, able and willing at
the time of application to perform the services for which the alien is desired.
For an enterprise registered in preferred areas of investments, said employment permit may be issued
upon recommendation of the government agency charged with the supervision of said registered
enterprise. (Emphasis supplied)
Petitioners apparently suggest that the Secretary of Labor is not authorized to take into account the question of
whether or not employment of an alien applicant would "redound to the national interest" because Article 40
does not explicitly refer to such assessment. This argument (which seems impliedly to concede that the
relationship of basketball coaching and the national interest is tenuous and unreal) is not persuasive. In the first
place, the second paragraph of Article 40 says: "[t]he employment permit may be issued to a non-resident alien
or to the applicant employer after a determination of the non-availability of a person in the Philippines who is
competent, able and willing at the time of application to perform the services for which the alien is desired."
The permissive language employed in the Labor Code indicates that the authority granted involves the exercise
of discretion on the part of the issuing authority. In the second place, Article 12 of the Labor Code sets forth a
statement of objectives that the Secretary of Labor should, and indeed must, take into account in exercising his
authority and jurisdiction granted by the Labor Code,
Art. 12. Statement of Objectives. It is the policy of the State:
a) To promote and maintain a state of full employment through improved manpower training, allocation
and utilization;
xxx

xxx

xxx

c) To facilitate a free choice of available employment by persons seeking work in conformity with the
national interest;
d) To facilitate and regulate the movement of workers in conformity with the national interest;
e) To regulate the employment of aliens, including the establishment of a registration and/or work permit
system;
xxx

xxx

xxx

Thus, we find petitioners' arguments on the above points of constitutional law too insubstantial to require
further consideration.1avvphi1
Petitioners have very recently manifested to this Court that public respondent Secretary of Labor has reversed
his earlier decision and has issued an Employment Permit to petitioner Cone. Petitioners seek to withdraw their
Petition for Certiorari on the ground that it has become moot and academic.

While ordinarily this Court would dismiss a petition that clearly appears to have become moot and academic,
the circumstances of this case and the nature of the questions raised by petitioners are such that we do not feel
justified in leaving those questions unanswered.4
Moreover, assuming that an alien employment permit has in fact been issued to petitioner Cone, the basis of the
reversal by the Secretary of Labor of his earlier decision does not appear in the record. If such reversal is based
on some view of constitutional law or labor law different from those here set out, then such employment permit,
if one has been issued, would appear open to serious legal objections.
ACCORDINGLY, the Court Resolved to DISMISS the Petition for certiorari for lack of merit. Costs against
petitioners.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 122917 July 12, 1999

MARITES BERNARDO, ELVIRA GO DIAMANTE, REBECCA E. DAVID, DAVID P. PASCUAL,
RAQUEL ESTILLER, ALBERT HALLARE, EDMUND M. CORTEZ, JOSELITO O. AGDON
GEORGE P. LIGUTAN JR., CELSO M. YAZAR, ALEX G. CORPUZ, RONALD M. DELFIN,
ROWENA M. TABAQUERO, CORAZON C. DELOS REYES, ROBERT G. NOORA, MILAGROS O.
LEQUIGAN, ADRIANA F. TATLONGHARI, IKE CABANDUCOS, COCOY NOBELLO, DORENDA
CANTIMBUHAN, ROBERT MARCELO, LILIBETH Q. MARMOLEJO, JOSE E. SALES, ISABEL
MAMAUAG, VIOLETA G. MONTES, ALBINO TECSON, MELODY V. GRUELA, BERNADETH D.
AGERO, CYNTHIA DE VERA, LANI R. CORTEZ, MA. ISABEL B. CONCEPCION, DINDO
VALERIO, ZENAIDA MATA, ARIEL DEL PILAR, MARGARET CECILIA CANOZA, THELMA
SEBASTIAN, MA. JEANETTE CERVANTES, JEANNIE RAMIL, ROZAIDA PASCUAL, PINKY
BALOLOA, ELIZABETH VENTURA, GRACE S. PARDO and TIMOSA,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FAR EAST BANK AND TRUST
COMPANY, respondents.

PANGANIBAN, J.:
The Magna Carta for Disabled Persons mandates that qualified disabled persons be granted the same terms and
conditions of employment as qualified able-bodied employees. Once they have attained the status of regular
workers, they should be accorded all the benefits granted by law, notwithstanding written or verbal contracts to
the contrary. This treatments is rooted not merely on charity or accomodation, but on justice for all.
The Case
Challenged in the Petition for Certiorari 1 before us is the June 20, 1995 Decision 2 of the National Labor
Relations Commission (NLRC), 3 which affirmed the August, 22 1994 ruling of Labor Arbiter Cornelio L.
Linsangan. The labor arbiter's Decision disposed as follows: 4
WHEREFORE, judgment is hereby rendered dismissing the above-mentioned complaint for lack
of merit.
Also assailed is the August 4, 1995 Resolution 5 of the NLRC, which denied the Motion for Reconsideration.
The Facts
The facts were summarized by the NLRC in this wise: 6

Complainants numbering 43 (p. 176, Records) are deaf-mutes who were hired on various periods
from 1988 to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and Counters
through a uniformly worded agreement called "Employment Contract for Handicapped
Workers". (pp. 68 & 69, Records) The full text of said agreement is quoted below:
EMPLOYMENT CONTRACT FOR
HANDICAPPED WORKERS
This Contract, entered into by and between:
FAR EAST BANK AND TRUST COMPANY, a universal banking corporation
duly organized and existing under and by virtue of the laws of the Philippines,
with business address at FEBTC Building, Muralla, Intramuros, Manila,
represented herein by its Assistant Vice President, MR. FLORENDO G.
MARANAN, (hereinafter referred to as the "BANK");
-and, years old, of legal age, , and residing at
(hereinafter referred to as the ("EMPLOYEE").
WITNESSETH : That
WHEREAS, the BANK, cognizant of its social responsibility, realizes that there is
a need to provide disabled and handicapped persons gainful employment and
opportunities to realize their potentials, uplift their socio-economic well being and
welfare and make them productive, self-reliant and useful citizens to enable them
to fully integrate in the mainstream of society;
WHEREAS, there are certain positions in the BANK which may be filled-up by
disabled and handicapped persons, particularly deaf-mutes, and the BANK ha[s]
been approached by some civic-minded citizens and authorized government
agencies [regarding] the possibility of hiring handicapped workers for these
positions;
WHEREAS, the EMPLOYEE is one of those handicapped workers who [were]
recommended for possible employment with the BANK;
NOW, THEREFORE, for and in consideration of the foregoing premises and in
compliance with Article 80 of the Labor Code of the Philippines as amended, the
BANK and the EMPLOYEE have entered into this Employment Contract as
follows:
1. The BANK agrees to employ and train the EMPLOYEE, and the EMPLOYEE
agrees to diligently and faithfully work with the BANK, as Money
Sorter and Counter.
2. The EMPLOYEE shall perform among others, the following duties and
responsibilities:
i. Sort out bills according to color;
ii. Count each denomination per hundred, either
manually or with the aid of a counting machine;
iii. Wrap and label bills per hundred;
iv. Put the wrapped bills into bundles; and
v. Submit bundled bills to the bank teller for
verification.

3. The EMPLOYEE shall undergo a training period of one (1) month, after which
the BANK shall determine whether or not he/she should be allowed to finish the
remaining term of this Contract.
4. The EMPLOYEE shall be entitled to an initial compensation of P118.00 per
day, subject to adjustment in the sole judgment of the BANK, payable every 15th
and end of the month.1wphi1.nt
5. The regular work schedule of the EMPLOYEE shall be five (5) days per week,
from Mondays thru Fridays, at eight (8) hours a day. The EMPLOYEE may be
required to perform overtime work as circumstance may warrant, for which
overtime work he/she [shall] be paid an additional compensation of 125% of his
daily rate if performed during ordinary days and 130% if performed during
Saturday or [a] rest day.
6. The EMPLOYEE shall likewise be entitled to the following benefits:
i. Proportionate 13th month pay based on his basic
daily wage.
ii. Five (5) days incentive leave.
iii. SSS premium payment.
7. The EMPLOYEE binds himself/herself to abide [by] and comply with all the
BANK Rules and Regulations and Policies, and to conduct himself/herself in a
manner expected of all employees of the BANK.
8. The EMPLOYEE acknowledges the fact that he/she had been employed under
a special employment program of the BANK, for which reason the standard hiring
requirements of the BANK were not applied in his/her case. Consequently, the
EMPLOYEE acknowledges and accepts the fact that the terms and conditions of
the employment generally observed by the BANK with respect to the BANK's
regular employee are not applicable to the EMPLOYEE, and that therefore, the
terms and conditions of the EMPLOYEE's employment with the BANK shall be
governed solely and exclusively by this Contract and by the applicable rules and
regulations that the Department of Labor and Employment may issue in
connection with the employment ofdisabled and handicapped workers. More
specifically, the EMPLOYEE hereby acknowledges that the provisions of Book
Six of the Labor Code of the Philippines as amended, particularly on regulation of
employment and separation pay are not applicable to him/her.
9. The Employment Contract shall be for a period of six (6) months or from
to unless earlier terminated by the BANK for any just or reasonable cause.
Any continuation or extension of this Contract shall be in writing and therefore
this Contract will automatically expire at the end of its terms unless renewed in
writing by the BANK.
IN WITNESS WHEREOF, the parties, have hereunto affixed their signature[s]
this day of , at Intramuros, Manila, Philippines.
In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989 another two (2); in 1990,
nineteen (19); in 1991 six (6); in 1992, six (6) and in 1993, twenty-one (21). Their
employment[s] were renewed every six months such that by the time this case arose, there were
fifty-six (56) deaf-mutes who were employed by respondent under the said employment
agreement. The last one was Thelma Malindoy who was employed in 1992 and whose contract
expired on July 1993.
xxx xxx xxx
Disclaiming that complainants were regular employees, respondent Far East Bank and Trust
Company maintained that complainants who are a special class of workers the hearing

impaired employees were hired temporarily under [a] special employment arrangement which
was a result of overtures made by some civic and political personalities to the respondent Bank;
that complainant[s] were hired due to "pakiusap" which must be considered in the light of the
context career and working environment which is to maintain and strengthen a corps of
professionals trained and qualified officers and regular employees who are baccalaureate degree
holders from excellent schools which is an unbending policy in the hiring of regular employees;
that in addition to this, training continues so that the regular employee grows in the corporate
ladder; that the idea of hiring handicapped workers was acceptable to them only on a special
arrangement basis; that it was adopted the special program to help tide over a group of workers
such as deaf-mutes like the complainants who could do manual work for the respondent Bank;
that the task of counting and sorting of bills which was being performed by tellers could be
assigned to deaf-mutes that the counting and sorting of money are tellering works which were
always logically and naturally part and parcel of the tellers' normal functions; that from the
beginning there have been no separate items in the respondent Bank plantilla for sortes or
counters; that the tellers themselves already did the sorting and counting chore as a regular
feature and integral part of their duties (p. 97, Records); that through the "pakiusap" of Arturo
Borjal, the tellers were relieved of this task of counting and sorting bills in favor of deaf-mutes
without creating new positions as there is no position either in the respondent or in any other
bank in the Philippines which deals with purely counting and sorting of bills in banking
operations.
Petitioners specified when each of them was hired and dimissed, viz: 7

NAME OF PETITIONER

WORKPLACE

Date Hired

Date Dismissed

1. MARITES BERNARDO

Intramuros

12-Nov-90

17-Nov-93

2. ELVIRA GO DIAMANTE

Intramuros

24-Jan-90

11-Jan-94

3. REBECCA E. DAVID

Intramuros

16-Apr-90

23-Oct-93

4. DAVID P. PASCUAL

Bel-Air

15-Oct-88

21-Nov-94

5. RAQUEL ESTILLER

Intramuros

2-Jul-92

4-Jan-94

6. ALBERT HALLARE

West

4-Jan-91

9-Jan-94

7. EDMUND M. CORTEZ

Bel-Air

15-Jan-91

3-Dec-93

8. JOSELITO O. AGDON

Intramuros

5-Nov-90

17-Nov-93

9. GEORGE P. LIGUTAN JR.

Intramuros

6-Sep-89

19-Jan-94

10. CELSO M. YAZAR

Intramuros

8-Feb-93

8-Aug-93

11. ALEX G. CORPUZ

Intramuros

15-Feb-93

15-Aug-93

12. RONALD M. DELFIN

Intramuros

22-Feb-93

22-Aug-93

13. ROWENA M. TABAQUERO

Intramuros

22-Feb-93

22-Aug-93

14. CORAZON C. DELOS REYES

Intramuros

8-Feb-93

8-Aug-93

15. ROBERT G. NOORA

Intramuros

15-Feb-93

15-Aug-93

16. MILAGROS O. LEQUIGAN

Intramuros

1-Feb-93

1-Aug-93

17. ADRIANA F. TATLONGHARI

Intramuros

22-Jan-93

22-Jul-93

18. IKE CABUNDUCOS

Intramuros

24-Feb-93

24-Aug-93

19. COCOY NOBELLO

Intramuros

22-Feb-93

22-Aug-93

20. DORENDA CATIMBUHAN

Intramuros

15-Feb-93

15-Aug-93

21. ROBERT MARCELO

West

31 JUL 93 8

1-Aug-93

22. LILIBETH Q. MARMOLEJO

West

15-Jun-90

21-Nov-93

23. JOSE E. SALES

West

6-Aug-92

12-Oct-93

24. ISABEL MAMAUAG

West

8-May-92

10-Nov-93

25. VIOLETA G. MONTES

Intramuros

2-Feb-90

15-Jan-94

26. ALBINO TECSON

Intramuros

7-Nov-91

10-Nov-93

27. MELODY B. GRUELA

West

28-Oct-91

3-Nov-93

28. BERNADETH D. AGERO

West

19-Dec-90

27-Dec-93

29. CYNTHIA DE VERA

Bel-Air

26-Jun-90

3-Dec-93

30. LANI R. CORTEZ

Bel-Air

15-Oct-88

10-Dec-93

31. MARIA ISABEL B.CONCEPCION West

6-Sep-90

6-Feb-94

32. DINDO VALERIO

Intramuros

30-May-93

30-Nov-93

33. ZENAIDA MATA

Intramuros

10-Feb-93

10-Aug-93

34. ARIEL DEL PILAR

Intramuros

24-Feb-93

24-Aug-93

35. MARGARET CECILIA CANOZA Intramuros

27-Jul-90

4-Feb-94

12-Nov-90

17-Nov-93

6-Jun-92

7-Dec-93

36. THELMA SEBASTIAN

Intramuros

37. MA. JEANETTE CERVANTES

West

38. JEANNIE RAMIL

Intramuros

23-Apr-90

12-Oct-93

39. ROZAIDA PASCUAL

Bel-Air

20-Apr-89

29-Oct-93

40. PINKY BALOLOA

West

3-Jun-91

2-Dec-93

41. ELIZABETH VENTURA

West

12-Mar-90

FEB 94 [sic]

42. GRACE S. PARDO

West

4-Apr-90

13-Mar-94

43. RICO TIMOSA

Intramuros

28-Apr-93

28-Oct-93

As earlier noted, the labor arbiter and, on appeal, the NLRC ruled against herein petitioners. Hence, this
recourse to this Court. 9
The Ruling of the NLRC
In affirming the ruling of the labor arbiter that herein petitioners could not be deemed regular employees under
Article 280 of the Labor Code, as amended, Respondent Commission ratiocinated as follows:
We agree that Art. 280 is not controlling herein. We give due credence to the conclusion that
complainants were hired as an accommodation to [the] recommendation of civic oriented
personalities whose employment[s] were covered by . . . Employment Contract[s] with special
provisions on duration of contract as specified under Art. 80. Hence, as correctly held by the
Labor Arbiter a quo, the terms of the contract shall be the law between the parties. 10
The NLRC also declared that the Magna Carta for Disabled Persons was not applicable, "considering the
prevailing circumstances/milieu of the case."
Issues

In their Memorandum, petitioners cite the following grounds in support of their cause:
I. The Honorable Commission committed grave abuse of discretion in holding that the petitioners
money sorters and counters working in a bank were not regular employees.
II. The Honorable Commission committed grave abuse of discretion in holding that the
employment contracts signed and renewed by the petitioners which provide for a period of six
(6) months were valid.
III. The Honorable Commission committed grave abuse of discretion in not applying the
provisions of the Magna Carta for the Disabled (Republic Act No. 7277), on proscription against
discrimination against disabled persons. 11
In the main, the Court will resolve whether petitioners have become regular employees.
This Court's Ruling
The petition is meritorious. However, only the employees, who worked for more than six months and whose
contracts were renewed are deemed regular. Hence, their dismissal from employement was illegal.
Preliminary Matter:
Propriety of Certiorari
Respondent Far East Bank and Trust Company argues that a review of the findings of facts of the NLRC is not
allowed in a petition for certiorari. Specifically, it maintains that the Court cannot pass upon the findings of
public respondent that petitioners were not regular employees.
True, the Court, as a rule, does not review the factual findings of public respondents in a certiorari proceeding.
In resolving whether the petitioners have become regular employees, we shall not change the facts found by the
public respondent. Our task is merely to determine whether the NLRC committed grave abuse of discretion in
applying the law to the established facts, as above-quoted from the assailed Decision.
Main Issue
Are Petitioners Regular Employee?
Petitioners maintain that they should be considered regular employees, because their task as money sorters and
counters was necessary and desirable to the business of respondent bank. They further allege that their contracts
served merely to preclude the application of Article 280 and to bar them from becoming regular employees.
Private respondent, on the other hand, submits that petitioners were hired only as "special workers and should
not in any way be considered as part of the regular complement of the Bank." 12 Rather, they were "special"
workers under Article 80 of the Labor Code. Private respondent contends that it never solicited the services of
petitioners, whose employment was merely an "accommodation" in response to the requests of government
officials and civic-minded citizens. They were told from the start, "with the assistance of government
representatives," that they could not become regular employees because there were no plantilla positions for
"money sorters," whose task used to be performed by tellers. Their contracts were renewed several times, not
because of need "but merely for humanitarian reasons." Respondent submits that "as of the present, the "special
position" that was created for the petitioners no longer exist[s] in private respondent [bank], after the latter had
decided not to renew anymore their special employment contracts."
At the outset, let it be known that this Court appreciates the nobility of private respondent's effort to provide
employment to physically impaired individuals and to make them more productive members of society.
However, we cannot allow it to elude the legal consequences of that effort, simply because it now deems their
employment irrelevant. The facts, viewed in light of the Labor Code and the Magna Carta for Disabled Persons,
indubitably show that the petitioners, except sixteen of them, should be deemed regular employees. As such,
they have acquired legal rights that this Court is duty-bound to protect and uphold, not as a matter of
compassion but as a consequence of law and justice.
The uniform employment contracts of the petitioners stipulated that they shall be trained for a period of one
month, after which the employer shall determine whether or not they should be allowed to finish the 6-month

term of the contract. Furthermore, the employer may terminate the contract at any time for a just and reasonable
cause. Unless renewed in writing by the employer, the contract shall automatically expire at the end of the
term.1wphi1.nt
According to private respondent, the employment contracts were prepared in accordance with Article 80 of the
Labor code, which provides;
Art. 80. Employment agreement. Any employer who employs handicapped workers shall enter
into an employment agreement with them, which agreement shall include:
(a) The names and addresses of the handicapped workers to be employed;
(b) The rate to be paid the handicapped workers which shall be not less than
seventy five (75%) per cent of the applicable legal minimum wage;
(c) The duration of employment period; and
(d) The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary of Labor or his duly
authorized representatives.
The stipulations in the employment contracts indubitably conform with the aforecited provision. Succeeding
events and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons), 13 however, justify the
application of Article 280 of the Labor Code.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the
contracts of 37 of them. In fact, two of them worked from 1988 to 1993. Verily, the renewal of the contracts of
the handicapped workers and the hiring of others lead to the conclusion that their tasks were beneficial and
necessary to the bank. More important, these facts show that they were qualified to perform the responsibilities
of their positions. In other words, their disability did not render them unqualified or unfit for the tasks assigned
to them.
In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given
the same terms and conditions of employment as a qualified able-bodied person. Section 5 of the Magna Carta
provides:
Sec. 5. Equal Opportunity for Employment. No disabled person shall be denied access to
opportunities for suitable employment. A qualified disabled employee shall be subject to the
same terms and conditions of employment and the same compensation, privileges, benefits,
fringe benefits, incentives or allowances as a qualified able bodied person.
The fact that the employees were qualified disabled persons necessarily removes the employment contracts
from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons,
they are thus covered by Article 280 of the Labor Code, which 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 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 activity exists.
The test of whether an employee is regular was laid down in De Leon v. NLRC, 14 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 one 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 indispensibility of that
activity to the business. Hence, the employment is considered regular, but only with respect to
such activity, and while such activity exist.
Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of respondent
bank. With the exception of sixteen of them, petitioners performed these tasks for more than six months. Thus,
the following twenty-seven petitioners should be deemed regular employees: Marites Bernardo, Elvira Go
Diamante, Rebecca E. David, David P. Pascual, Raquel Estiller, Albert Hallare, Edmund M. Cortez, Joselito O.
Agdon, George P. Ligutan Jr., Lilibeth Q. Marmolejo, Jose E. Sales, Isabel Mamauag, Violeta G. Montes,
Albino Tecson, Melody V. Gruela, Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B.
Concepcion, Margaret Cecilia Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil, Rozaida
Pascual, Pinky Baloloa, Elizabeth Ventura and Grace S. Pardo.
As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making
permanent casuals of our lowly employees by the simple expedient of extending to them probationary
appointments, ad infinitum." 15 The contract signed by petitioners is akin to a probationary employment, during
which the bank determined the employees' fitness for the job. When the bank renewed the contract after the
lapse of the six-month probationary period, the employees thereby became regular employees. 16 No employer is
allowed to determine indefinitely the fitness of its employees.
As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is, their services may
be terminated only for a just or authorized cause. Because respondent failed to show such cause, 17 these twentyseven petitioners are deemed illegally dismissed and therefore entitled to back wages and reinstatement without
loss of seniority rights and other privileges. 18 Considering the allegation of respondent that the job of money
sorting is no longer available because it has been assigned back to the tellers to whom it originally
belonged, 18 petitioners are hereby awarded separation pay in lieu of reinstatement. 20
Because the other sixteen worked only for six months, they are not deemed regular employees and hence not
entitled to the same benefits.
Applicability of the
Brent Ruling
Respondent bank, citing Brent School v. Zamora 21 in which the Court upheld the validity of an employment
contract with a fixed term, argues that the parties entered into the contract on equal footing. It adds that the
petitioners had in fact an advantage, because they were backed by then DSWD Secretary Mita Pardo de Tavera
and Representative Arturo Borjal.
We are not persuaded. The term limit in the contract was premised on the fact that the petitioners were disabled,
and that the bank had to determine their fitness for the position. Indeed, its validity is based on Article 80 of the
Labor Code. But as noted earlier, petitioners proved themselves to be qualified disabled persons who, under the
Magna Carta for Disabled Persons, are entitled to terms and conditions of employment enjoyed
by qualified able-bodied individuals; hence, Article 80 does not apply because petitioners are qualified for their
positions. The validation of the limit imposed on their contracts, imposed by reason of their disability, was a
glaring instance of the very mischief sought to be addressed by the new law.
Moreover, it must be emphasized that a contract of employment is impressed with public interest. 22 Provisions
of applicable statutes are deemed written into the contract, and the "parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws and regulations by simply contracting with
each other." 23 Clearly, the agreement of the parties regarding the period of employment cannot prevail over the
provisions of the Magna Carta for Disabled Persons, which mandate that petitioners must be treated as qualified
able-bodied employees.

Respondent's reason for terminating the employment of petitioners is instructive. Because the Bangko Sentral
ng Pilipinas (BSP) required that cash in the bank be turned over to the BSP during business hours from 8:00
a.m. to 5:00 p.m., respondent resorted to nighttime sorting and counting of money. Thus, it reasons that this task
"could not be done by deaf mutes because of their physical limitations as it is very risky for them to travel at
night." 24 We find no basis for this argument. Travelling at night involves risks to handicapped and able-bodied
persons alike. This excuse cannot justify the termination of their employment.
Other Grounds Cited by Respondent
Respondent argues that petitioners were merely "accommodated" employees. This fact does not change the
nature of their employment. As earlier noted, an employee is regular because of the nature of work and the
length of service, not because of the mode or even the reason for hiring them.
Equally unavailing are private respondent's arguments that it did not go out of its way to recruit petitioners, and
that its plantilla did not contain their positions. In L. T. Datu v. NLRC, 25 the Court held that "the determination
of whether employment is casual or regular does not depend on the will or word of the employer, and the
procedure of hiring . . . but on the nature of the activities performed by the employee, and to some extent, the
length of performance and its continued existence."
Private respondent argues that the petitioners were informed from the start that they could not become regular
employees. In fact, the bank adds, they agreed with the stipulation in the contract regarding this point. Still, we
are not persuaded. The well-settled rule is that the character of employment is determined not by stipulations in
the contract, but by the nature of the work performed. 26 Otherwise, no employee can become regular by the
simple expedient of incorporating this condition in the contract of employment.
In this light, we iterate our ruling in Romares v. NLRC: 27
Art. 280 was emplaced in our statute books to prevent the circumvention of the employee's right
to be secure in his tenure by indiscriminately and completely ruling out all written and oral
agreements inconsistent with the concept of regular employment defined therein. Where an
employee has been engaged to perform activities which are usually necessary or desirable in the
usual business of the employer, such employee is deemed a regular employee and is entitled to
security of tenure notwithstanding the contrary provisions of his contract of employment.
xxx xxx xxx
At this juncture, the leading case of Brent School, Inc. v. Zamora proves instructive. As
reaffirmed in subsequent cases, this Court has upheld the legality of fixed-term employment. It
ruled that the decisive determinant in "term employment" should not be the activities that the
employee is called upon to perform but the day certain agreed upon the parties for the
commencement and termination of their employment relationship. But this Court went on to say
that where from the circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down or disregarded as
contrary to public policy and morals.
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the working class,
but also the concern of the State for the plight of the disabled. The noble objectives of Magna Carta for Disabled
Persons are not based merely on charity or accommodation, but on justice and the equal treatment
of qualifiedpersons, disabled or not. In the present case, the handicap of petitioners (deaf-mutes) is not a
hindrance to their work. The eloquent proof of this statement is the repeated renewal of their employment
contracts. Why then should they be dismissed, simply because they are physically impaired? The Court
believes, that, after showing their fitness for the work assigned to them, they should be treated and granted the
same rights like any other regular employees.
In this light, we note the Office of the Solicitor General's prayer joining the petitioners' cause. 28
WHEREFORE, premises considered, the Petition is hereby GRANTED. The June 20, 1995 Decision and the
August 4, 1995 Resolution of the NLRC are REVERSED and SET ASIDE. Respondent Far East Bank and
Trust Company is hereby ORDERED to pay back wages and separation pay to each of the following twentyseven (27) petitioners, namely, Marites Bernardo, Elvira Go Diamante, Rebecca E. David, David P. Pascual,
Raquel Estiller, Albert Hallare, Edmund M. Cortez, Joselito O. Agdon, George P. Ligutan Jr., Liliberh Q.
Marmolejo, Jose E. Sales, Isabel Mamauag, Violeta G. Montes, Albino Tecson, Melody V. Gruela, Bernadeth D.

Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B. Concepcion, Margaret Cecilia Canoza, Thelma
Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil, Rozaida Pascual, Pinky Baloloa, Elizabeth Ventura and
Grace S. Pardo. The NLRC is hereby directed to compute the exact amount due each of said employees,
pursuant to existing laws and regulations, within fifteen days from the finality of this Decision. No
costs.1wphi1.nt
SO ORDERED.
SECOND DIVISION
[G. R. No.101738. April 12, 2000]
PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES, petitioner, vs. HON. BIENVENIDO E.
LAGUESMA, Undersecretary of Labor and Employment, HON. HENRY PABEL, Director of the
Department of Labor and Employment Regional Office No. XI and/or the Representation Officer of the
Industrial Relations Division who will act for and in his behalf, PCOP- BISLIG SUPERVISORY AND
TECHNICAL STAFF EMPLOYEES UNION, ASSOCIATED LABOR UNION and FEDERATION OF
FREE WORKERS, respondents.
DECISION
DE LEON, JR., J.: Miso
Before us is a petition for certiorari seeking to annul the Resolution[1] and the Order[2] dated April 17, 1991 and
August 7, 1991, respectively, of public respondent Bienvenido E. Laguesma, acting then as Undersecretary, now
the Secretary, of the Department of Labor and Employment (DOLE), which reversed the Order dated March 27,
1990[3] of Med-Arbiter Phibun D. Pura declaring that supervisors and section heads of petitioner under its new
organizational structure are managerial employees and should be excluded from the list of voters for the
purpose of a certification election among supervisory and technical staff employees of petitioner.[4]
The facts of the case are the following:
Petitioner Paper Industries Corporation of the Philippines (PICOP) is engaged in the manufacture of paper and
timber products, with principal place of operations at Tabon, Bislig, Surigao del Sur. It has over
9,000[5] employees, 944[6] of whom are supervisory and technical staff employees. More or less 487 of these
supervisory and technical staff employees are signatory members of the private respondent PICOP-Bislig
Supervisory and Technical Staff Employees Union (PBSTSEU).[7]
On August 9, 1989. PBSTSEU instituted a Petition[8] for Certification Election to determine the sole and
exclusive bargaining agent of the supervisory and technical staff employees of PICOP for collective bargaining
agreement (CBA) purposes.
In a Notice[9] dated August 10, 1989, the initial hearing of the petition was set on August 18, 1989 but it was
reset to August 25, 1989, at the instance of PICOP, as it requested a fifteen (15) day period within which to file
its comments and/or position paper. But PICOP failed to file any comment or position paper. Meanwhile,
private respondents Federation of Free Workers (FFW) and Associated Labor Union (ALU) filed their
respective petitions for intervention.
On September 14, 1989, Med-Arbiter Arturo L. Gamolo issued an Order[10] granting the petitions for
interventions of the FFW and ALU. Another Order[11] issued on the same day set the holding of a certification
election among PICOP's supervisory and technical staff employees in Tabon, Bislig, Surigao del Sur, with four
(4) choices, namely: (1) PBSTSEU; (2) FFW; (3) ALU; and (4) no union. Nex old
On September 21, 1989, PICOP appealed[12] the Order which set the holding of the certification election
contending that the Med-Arbiter committed grave abuse of discretion in deciding the case without giving

PICOP the opportunity to file its comments/answer, and that PBSTSEU had no personality to file the petition
for certification election.
After PBSTSEU filed its Comments[13] to petitioner's appeal, the Secretary of the Labor[14] issued a
Resolution[15] dated November 17, 1989 which upheld the Med-Arbiter's Order dated September 17, 1989, with
modification allowing the supervising and staff employees in Cebu, Davao and Iligan City to participate in the
certification election.
During the pre-election conference on January 18, 1990, PICOP questioned and objected to the inclusion of
some section heads and supervisors in the list of voters whose positions it averred were reclassified as
managerial employees in the light of the reorganization effected by it.[16] Under the Revised Organizational
Structure of the PICOP, the company was divided into four (4) main business groups, namely: Paper Products
Business, Timber Products Business, Forest Resource Business and Support Services Business. A vicepresident or assistant vice-president heads each of these business groups. A division manager heads the
divisions comprising each business group. A department manager heads the departments comprising each
division. Section heads and supervisors, now called section managers and unit managers, head the sections and
independent units, respectively, comprising each department.[17] PICOP advanced the view that considering the
alleged present authority of these section managers and unit managers to hire and fire, they are classified as
managerial employees, and hence, ineligible to form or join any labor organization.[18] Mani kx
Following the submission by the parties of their respective position papers[19] and evidence[20] on this issue,
Med-Arbiter Phibun D. Pura issued an Order[21] dated March 27, 1990, holding that supervisors and section
heads of the petitioner are managerial employees and therefore excluded from the list of voters for purposes of
certification election.
PBSTSEU appealed[22] the Order of the Med-Arbiter to the Office of the Secretary, DOLE. ALU likewise
appealed.[23] PICOP submitted evidence militating against the appeal.[24] Public respondent Bienvenido E.
Laguesma, acting as the then Undersecretary of Labor, issued the assailed Order[25] dated April 17, 1991 setting
aside the Order dated March 27, 1990 of the Med-Arbiter and declaring that the subject supervisors and section
heads are supervisory employees eligible to vote in the certification election.
PICOP sought[26] reconsideration of the Order dated April 7, 1991. However, public respondent in his
Order[27] dated August 7, 1991 denied PICOP's motion for reconsideration.
Hence, this petition.
PICOP anchors its petition on two (2) grounds, to wit: Maniks
I.
THE PUBLIC RESPONDENT HONORABLE BIENVENIDO E. LAGUESMA,
UNDERSECRETARY OF LABOR AND EMPLOYMENT, IN A CAPRICIOUS, ARBITRARY
AND WHIMSICAL EXERCISE OF POWER ERRED AND COMMITTED GRAVE ABUSE
OF DISCRETION, TANTAMOUNT TO ACTING WITHOUT OR IN EXCESS OF
JURISDICTION WHEN HE DENIED YOUR PETITIONER'S PLEA TO PRESENT
ADDITIONAL EVIDENCE TO PROVE THAT SOME OF ITS MANAGERIAL EMPLOYEES
ARE DISQUALIFIED FROM JOINING OR FORMING A UNION REPRESENTED BY CORESPONDENT PBSTSEU, IN VIEW OF A SUPERVENING EVENT BROUGHT ABOUT BY
THE CHANGES IN THE ORGANIZATIONAL STRUCTURE OF YOUR PETITIONER
WHICH WAS FULLY IMPLEMENTED IN JANUARY 1991 AFTER THE CASE WAS
ELEVATED ON APPEAL AND SUBMITTED FOR DECISION.
II.

THE PUBLIC RESPONDENT, HONORABLE BIENVENIDO E. LAGUESMA, ALSO

ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION, TANTAMOUNT TO
ARBITRARILY ACTING WITHOUT OR IN EXCESS OF JURISDICTION WHEN HE
TOTALLY DISREGARDED THE DOCUMENTARY EVIDENCE SO FAR SUBMITTED BY
YOUR PETITIONER AND RELIED MAINLY ON THE UNSUBSTANTIATED CLAIM AND
MERE ALLEGATIONS OF PRIVATE RESPONDENT, PBSTSEU, THAT THE
REORGANIZATION OF YOUR PETITIONER WAS A SHAM AND CALCULATED
MERELY TO FRUSTRATE THE UNIONIZATION OF YOUR PETITIONER'S
SUPERVISORY PERSONNEL; AND SOLELY ON THIS BASIS, DENIED YOUR
PETITIONER'S URGENT MOTION FOR RECONSIDERATION.[28] Manikan
PICOP's main thesis is that the positions Section Heads and Supervisors, who have been designated as Section
Managers and Unit Managers, as the case may be, were converted to managerial employees under the
decentralization and reorganization program it implemented in 1989. Being managerial employees, with alleged
authority to hire and fire employees, they are ineligible for union membership under Article 245[29] of the Labor
Code. Furthermore, PICOP contends that no malice should be imputed against it for implementing its
decentralization program only after the petition for certification election was filed inasmuch as the same is a
valid exercise of its management prerogative, and that said program has long been in the drawing boards of the
company, which was realized only in 1989 and fully implemented in 1991. PICOP emphatically stresses that it
could not have conceptualized the decentralization program only for the purpose of "thwarting the right of the
concerned employees to self-organization."
The petition, not being meritorious, must fail and the same should be as it is hereby dismissed.
First. In United Pepsi-Co/a Supervisory Union (UPSU) v. Laguesma,[30] we had occasion to elucidate on the
term "managerial employees." Managerial employees are ranked as Top Managers, Middle Managers and First
Line Managers. Top and Middle Managers have the authority to devise, implement and control strategic and
operational policies while the task of First-Line Managers is simply to ensure that such policies are carried out
by the rank-and- file employees of an organization. Under this distinction, "managerial employees" therefore
fall in two (2) categories, namely, the "managers" per se composed of Top and Middle Managers, and the
"supervisors" composed of First-Line Managers.[31] Thus, the mere fact that an employee is designated
manager" does not ipso facto make him one. Designation should be reconciled with the actual job description of
the employee,[32] for it is the job description that determines the nature of employment.[33] Oldmis o
In the petition before us, a thorough dissection of the job description[34] of the concerned supervisory employees
and section heads indisputably show that they are not actually managerial but only supervisory employees since
they do not lay down company policies. PICOP's contention that the subject section heads and unit managers
exercise the authority to hire and fire[35] is ambiguous and quite misleading for the reason that any authority they
exercise is not supreme but merely advisory in character. Theirs is not a final determination of the company
policies inasmuch as any action taken by them on matters relative to hiring, promotion, transfer, suspension and
termination of employees is still subject to confirmation and approval by their respective superior.[36] Thus,
where such power, which is in effect recommendatory in character, is subject to evaluation, review and final
action by the department heads and other higher executives of the company, the same, although present, is not
effective and not an exercise of independent judgment as required by law.[37]
Second. No denial of due process can be ascribed to public respondent Undersecretary Laguesma for the latter's
denial to allow PICOP to present additional evidence on the implementation of its program inasmuch as in the
appeal before the said public respondent, PICOP even then had already submitted voluminous supporting
documents.[38] The record of the case is replete with position papers and exhibits that dealt with the main thesis
it relied upon. What the law prohibits is the lack of opportunity to be heard.[39] PICOP has long harped on its
contentions and these were dealt upon and resolved in detail by public respondent Laguesma. We see no reason
or justification to deviate from his assailed resolutions for the reason that law and jurisprudence aptly support
them.

Finally, considering all the foregoing, the fact that PICOP voiced out its objection to the holding of certification
election, despite numerous opportunities to ventilate the same, only after respondent Undersecretary of Labor
affirmed the holding thereof, simply bolstered the public respondents' conclusion that PICOP raised the issue
merely to prevent and thwart the concerned section heads and supervisory employees from exercising a right
granted them by law. Needless to stress, no obstacle must be placed to the holding of certification elections, for
it is a statutory policy that should not be circumvented.[40]
WHEREFORE, the petition is hereby DISMISSED, and the Resolution and Order of public respondent
Bienvenido E. Laguesma dated April 17, 1991 and August 17, 1991, respectively, finding the subject
supervisors and section heads as supervisory employees eligible to vote in the certification election are
AFFIRMED. Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178184

January 29, 2014

GRAND ASIAN SHIPPING LINES, INC., EDUARDO P. FRANCISCO and WILLIAM

HOW, Petitioners,
vs.
WILFREDO GALVEZ, JOEL SALES, CRISTITO GRUTA, DANILO ARGUELLES, RENATO
BATAYOLA, PATRICIO FRESMILLO,* JOVY NOBLE, EMILIO DOMINICO, BENNY NILMAO,
and JOSE AUSTRAL, Respondents.
DECISION
DEL CASTILLO, J.:
The employer has broader discretion in dismissing managerial employees on the ground of loss of trust and
confidence than those occupying ordinary ranks. While plain accusations are not sufficient to justify the
dismissal of rank and file employees, the mere existence of a basis for believing that managerial employees
have breached the trust reposed on them by their employer would suffice to justify their dismissal.1
Before us is a Petition for Review on Certiorari2 assailing the September 12, 2006 Decision3 of the Court of
Appeals (CA) in CA-G.R. SP No. 82379, which annulled the September 10, 2003 Decision4 and January 14,
2004 Resolution5 of the National Labor Relations Commission (NLRC), thereby reinstating the August 30, 2001
Decision6 of the Labor Arbiter for having attained finality as a result of petitioners failure to post the correct
amount of bond in their appeal before the NLRC. Likewise assailed is the May 23, 2007 Resolution7 of the CA
which denied petitioners Motion for Reconsideration.8
Factual Antecedents
Petitioner Grand Asian Shipping Lines, Inc. (GASLI) is a domestic corporation engaged in transporting
liquified petroleum gas (LPG) from Petron Corporations refinery in Limay, Bataan to Petrons Plant in Ugong,
Pasig and Petrons Depot in Rosario, Cavite. Petitioners William How and Eduardo Francisco are its President
and General Manager, respectively. Respondents, on the other hand, are crewmembers of one of GASLIs
vessels, M/T Dorothy Uno, with the following designations: Wilfredo Galvez (Galvez) as Captain; Joel Sales
(Sales) as Chief Mate; Cristito Gruta (Gruta) as Chief Engineer; Danilo Arguelles (Arguelles) as Radio
Operator; Renato Batayola (Batayola), Patricio Fresmillo (Fresmillo) and Jovy Noble (Noble) as Able Seamen;
Emilio Dominico (Dominico) and Benny Nilmao (Nilmao) as Oilers; and Jose Austral (Austral) as 2nd
Engineer.
Sometime in January 2000, one of the vessels Oilers, Richard Abis (Abis), reported to GASLIs Office and
Crewing Manager, Elsa Montegrico (Montegrico), an alleged illegal activity being committed by respondents
aboard the vessel. Abis revealed that after about four to five voyages a week, a substantial volume of fuel oil is

unconsumed and stored in the vessels fuel tanks. However, Gruta would misdeclare it as consumed fuel in the
Engineers Voyage Reports. Then, the saved fuel oil is siphoned and sold to other vessels out at sea usually at
nighttime. Respondents would then divide among themselves the proceeds of the sale. Abis added that he was
hesitant at first to report respondents illegal activities for fear for his life.
An investigation on the alleged pilferage was conducted. After audit and examination of the Engineers Voyage
Reports, GASLIs Internal Auditor, Roger de la Rama (De la Rama), issued a Certification of Overstatement of
Fuel Oil Consumption9 for M/T Dorothy Uno stating that for the period June 30, 1999 to February 15, 2000 fuel
oil consumption was overstated by 6,954.3 liters amounting to P74,737.86.10
On February 11, 2000, a formal complaint11 for qualified theft was filed with the Criminal Investigation and
Detection Group (CIDG) at Camp Crame against respondents, with Montegricos ComplaintAffidavit12 attached. On February 14, 2000, Abis submitted his Sinumpaang Salaysay,13 attesting to the facts
surrounding respondents pilferage of fuel oil while on board the vessel, which he alleged started in August of
1999. On March 22, 2000, GASLIs Port Captain, Genaro Bernabe (Bernabe), and De la Rama submitted a
Complaint-Joint Affidavit,14 stating that in Grutas Engineers Voyage Reports, particularly for the period June
30, 1999 to February 15, 2000, he overstated the number of hours the vessels main and auxiliary engines, as
well as its generators, were used resulting in the exaggerated fuel consumption. They also stated that according
to independent surveyor Jade Sea-Land Inspection Services, the normal diesel fuel consumption of M/T
Dorothy Uno for Petron UgongBataan RefineryPetron Ugong route averaged 1,021 liters only. Thus,
comparing this with the declared amount of fuel consumed by the vessel when manned by the respondents,
Bernabe and De la Rama concluded that the pilferage was considerable.15 In her Supplementary Complaint
Affidavit,16 Montegrico implicated respondents except Sales, in the illegal activity. Bernabe, in his ReplyAffidavit,17 further detailed their analysis of the voyage reports vis-a-vis the report of Jade Sea-Land Inspection
Services to strengthen the accusations.
In their Joint Counter-Affidavit18 and Joint Rejoinder-Affidavit,19 respondents denied the charge. They alleged
that the complaint was based on conflicting and erroneous computation/estimates of fuel consumption; that the
complaint was fabricated as borne out by its failure to specify the exact time the alleged pilferage took place;
that the allegations that the pilferage has been going on since August 1999 and that Austral and Sales acted as
lookouts are not true because both embarked on the vessel only on December 28, 1999 and January of 2000,
respectively; that four other officers who were on board the vessel much longer than Austral and Sales were not
included in the charge; and, that the complaint was intended as a mere leverage.
In a letter20 dated April 14, 2000, the CIDG referred the case to the Office of the City Prosecutor of Manila,
which, after finding a prima facie case, filed the corresponding Information for Qualified Theft21 dated August
18, 2000 with the Regional Trial Court (RTC) of Manila.
Meanwhile, GASLI placed respondents under preventive suspension. After conducting administrative hearings,
petitioners decided to terminate respondents from employment. Respondents (except Sales) were thus served
with notices22 informing them of their termination for serious misconduct, willful breach of trust, and
commission of a crime or offense against their employer.
It appears that several other employees and crewmembers of GASLIs two other vessels were likewise
suspended and terminated from employment. Nine seafarers of M/T Deborah Uno were charged and terminated
for insubordination, defying orders and refusal to take responsibility of cargo products/fuel.23 For vessel M/T
Coral Song, two crewmembers were dismissed for serious act of sabotage and grave
insubordination.24 Proceedings before the Labor Arbiter Respondents and the other dismissed crewmembers of
M/T Deborah Uno and M/T Coral Song (complainants) filed with the NLRC separate complaints25 for illegal
suspension and dismissal, underpayment/non-payment of salaries/wages, overtime pay, premium pay for
holiday and rest day, holiday pay, service incentive leave pay, hazard pay, tax refunds and indemnities for
damages and attorneys fees against petitioners. The complaints, docketed as NLRC NCR Case Nos. 00-0402026-00, 00-04-02062-00, 00-05-02620-00 and 00-07-03769-00, were consolidated.1wphi1
On August 30, 2001, the Labor Arbiter rendered a Decision26 finding the dismissal of all 21 complainants
illegal. As regards the dismissal of herein respondents, the Labor Arbiter ruled that the filing of a criminal case
for qualified theft against them did not justify their termination from employment. The Labor Arbiter found it
abstruse that the specific date and time the alleged pilferage took place were not specified and that some
crewmembers who boarded the vessel during the same period the alleged pilferage transpired were not included
in the charge. With regard to the other complainants, petitioners likewise failed to prove the legality of their
dismissal.

The Labor Arbiter ordered petitioners to reinstate complainants with full backwages and to pay their money
claims for unpaid salary, overtime pay, premium pay for holidays and rest days, holiday and service incentive
leave pay, as indicated in the Computation of Money Claims. Complainants were likewise awarded damages
due to the attending bad faith in effecting their termination, double indemnity prescribed by Republic Act (RA)
No. 818827 in view of violation of the Minimum Wage Law, as well as 10% attorneys fee. With respect to the
claim for tax refund, the same was referred to the Bureau of Internal Revenue, while the claim for hazard pay
was dismissed for lack of basis. The Labor Arbiter modified and recomputed the money claims of respondents,
as follows:
1. WILFREDO GALVEZ (Dismissed in Mar. 2000)
Backwages from Mar. 2000 to
May 2001 (P8,658.74 x 14 mos.)

----------

P 121,225.16

13th Month Pay for the period

----------

8,658.94

Unpaid Salary from Feb 16 to 29, 2000

----------

3,985.38

Non-payment of Premium Pay for Holiday;

Restday and Non-payment of Holiday Pay;
(limited to 3 years only = P7,372.90 x 3 yrs.)

----------

22,188.70

Non-payment of (5 days) Service Incentive

Leave Pay (for every year of service, but
Limited to 3 years only): = P1,423.35 x 3 yrs.)

----------

P 4,270.05

Actual Moral Exemplary & Compensatory

Damages

----------

P 100,000.00

(P260,258.23)
Ten (10%) Percent Attorneys Fees

P 26,025.82
TOTAL

P 286,284.05

2. JOEL SALES (Dismissed in Mar. 2000)

Backwages from Mar. 2000 to May 2001
(P8,274.14 x 14 mos.)

----------

- P 115,840.76

13th Month Pay for the period&

----------

8,274.34

Actual, Moral, Exemplary &

Compensatory Damages

----------

P 100,000.00

(P224,115.10)
Ten (10%) Percent Attorneys Fees

P 22,411.51
TOTAL

P 246,526.61

3. CRISTITO G. GRUTA (Dismissed in Mar. 2000)

Backwages from Mar. 200[0] to May 2001
(P8,274.14 x 14 mos.)

----------

P 115,840.76

13th Month Pay for the period

----------

8,274.34

Non-payment of Premium Pay for Holiday; Restday and

Non-payment of Holiday Pay: (P7,045.57 x 2 yrs.)

14,091.51

Non-payment of (5 days) Service Incentive Leave Pay

(for every year of service = P1,360.15 x 2 yrs.)

----------

2,720.30

Actual, Moral, Exemplary &

Compensatory Damages

----------

P 100,000.00

(P240,926.91)
Ten (10%) Percent Attorneys Fees

---------TOTAL

4. DANILO ARGUELLES (Dismissed in Feb. 2000)

Backwages from Mar. 2000 to May 2001

P 24,092.69
P 265,019.60

----------

[P]110,109.30

(P7,340.62 x 15 mos.)
13th Month Pay for the period

----------

7,340.62

Unpaid Salary from Feb. 16 to 29, 2000

(P225.00 x 14 days)

----------

3,150.00

Underpayment/Non-payment of Salary/Wages:
A. From April 98 to Nov. 98 (7 mos.)
Minimum Wage P198 x 391.5 [/] 12 =
Actual Basic Wage for the period
Difference

P 6,459.75
4,320.00
P 2,139.75
x 7 mos.
P 14,978.25

Double Indemnity prescribed by Rep. Act 8188, Sec. 4

B. From Dec. 98 to Mar. 2000 (16 mos.)
Minimum Wage P225 391.5 [/] 12 =
Actual Basic Wage for the period
Difference

P 29,956.50
P 7,340.62
6,240.00
P 1,100.62
x 16 mos.
P 17,609.92

Double Indemnity prescribed by Rep. Act 8188, Sec. 4

P 35,219.84

Underpayment/Non-payment of Overtime Pay:

A. From Apr. 98 to Nov. 98 (7 mos.)
30% of Minimum Wage
(P6,459.75 x 30%)

P 1,937.92

30% of Salary Actually Paid

(P4,320.00 x 30%)
Difference

1,872.00

P 641.92
x 7 mos.
P 4,493.44

P 4,493.44

(P7,340.62 x 30%)

2,202.18

B. From Dec. 98 to Mar. 2000 (16 mos.)

30% of Minimum Wage
30% of Salary Actually Paid
(P6,240.00 x 30%)

Difference

P 330.18
x 16 mos.
P 5,282.88

Non-payment of Premium Pay for Holiday; Restday and

Non-payment of Holiday Pay (P5,872.50 x 2 yrs.)
Non-payment of (5 days) Service Incentive Leave Pay
(for every year of service/but limited to 2 yrs. only):

1,872.00

P 5,282.88
P 11,655.00

2,250.00

= P 1,125.00 x 2 yrs.
Actual, Moral, Exemplary &
Compensatory Damages

P 100,000.00
(P309,457.58)

Ten (10%) Percent Attorneys Fees

P 30,945.75
TOTAL

P 340,403.33

5. RENATO BATAYOLA
6. PATRICIO FRESNILLO
7. JOVY NOBLE
8. EMILIO DOMINICO
9. BENNY NILMAO (All dismissed in Feb. 2001)
Backwages from Mar. 2000 to May 2001
(P7,340.62 x 15 mos.)
13th Month Pay for the period

P 110,109.30
----------

Unpaid Salary from Feb. 16 to 29, 2000

(P225.00 x 14 days)

7,340.62
3,150.00

Underpayment/Non-payment of Salary/Wages:
A. From Apr. 97 to Jan. 98 ([9] mos.)
Minimum Wage P185 x 391.5 [/] 12 =
Actual Basic Wage for the period
Difference

P 6,035.62
4,098.24
P 1,932.58
x 9 mos.
P 17,436.42

Double Indemnity prescribed by Rep. Act 8188, Sec. 4

B. From Feb. 98 to Nov. 98 (10 mos.)
Minimum Wage P198 x 391.5 [/] 12 =
Actual Basic Wage for the period
Difference

P 34,872.84
P 6,459.75
4,098.24
P 2,361.51
x 10 mos.
P 23,615.10

Double Indemnity prescribed by Rep. Act 8188, Sec. 4

P 47,230.20

C. From Dec. 98 to Mar. 2000 (16 mos.)

Minimum Wage P225 x 391.5 [/] 12 =

7,340.62

Actual Basic Wage for the period

6,022.00

Difference

P 1,318.62
x 16 mos.
P 21,098.00

Double Indemnity prescribed by Rep. Act 8188, Sec. 4

Underpayment/Non-payment of Overtime Pay:
A. From Apr. 97 to Jan. 98 (9 mos.)
30% Minimum Wage

P 42,196.00

(P6,035.62 x 30%)

P 1,810.68

(P4,098.24 x 30%)

1,226.77

30% of Salary Actually Paid

Difference

P 583.91
x 9 mos.
P 5,255.19

- P 5,255.19

B. From Feb. 98 to Nov. 98 (10 mos.)

30% Minimum Wage
(P6,459.75 x 30%)

P 1,937.92

30% of Salary Actually Paid

1,226.72

(P4,098.24 x 30%)
Difference

P 711.15
x 10 mos.
P 7,111.70

C. From Dec. 98 to Mar. 2000 (16 mos.)

30% Minimum Wage

- P 7,111.70

P 2,202.18

(P7,340.62 x 30%)
30% of Salary Actually Paid

P 1,806.75

(P6,022.50 x 30%)
Difference

x 16 mos.
P 6,326.97

Non-Payment of Premium Pay for Holiday & Restday; and

Non-Payment of Holiday Pay: (P5,827.50 x 3 yrs.)

P 17,482.50

Non-Payment of (5 days) Service Incentive Leave Pay

(for every year of service/but limited to 3 years only)
= P1,125.00 x 3 yrs.)
Actual, Moral, Exemplary &
Compensatory Damages

- P 6,326.97

3,375.00
----------

100,000.00

(P384,450.12)
P 38, 445.01

Ten (10%) Percent Attorneys Fees

(Total for 5 above-named Complainants

P2,114,475.00)

10. JOSE AUSTRAL (Dismissed in Feb. 2000)

Backwages from Mar. 2000 to May 2001
(P8,900.00 x 15 mos.)

P 133.500.00

13th Month Pay for the period

8,900.00

Unpaid Salary from Feb. 16 to 29, 2000

(P8,900.00 x 12 mos. / 365 days = (P292.60 x 14 days)

4,096.40

Actual, [M]oral, Exemplary &

----------

P 100,000.00

Compensatory Damages
(P246,496.40)
Ten (10%) Percent Attorneys Fees

P 24,679.64
TOTAL

P 271, 146.04

28

The dispositive portion of the Labor Arbiters Decision reads:

WHEREFORE, premises all considered, judgment is hereby rendered finding the dismissal of all 21
complainants herein as illegal and ordering respondents Grand Asian Shipping Lines, Inc., Eduardo P.
Franscisco and William How to pay, jointly and severally, each complainant the amounts, as follows, to wit:
A)

1. Wilfredo Galvez

P 286,284.05

2. Joel Sales

246,526.61

3. Cristito G. Gruta

265,019.60

4. Danilo Arguelles

340,403.33

5. Renato Batayola

422,895.13

6. Patricio Fresnillo

422,895.13

7. Jovy Noble

422,895.13

8. Emilio Dominico

422,895.13

9. Benny Nilmao

422,895.13

10. Jose Austral

271,146.04

11. Nobelito Rivas

281,900.13

12. Elias Facto

259,471.41

13. Jeremias Bonlagua

316,683.53

14. Rannie Canon

391,816.70

15. Fernando Malia

411,355.45

16. Calixto Flores

411,355.45

17. Necito Llanzana

411,355.45

18. Ramie Barrido

411,355.45

19. Albert Faulan

265,982.28

20. Magno Tosalem

419,352.79

21. Rolando Dela Guardia

419,352.79
(Grand Total)

P 7,104,483.84

B) The awards of P100,000.00 each, as indemnity for damages and ten percent (10%) of the total
amount, as attorneys fees, are included in the above-individual amount so awarded.
C) Respondents should immediately reinstate all the complainants to their former position without loss
of seniority [sic] and other benefits; and to pay them full backwages up to the time of their actual
reinstatement.
All other claims of complainants, not included in the above awards, are hereby ordered dismissed for lack of
merit.
SO ORDERED.29
Proceedings before the National Labor Relations Commission

Petitioners filed a Notice of Appeal With A Very Urgent Motion to Reduce Bond30 before the NLRC and posted
a cash bond in the amount of P500,000.00.
In a Supplemental Motion to Reduce Bond,31 petitioners cited economic depression, legality of the employees
termination, compliance with labor standards, and wage increases as grounds for the reduction of appeal bond.
The NLRC issued an Order32 dated February 20, 2002 denying petitioners motion to reduce bond and directing
them to post an additional bond in the amount of P4,084,736.70 in cash or surety within an unextendible period
of 10 days; otherwise, their appeal would be dismissed. Petitioners failed to comply with the Order. Thus, on
February 3, 2003, complainants moved for the dismissal of the appeal since petitioners had thus far posted
onlyP1.5 million supersedeas bond and P500,000.00 cash bond, short of the amount required by the NLRC.33
In a Decision34 dated September 10, 2003, the NLRC, despite its earlier Order denying petitioners motion for
the reduction of bond, reduced the amount of appeal bond to P1.5 million and gave due course to petitioners
appeal. It also found the appeal meritorious and ruled that petitioners presented sufficient evidence to show just
causes for terminating complainants employment and compliance with due process. Accordingly, complainants
dismissal was valid, with the exception of Sales. The NLRC adjudged petitioners to have illegally dismissed
Sales as there was absence of any record that the latter received any notice of suspension, administrative
hearing, or termination.
The NLRC struck down the monetary awards given by the Labor Arbiter, which, it ruled, were based merely on
the computations unilaterally prepared by the complainants. It also ruled that Galvez, a ship captain, is
considered a managerial employee not entitled to premium pay for holiday and rest day, holiday pay and service
incentive leave pay. As for the other complainants, the award for premium pay, holiday pay, rest day pay and
overtime pay had no factual basis because no proof was adduced to show that work was performed on a given
holiday or rest day or beyond the eight hours normal work time. Even then, the NLRC opined that these claims
had already been given since complainants salaries were paid on a 365-day basis. Likewise, service incentive
leave pay, awards for damages and double indemnity were deleted. Further, the NLRC sustained respondents
contention that it is the Secretary of Labor or the Regional Director who has jurisdiction to impose the penalty
of double indemnity for violations of the Minimum Wage Laws and not the Labor Arbiter. The NLRC disposed
of the case as follows:
WHEREFORE, premises considered, the assailed Decision is hereby reversed as to all complainants but
modified with respect to Joel Sales.
Respondents are adjudged not guilty of illegal dismissal with respect to all complainants except complainant
Joel Sales. With the exception of Joel Sales, all the monetary awards to all complainants are deleted from the
decision.1wphi1
Respondents are ordered to pay, jointly and severally complainant Joel Sales his backwages in the amount
ofP124,115.10 as computed in the assailed decision plus ten (10%) thereof as attorneys fees.
We also sustain the order to reinstate him to his former position without loss of seniority rights and other
benefits and to pay him backwages up to the time of his actual reinstatement.
SO ORDERED.35
Complainants filed Motions for Reconsideration while petitioners filed a Motion for Partial Reconsideration. In
a Resolution36 dated January 14, 2004, the NLRC reconsidered its ruling with respect to Sales, absolving
petitioners from the charge of illegally dismissing him as Sales was neither placed under preventive suspension
nor terminated from the service. The NLRC upheld petitioners claim that it was Sales who abandoned his work
by failing to report back for re-assignment. The dispositive portion of the Resolution reads:
WHEREFORE, premises considered, the Motions for Reconsideration filed by complainants are denied for lack
of merit. The Motion for Partial Reconsideration filed by respondents is granted. The assailed decision is
reconsidered in that Respondents are likewise adjudged not guilty of illegal dismissal with respect to
complainant Joel Sales. The monetary awards in favor of complainant Joel Sales as well as the reinstatement
order are hereby deleted from the Decision.
SO ORDERED.37
Proceedings before the Court of Appeals

Respondents, excluding the other complainants, filed a Petition for Certiorari38 with the CA, attributing grave
abuse of discretion on the part of the NLRC in entertaining the appeal despite the insufficiency of petitioners
appeal bond. Respondents also assailed the NLRCs ruling upholding the validity of their dismissal. They
posited that the charge of pilferage is not supported by clear, convincing and concrete evidence. In fact, the
RTC, Branch 15 of Manila already rendered a Decision39 on December 19, 2003 acquitting them of the crime of
qualified theft lodged by the petitioners. Respondents further prayed for the reinstatement of the Labor Arbiters
monetary awards in their favor.
In a Decision40 dated September 12, 2006, the CA set aside the NLRCs Decision and Resolution. It held that
the NLRCs act of entertaining the appeal is a jurisdictional error since petitioners failure to post additional
bond rendered the Labor Arbiters Decision final, executory and immutable. The CA, nonetheless, proceeded to
discuss the merits of the case insofar as the illegal dismissal charge is concerned. The CA conformed with the
Labor Arbiters ruling that petitioners evidence was inadequate to support the charge of pilferage and justify
respondents termination. The CA ruled that Sales was also illegally dismissed, stating that Sales active
participation in the labor case against petitioners belies the theory that he was not terminated from employment.
The dispositive portion of the CA Decision reads:
WHEREFORE, the petition is GRANTED and the assailed September 10, 2003 Decision and January 14, 2003
Resolution are, accordingly, ANNULLED and SET ASIDE. In lieu thereof, the Labor Arbiters August 30, 2001
Decision is ordered REINSTATED.
SO ORDERED.41
Petitioners filed a Motion for Reconsideration,42 questioning the CA in finding that respondents were illegally
dismissed, in reinstating the monetary awards granted by the Labor Arbiter without passing upon the merits of
these money claims and in ascribing grave abuse of discretion on the part of the NLRC in taking cognizance of
the appeal before it.
On May 23, 2007, the CA issued a Resolution43 denying petitioners Motion for Reconsideration. Hence, the
instant Petition.
Issues
Petitioners assign the following errors:
I.
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE JURISPRUDENCE
WHEN IT CONCLUDED THAT RESPONDENTS WERE ILLEGALLY DISMISSED.
A. THIS HONORABLE COURT OF APPEAL[S] OF APPEALS [sic] DISREGARDED THE FACT
THAT THE OFFICE OF THE CITY PROSECUTOR OF MANILA DETERMINED THAT THERE
WAS A PRIMA FACIE CASE FOR QUALIFIED THEFT AGAINST PETITIONERS, CONTRARY TO
DECISIONS THIS MOST HONORABLE COURT OF APPEAL[S] HAS HELD WHERE SIMILAR
FINDINGS OF THE INVESTIGATING PUBLIC PROSECUTOR HAD BEEN CONSIDERED
SUBSTANTIAL EVIDENCE TO JUSTIFY TERMINATION OF EMPLOYMENT BASED ON LOSS
OF TRUST AND CONFIDENCE.
B. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN DISCREDITING
PRIVATE RESPONDENTS EVIDENCE ONE BY ONE WHEN, TAKEN TOGETHER, SUCH
EVIDENCE PROVIDED ADEQUATE BASIS FOR THE DISMISSAL OF PETITIONERS IN
ACCORDANCE WITH RELEVANT SUPREME COURT OF APPEAL [sic] DECISIONS.
C. IN SUM, PETITIONERS WERE NOT ILLEGALLY DISMISSED SINCE THE SUBSTANTIVE
AND PROCEDURAL REQUIREMENTS FOR THE TERMINATION OF THEIR EMPLOYMENT
WERE SATISFIED IN THIS CASE.
D. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN RULING THAT
PETITIONER JOEL SALES WAS ILLEGALLY DISMISSED.
II.

THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE JURISPRUDENCE

WHEN IT CONCLUDED THAT PETITIONERS WERE NOT ABLE TO VALIDLY PERFECT [THEIR]
APPEAL OF THE LABOR ARBITERS DECISION.44
Petitioners claim that the NLRC properly took cognizance of their appeal and properly granted their motion for
reduction of the appeal bond, explaining that strict implementation of the rules may be relaxed in certain cases
so as to avoid a miscarriage of justice. Petitioners also claim that there was adequate basis to render
respondents dismissal from service valid, as correctly ruled by the NLRC.
Our Ruling
The assailed CA Decision must be vacated and set aside.
There was substantial compliance with
the rules on appeal bonds.
In order to perfect an appeal from the Decision of the Labor Arbiter granting monetary award, the Labor Code
requires the posting of a bond, either in cash or surety bond, in an amount equivalent to the monetary award.
Article 223 of the Labor Code provides:
ART. 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed
to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards,
or orders. x x x
xxxx
In case of a judgment involving a monetary award, an appeal by the employer [may] be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in
the amount equivalent to the monetary award in the judgment appealed from.
Nonetheless, we have consistently held that rules should not be applied in a very rigid and strict sense.45 This is
especially true in labor cases wherein the substantial merits of the case must accordingly be decided upon to
serve the interest of justice.46 When there has been substantial compliance, relaxation of the Rules is
warranted.47
In Mendoza v. HMS Credit Corporation,48 we held that the posting of an appeal bond in the amount
of P650,000.00 instead of P1,025,081.82 award stated in the Decision of the Labor Arbiter is substantial
compliance with the requirement under Article 223. Likewise, in Pasig Cylinder Mfg. Corp. v. Rollo,49 we ruled
that the filing of a reduced appeal bond of P100,000.00 is not fatal in an appeal from the labor arbiters ruling
awardingP3,132,335.57 to the dismissed employees. In Rosewood Processing, Inc. v. National Labor Relations
Commission,50 we allowed the filing of a reduced bond of P50,000.00, accompanied with a motion, in an appeal
from the Labor Arbiters award of P789,154.39.
In the case at bench, petitioners appealed from the Decision of the Labor Arbiter awarding to crewmembers the
amount of P7,104,483.84 by filing a Notice of Appeal with a Very Urgent Motion to Reduce Bond and posting a
cash bond in the amount of P500,000.00 and a supersedeas bond in the amount of P1.5 million. We find this to
be in substantial compliance with Article 223 of the Labor Code. It is true that the NLRC initially denied the
request for reduction of the appeal bond. However, it eventually allowed its reduction and entertained
petitioners appeal. We disagree with the CA in holding that the NLRC acted with grave abuse of discretion as
the granting of a motion to reduce appeal bond lies within the sound discretion of the NLRC upon showing of
the reasonableness of the bond tendered and the merits of the grounds relied upon.51 Hence, the NLRC did not
err or commit grave abuse of discretion in taking cognizance of petitioners appeal before it.
Galvez and Gruta were validly dismissed
on the ground of loss of trust and
confidence; there were no valid grounds
for the dismissal of Arguelles, Batayola,
Fresnillo, Noble, Dominico, Nilmao and
Austral.

We do not, however, agree with the findings of the NLRC that all respondents were dismissed for just causes. In
termination disputes, the burden of proving that the dismissal is for a just or valid cause rests on the employers.
Failure on their part to discharge such burden will render the dismissal illegal.52
As specified in the termination notice, respondents were dismissed on the grounds of (i) serious misconduct,
particularly in engaging in pilferage while navigating at sea, (ii) willful breach of the trust reposed by the
company, and (iii) commission of a crime or offense against their employer. Petitioners claim that based on the
sworn statement of Abis, joint affidavit of Bernabe and De la Rama, letter of petitioner Francisco requesting
assistance from the CIDG, formal complaint sheet, complaint and supplementary complaint affidavit of
Montegrico, CIDGs letter referring respondents case to the Office of the City Prosecutor of Manila, resolution
of the City Prosecutor finding a prima facie case of qualified theft, and the Information for qualified theft, there
is a reasonable ground to believe that respondents were responsible for the pilferage of diesel fuel oil at M/T
Dorothy Uno, which renders them unworthy of the trust and confidence reposed on them.
After examination of the evidence presented, however, we find that petitioners failed to substantiate adequately
the charges of pilferage against respondents. "[T]he quantum of proof which the employer must discharge is
substantial evidence. x x x Substantial evidence is that amount of relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise."53
Here, the mere filing of a formal charge, to our mind, does not automatically make the dismissal valid. Evidence
submitted to support the charge should be evaluated to see if the degree of proof is met to justify respondents
termination. The affidavit executed by Montegrico simply contained the accusations of Abis that respondents
committed pilferage, which allegations remain uncorroborated. "Unsubstantiated suspicions, accusations, and
conclusions of employers do not provide for legal justification for dismissing employees."54 The other bits of
evidence were also inadequate to support the charge of pilferage. The findings made by GASLIs port captain
and internal auditor and the resulting certification executed by De la Rama merely showed an overstatement of
fuel consumption as revealed in the Engineers Voyage Reports. The report of Jade Sea Land Inspection
Services only declares the actual usage and amount of fuel consumed for a particular voyage. There are no other
sufficient evidence to show that respondents participated in the commission of a serious misconduct or an
offense against their employer.
As for the second ground for respondents termination, which is loss of trust and confidence, distinction should
be made between managerial and rank and file employees. "[W]ith respect to rank-and-file personnel, loss of
trust and confidence, as ground for valid dismissal, requires proof of involvement in the alleged events x x x
[while for] managerial employees, the mere existence of a basis for believing that such employee has breached
the trust of his employer would suffice for his dismissal."55
In the case before us, Galvez, as the ship captain, is considered a managerial employee since his duties involve
the governance, care and management of the vessel.56 Gruta, as chief engineer, is also a managerial employee
for he is tasked to take complete charge of the technical operations of the vessel.57 As captain and as chief
engineer, Galvez and Gruta perform functions vested with authority to execute management policies and
thereby hold positions of responsibility over the activities in the vessel. Indeed, their position requires the full
trust and confidence of their employer for they are entrusted with the custody, handling and care of company
property and exercise authority over it.
Thus, we find that there is some basis for the loss of confidence reposed on Galvez and Gruta. The certification
issued by De la Rama stated that there is an overstatement of fuel consumption. Notably, while respondents
made self-serving allegations that the computation made therein is erroneous, they never questioned the
competence of De la Rama to make such certification. Neither did they question the authenticity and validity of
the certification. Thus, the fact that there was an overstatement of fuel consumption and that there was loss of a
considerable amount of diesel fuel oil remained unrefuted. Their failure to account for this loss of company
property betrays the trust reposed and expected of them. They had violated petitioners trust and for which their
dismissal is justified on the ground of breach of confidence.
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, proof of involvement in the loss of
the vessels fuel as well as their participation in the alleged theft is required for they are ordinary rank and file
employees. And as discussed above, no substantial evidence exists in the records that would establish their
participation in the offense charged. This renders their dismissal illegal, thus, entitling them to reinstatement
plus full backwages, inclusive of allowances and other benefits, computed from the time of their dismissal up to
the time of actual reinstatement.

No evidence of Sales dismissal from employment.

The rule that the employer bears the burden of proof in illegal dismissal cases finds no application when the
employer denies having dismissed the employee.58 The employee must first establish by substantial evidence the
fact of dismissal59 before shifting to the employer the burden of proving the validity of such dismissal.
We give credence to petitioners claim that Sales was not dismissed from employment. Unlike the other
respondents, we find no evidence in the records to show that Sales was preventively suspended, that he was
summoned and subjected to any administrative hearing and that he was given termination notice. From the
records, it appears Sales was not among those preventively suspended on February 26, 2000. To bolster this
fact, petitioners presented the Payroll Journal Register for the period March 1-15, 200060 showing that Sales was
still included in the payroll and was not among those who were charged with an offense to warrant suspension.
In fact, Sales signature in the Semi-Monthly Attendance Report for February 26, 2000 to March 10,
200061 proves that he continued to work as Chief Mate for the vessel M/T Dorothy Uno along with a new set of
crewmembers. It is likewise worth noting that in the Supplemental Complaint Affidavit of Montegrico, Sales
was not included in the list of those employees who were accused of having knowledge of the alleged pilferage.
This only shows that he was never subjected to any accusation or investigation as a prelude to termination.
Hence, it would be pointless to determine the legality or illegality of his dismissal because, in the first place, he
was not dismissed from employment.
Respondents are not entitled to their
money claims except 13th month pay for
the period of their illegal dismissal,
unpaid salaries, salary differentials,
double indemnity for violation of the
Minimum Wage Law and attorneys fees.
As for the money claims of respondents, we note that petitioners did not bring this issue before us or assign it as
error in this Petition. It was raised by the petitioners only in their Memorandum of Appeal filed with the NLRC
and in their Motion for Reconsideration of the CAs Decision reinstating the Labor Arbiters award.
Nonetheless, in order to arrive at a complete adjudication of the case and avoid piecemeal dispensation of
justice, we deem it necessary to resolve the validity of respondents money claims and to discuss the propriety
of the Labor Arbiters award.
Galvez and Gruta, as managerial employees, are not entitled to their claims for holiday pay, service incentive
leave pay and premium pay for holiday and restday. Article 82 of the Labor Code specifically excludes
managerial employees from the coverage of the law regarding conditions of employment which include hours
of work, weekly rest periods, holidays, service incentive leaves and service charges.62
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, we cannot sustain the argument
that they are classified as field personnel under Article 82 of the Labor Code who are likewise excluded. Article
82 defines field personnel as referring to "non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty." They are those who perform functions which "cannot be
effectively monitored by the employer or his representative."63 Here, respondents, during the entire course of
their voyage, remain on board the vessel. They are not field personnel inasmuch as they were constantly
supervised and under the effective control of the petitioners through the vessels ship captain.
Nevertheless, we cannot grant them their claims for holiday pay, premium pay for holiday and restday, overtime
pay and service incentive leave pay. Respondents do not dispute petitioners assertion that in computing
respondents salaries, petitioners use 365 days as divisor. In fact, this was the same divisor respondents used in
computing their money claims against petitioners. Hence, they are paid all the days of the month, which already
include the benefits they claim.64 As for overtime pay and premium pay for holidays and restdays, no evidence
was presented to prove that they rendered work in excess of the regular eight working hours a day or worked
during holidays and restdays. In the absence of such proof, there could be no basis to award these benefits.65
For the claim of service incentive leave pay, respondents did not specify what year they were not paid such
benefit. In addition, records show that they were paid their vacation leave benefits.66 Thus, in accordance with
Article 95 of the Labor Code,67 respondents can no longer claim service incentive leave pay.
On the other hand, for failure to effectively refute the awards for 13th month pay for the period that respondents
were illegally dismissed, unpaid salaries and salary differentials,68 we affirm the grant thereof as computed by

the Labor Arbiter. Petitioners evidence which consist of a mere tabulation69 of the amount of actual benefits
paid and given to respondents is self-serving as it does not bear the signatures of the employees to prove that
they had actually received the amounts stated therein.
Next, we come to the legitimacy of the Labor Arbiters authority to impose the penalty of double indemnity for
violations of the Minimum Wage Law. Petitioners argue that the authority to issue compliance orders in relation
to underpayment of wages is vested exclusively on the Secretary of Labor or the Regional Director and that the
Labor Arbiter has no jurisdiction thereover. They cite Section 12 of RA 6727,70 as amended by RA 8188, which
provides:
Sec. 12. Any person, corporation, trust, firm, partnership, association or entity which refuses or fails to pay any
of the prescribed increases or adjustments in the wage rates made in accordance with this Act shall be punished
by a fine [of] not less than Twenty-five thousand pesos (P25,000) nor more than One hundred thousand pesos
(P100,000) or imprisonment of not less than two (2) years nor more than four (4) years or both such fine and
imprisonment at the discretion of the court: Provided, That any person convicted under this Act shall not be
entitled to the benefits provided for under the Probation Law.
The employer concerned shall be ordered to pay an amount equivalent to double the unpaid benefits owing to
the employees: Provided, That payment of indemnity shall not absolve the employer from the criminal liability
under this Act.
If the violation is committed by a corporation, trust or firm, partnership, association or any other entity, the
penalty of imprisonment shall be imposed upon the entitys responsible officers including but not limited to, the
president, vice president, chief executive officer, general manager, managing director or partner.
Petitioners contention is untenable. First, there is no provision in RA 6727 or RA 8188 which precludes the
Labor Arbiter from imposing the penalty of double indemnity against employers. Second, Article 217 of the
Labor Code gives the Labor Arbiter jurisdiction over cases of termination disputes and those cases accompanied
with a claim for reinstatement. Thus, in Bay Haven, Inc. v. Abuan71 the Court held that an allegation of illegal
dismissal deprives the
Secretary of Labor of jurisdiction over claims to enforce compliance with labor standards law.1wphi1 This was
also pronounced in Peoples Broadcasting Service (Bombo Radyo Phils., Inc.) v. Secretary of the Department of
Labor and Employment,72 wherein we stated that the Secretary of Labor has no jurisdiction in cases where
employer-employee relationship has been terminated. We thus sustain the Labor Arbiters award of double
indemnity.
We also sustain the award of attorneys fees since respondents were compelled to file a complaint for the
recovery of wages and were forced to litigate and incur expenses.73
The Labor Arbiters grant of actual/compensatory, moral and exemplary damages in the amount of P100,000.00
is, however, incorrect. In order to recover actual or compensatory damages, it must be capable of proof and
must be necessarily proved with a reasonable degree of certainty.74 While moral damages is given to a dismissed
employee when the dismissal is attended by bad faith or fraud or constitutes an act oppressive to labor, or is
done in a manner contrary to good morals, good customs or public policy. Exemplary damages, on the other
hand, is given if the dismissal is effected in a wanton, oppressive or malevolent manner.75 Here, the Labor
Arbiter erred in awarding the damages by lumping actual, moral and exemplary damages. Said damages rest on
different jural foundations and, hence, must be independently identified and justified.76 Also, there are no
competent evidence of actual expenses incurred that would justify the award of actual damages. Lastly,
respondents were terminated after being accused of the charge of pilferage of the vessels fuel oil after
examination of the report made by the vessels chief engineer which showed a considerable amount of fuel lost.
Although the dismissal of Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral is illegal, based
on the circumstances surrounding their dismissal, petitioners could not have been motivated by bad faith in
deciding to terminate their services.
Lastly, this Court exculpates petitioners Francisco and How from being jointly and severally liable with GASLI
for the illegal dismissal and payment of money claims of herein respondents. In order to hold them liable, it
must first be shown by competent proof that they have acted with malice and bad faith in directing the corporate
affairs.77For want of such proof, Francisco and How should not be held liable for the corporate obligations of
GASLI.

WHEREFORE, the Court of Appeals Decision dated September 12, 2006 and the Resolution dated May 23,
2007 in CA-G.R. SP No. 82379 are ANNULLED and SET ASIDE. Respondents Wilfredo Galvez and Cristito
Gruta are hereby DECLARED dismissed from employment for just cause while respondent Joel Sales was not
dismissed from employment. Respondents Danilo
Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico, Benny Nilmao, and Jose Austral
are DECLARED to have been illegally dismissed; hence, petitioners are ordered to reinstate them to their
former position or its equivalent without loss of seniority rights and to pay them full backwages, inclusive of
allowances and other benefits, computed from the time of dismissal up to the time of actual reinstatement, as
well as 13th month pay for the period of their illegal dismissal.
Petitioner Grand Asian Shipping Lines, Inc. is also ordered to pay respondents Wilfredo Galvez, Danilo
Arguelles, Renato Batayola, Patricio Fresnillo, Jovy Noble, Emilio Dominico, Benny Nilmao and Jose Austral
unpaid salaries from February 16 to 29, 2000, as computed by the Labor Arbiter; and to pay respondents Danilo
Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico and Benny Nilmao salary
differentials plus double indemnity, as computed by the Labor Arbiter. Ten percent (10%) of the monetary
award should be added as and by way of attorneys fees. Interest at the rate of six percent (6%) per annum shall
be imposed on all monetary awards from date of finality of this Decision until full payment pursuant to Nacar v.
Gallery Frames.78
Petitioners Eduardo P. Francisco and William How are absolved from the liability adjudged against petitioner
Grand Asian Shipping Lines, Inc.
SO ORDERED.
SECOND DIVISION
[G.R. No. 156367. May 16, 2005]
AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO BAUTISTA, respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision[1] and Resolution[2] of the Court of
Appeals affirming the Decision[3] of the National Labor Relations Commission (NLRC). The NLRC ruling
modified the Decision of the Labor Arbiter (finding respondent entitled to the award of 13 th month pay and
service incentive leave pay) by deleting the award of 13thmonth pay to respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport
Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, BaguioTuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven
percent (7%) of the total gross income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus
he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped
at a sharp curve without giving any warning.
Respondent averred that the accident happened because he was compelled by the management to go back
to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila
from Roxas, Isabela. Respondent further alleged that he was not allowed to work until he fully paid the amount
of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite
respondents pleas for reconsideration, the same was ignored by management. After a month, management sent
him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respondents employment was replete with offenses involving
reckless imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of
letters, memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent
was involved.
Furthermore, petitioner avers that in the exercise of its management prerogative, respondents employment
was terminated only after the latter was provided with an opportunity to explain his side regarding the accident
on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor
Arbiter Monroe C. Tabingan promulgated a Decision,[4] the dispositive portion of which reads:
WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg to
stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to the complainant the
following:
a. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at
P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the respondent,
presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of merit.[5]
Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which
rendered its decision on 28 September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:
Section 3. Employers covered. The Decree shall apply to all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task basis, performing a specific work,
irrespective of the time consumed in the performance thereof. xxx.
Records show that complainant, in his position paper, admitted that he was paid on a commission basis.
In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the award of
13th month pay to the complainant.
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay.
The other findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a
reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October
2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said
decision with the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06
May 2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed Decision of
respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.[7]
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as
amended, is applicable to respondents claim of service incentive leave pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor
Code vis--vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code
which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:
(d) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who
are paid in a fixed amount for performing work irrespective of the time consumed in the
performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive
leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those
employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave shall not apply to employees classified as field personnel. The phrase other employees whose
performance is unsupervised by the employer must not be understood as a separate classification of employees
to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of
the definition of field personnel under the Labor Code as those whose actual hours of work in the field cannot
be determined with reasonable certainty.[8]
The same is true with respect to the phrase those who are engaged on task or contract basis, purely
commission basis. Said phrase should be related with field personnel, applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular terms that they follow. [9] Hence,
employees engaged on task or contract basis or paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.
Therefore, petitioners contention that respondent is not entitled to the grant of service incentive leave just
because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the
issue of propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty. This definition is
further elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine TechnicalClerical Commercial Employees Association[10] which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the
employer or his representative, the workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering
specific service or performing specific work. If required to be at specific places at specific times, employees
including drivers cannot be said to be field personnel despite the fact that they are performing work away from
the principal office of the employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no
employee would ever be considered a field personnel because every employer, in one way or another, exercises
control over his employees. Petitioner further argues that the only criterion that should be considered is the
nature of work of the employee in that, if the employees job requires that he works away from the principal
office like that of a messenger or a bus driver, then he is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a field personnel is not
merely concerned with the location where the employee regularly performs his duties but also with the fact that
the employees performance is unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether
an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or
not the employees time and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductors reports. There is also the mandatory once-a-week car barn or shop day, where the bus is regularly
checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as
reported by the driver and/or conductor. They too, must be at specific place as [sic] specified time, as they
generally observe prompt departure and arrival from their point of origin to their point of destination. In each
and every depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its crew
leave the premises at specific times and arrive at the estimated proper time. These, are present in the case at bar.
The driver, the complainant herein, was therefore under constant supervision while in the performance of this
work. He cannot be considered a field personnel.[11]
We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is
not a field personnel but a regular employee who performs tasks usually necessary and desirable to the usual
trade of petitioners business. Accordingly, respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of service incentive leave pay respondent is
entitled to.
The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year
prescriptive period under Article 291 of the Labor Code is applicable to respondents claim of service incentive
leave pay.
Article 291 of the Labor Code states that all money claims arising from employer-employee relationship
shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever
barred.
In the application of this section of the Labor Code, the pivotal question to be answered is when does the
cause of action for money claims accrue in order to determine the reckoning date of the three-year prescriptive
period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff
by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant
violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.[12]
To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third
element of a cause of action transpired. Stated differently, in the computation of the three-year prescriptive
period, a determination must be made as to the period when the act constituting a violation of the workers right
to the benefits being claimed was committed. For if the cause of action accrued more than three (3) years before
the filing of the money claim, said cause of action has already prescribed in accordance with Article 291.[13]
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that
the benefits being claimed have been withheld from the employee for a period longer than three (3) years, the
amount pertaining to the period beyond the three-year prescriptive period is therefore barred by prescription.
The amount that can only be demanded by the aggrieved employee shall be limited to the amount of the benefits
withheld within three (3) years before the filing of the complaint.[14]
It is essential at this point, however, to recognize that the service incentive leave is a curious animal in
relation to other benefits granted by the law to every employee. In the case of service incentive leave, the
employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at
the end of the year.[15] Furthermore, if the employee entitled to service incentive leave does not use or commute
the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service
incentive leave. As enunciated by the Court in Fernandez v. NLRC:[16]
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments,
subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides
that [e]very employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay. Service incentive leave is a right which accrues to every employee who
has served within 12 months, whether continuous or broken reckoned from the date the employee started
working, including authorized absences and paid regular holidays unless the working days in the establishment
as a matter of practice or policy, or that provided in the employment contracts, is less than 12 months, in which
case said period shall be considered as one year. It is also commutable to its money equivalent if not used or
exhausted at the end of the year. In other words, an employee who has served for one year is entitled to it. He
may use it as leave days or he may collect its monetary value. To limit the award to three years, as the solicitor
general recommends, is to unduly restrict such right.[17] [Italics supplied]
Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to
claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary
equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation.
Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his
resignation or separation from employment, his cause of action to claim the whole amount of his accumulated
service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or
separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can
conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee
becomes entitled to the commutation of his service incentive leave, but from the time when the employer
refuses to pay its monetary equivalent after demand of commutation or upon termination of the employees
services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is in keeping with the
rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its
implementing regulations, the workingmans welfare should be the primordial and paramount consideration.
[18]
The policy is to extend the applicability of the decree to a greater number of employees who can avail of the

benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and
protection to labor.[19]
In the case at bar, respondent had not made use of his service incentive leave nor demanded for its
commutation until his employment was terminated by petitioner. Neither did petitioner compensate his
accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint
for illegal dismissal, one month from the time of his dismissal, that respondent demanded from his former
employer commutation of his accumulated leave credits. His cause of action to claim the payment of his
accumulated service incentive leave thus accrued from the time when his employer dismissed him and failed to
pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced
from the time the employer failed to compensate his accumulated service incentive leave pay at the time of his
dismissal. Since respondent had filed his money claim after only one month from the time of his dismissal,
necessarily, his money claim was filed within the prescriptive period provided for by Article 291 of the Labor
Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the
Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 146530

January 17, 2005

PEDRO CHAVEZ, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE,
Plant Manager,respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated December 15, 2000 of the
Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed
resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations Commission (NLRC),
dismissing the complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision
similarly reversed its earlier Decision dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled
that the petitioner had been illegally dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other
packaging materials for export and distribution. It engaged the services of the petitioner, Pedro Chavez, as truck
driver on October 25, 1984. As such, the petitioner was tasked to deliver the respondent companys products
from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila. The respondent
company furnished the petitioner with a truck. Most of the petitioners delivery trips were made at nighttime,
commencing at 6:00 p.m. from Mariveles, and returning thereto in the afternoon two or three days after. The

deliveries were made in accordance with the routing slips issued by respondent company indicating the order,
time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip. This was later
adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving P900.00 per
trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant manager, his
(the petitioners) desire to avail himself of the benefits that the regular employees were receiving such as
overtime pay, nightshift differential pay, and 13th month pay, among others. Although he promised to extend
these benefits to the petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch
No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent company
terminated the services of the petitioner. Consequently, on May 25, 1995, the petitioner filed an amended
complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay,
nightshift differential pay, 13th month pay, among others. The case was docketed as NLRC Case No. RAB-III02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship between the
respondent company and the petitioner. They averred that the petitioner was an independent contractor as
evidenced by the contract of service which he and the respondent company entered into. The said contract
provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the Contractor
[referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the services to be
rendered to the Principal, under the following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the contractor to the principal,
shall only cover travel route from Mariveles to Metro Manila. Otherwise, any change to this travel route
shall be subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport services fully
rendered by the Contractor shall be on a per trip basis depending on the size or classification of the truck
being used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip
basis from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (P300.00) and
EFFECTIVE December 15, 1984.
b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip
basis, following the same route mentioned, shall be THREE HUNDRED FIFTY (P350.00) Pesos
and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of
any damage to, loss of any goods, cargoes, finished products or the like, while the same are in transit, or
due to reckless [sic] of its men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men working for him
subject to this agreement, and that the Contractor shall hold the Principal free and harmless from any
liability or claim that may arise by virtue of the Contractors non-compliance to the existing provisions
of the Minimum Wage Law, the Employees Compensation Act, the Social Security System Act, or any
other such law or decree that may hereafter be enacted, it being clearly understood that any truck
drivers, helpers or men working with and for the Contractor, are not employees who will be indemnified
by the Principal for any such claim, including damages incurred in connection therewith;

6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a
year-to-year basis.2
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989
and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the contracts were
substantially the same. The relationship of the respondent company and the petitioner was allegedly governed
by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by which his work
was accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner
was not entitled to regularization because he was not an employee of the respondent company. The respondents,
likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his contractual relation
with the respondent company was due to his violation of the terms and conditions of their contract. The
petitioner allegedly failed to observe the minimum degree of diligence in the proper maintenance of the truck he
was using, thereby exposing respondent company to unnecessary significant expenses of overhauling the said
truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3,
1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the petitioner was a
regular employee of the respondent company as he was performing a service that was necessary and desirable to
the latters business. Moreover, it was noted that the petitioner had discharged his duties as truck driver for the
respondent company for a continuous and uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted a circumvention
of the constitutional provision affording full protection to labor and security of tenure. The Labor Arbiter found
that the petitioners dismissal was anchored on his insistent demand to be regularized. Hence, for lack of a valid
and just cause therefor and for their failure to observe the due process requirements, the respondents were found
guilty of illegal dismissal. The dispositive portion of the Labor Arbiters decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME
PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ, Mariveles,
Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his separation pay equivalent to
one (1) month pay per year of service based on the average monthly pay of P10,800.00 in lieu of reinstatement
as his reinstatement back to work will not do any good between the parties as the employment relationship has
already become strained and full backwages from the time his compensation was withheld on February 23,
1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his backwages shall continue to run.
Also to pay complainant his 13th month pay, night shift differential pay and service incentive leave pay
hereunder computed as follows:
a) Backwages .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys fees.
SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the
NLRC in its Decision4 dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In the
said decision, the NLRC characterized the contract of service between the respondent company and the

petitioner as a "scheme" that was resorted to by the respondents who, taking advantage of the petitioners
unfamiliarity with the English language and/or legal niceties, wanted to evade the effects and implications of his
becoming a regularized employee.5
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the
NLRC rendered another Decision6 dated July 10, 1998, reversing its earlier decision and, this time, holding that
no employer-employee relationship existed between the respondent company and the petitioner. In
reconsidering its earlier decision, the NLRC stated that the respondents did not exercise control over the means
and methods by which the petitioner accomplished his delivery services. It upheld the validity of the contract of
service as it pointed out that said contract was silent as to the time by which the petitioner was to make the
deliveries and that the petitioner could hire his own helpers whose wages would be paid from his own account.
These factors indicated that the petitioner was an independent contractor, not an employee of the respondent
company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code on
the regularization of employees. Said contract, including the fixed period of employment contained therein,
having been knowingly and voluntarily entered into by the parties thereto was declared valid citing Brent
School, Inc. v. Zamora.7 The NLRC, thus, dismissed the petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its
Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which was referred
to the CA following the ruling in St. Martin Funeral Home v. NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of the
NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner
was a regular employee of the respondent company because as its truck driver, he performed a service that was
indispensable to the latters business. Further, he had been the respondent companys truck driver for ten
continuous years. The CA also reasoned that the petitioner could not be considered an independent contractor
since he had no substantial capital in the form of tools and machinery. In fact, the truck that he drove belonged
to the respondent company. The CA also observed that the routing slips that the respondent company issued to
the petitioner showed that it exercised control over the latter. The routing slips indicated the chronological order
and priority of delivery, the urgency of certain deliveries and the time when the goods were to be delivered to
the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job noting that he just
filed a complaint for regularization. This actuation of the petitioner negated the respondents allegation that he
abandoned his job. The CA held that the respondents failed to discharge their burden to show that the
petitioners dismissal was for a valid and just cause. Accordingly, the respondents were declared guilty of illegal
dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and
the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the
status of regular employment, it is but necessary for the courts to scrutinize with extreme caution their legality
and justness. Where from the circumstances it is apparent that a contract has been entered into to preclude
acquisition of tenurial security by the employee, they should be struck down and disregarded as contrary to
public policy and morals. In this case, the "contract of service" is just another attempt to exploit the unwitting
employee and deprive him of the protection of the Labor Code by making it appear that the stipulations of the
parties were governed by the Civil Code as in ordinary transactions.9
However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered
the assailed Resolution dated December 15, 2000 upholding the contract of service between the petitioner and
the respondent company. In reconsidering its decision, the CA explained that the extent of control exercised by
the respondents over the petitioner was only with respect to the result but not to the means and methods used by

him. The CA cited the following circumstances: (1) the respondents had no say on how the goods were to be
delivered to the customers; (2) the petitioner had the right to employ workers who would be under his direct
control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was, according to the
CA, of no moment because his status was determined not by the length of service but by the contract of service.
This contract, not being contrary to morals, good customs, public order or public policy, should be given the
force and effect of law as between the respondent company and the petitioner. Consequently, the CA reinstated
the July 10, 1998 Decision of the NLRC dismissing the petitioners complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the
appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO
EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE "CONTRACT OF SERVICE"
ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR
CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT
NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF
THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO
EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR
EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST"
WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE
OF SAID RELATIONSHIP IS NOT PRESENT.10
The threshold issue that needs to be resolved is whether there existed an employer-employee relationship
between the respondent company and the petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employers power to control the
employees conduct.11 The most important element is the employers control of the employees conduct, not
only as to the result of the work to be done, but also as to the means and methods to accomplish it.12 All the four
elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of
a third party.
Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be rendered."13 That the petitioner was
paid on a per trip basis is not significant. This is merely a method of computing compensation and not a basis
for determining the existence or absence of employer-employee relationship. One may be paid on the basis of
results or time expended on the work, and may or may not acquire an employment status, depending on whether
the elements of an employer-employee relationship are present or not.14 In this case, it cannot be gainsaid that
the petitioner received compensation from the respondent company for the services that he rendered to the
latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by
means of payroll.15 The payroll should show, among other things, the employees rate of pay, deductions made,
and the amount actually paid to the employee. Interestingly, the respondents did not present the payroll to
support their claim that the petitioner was not their employee, raising speculations whether this omission proves
that its presentation would be adverse to their case.16
Third. The respondents power to dismiss the petitioner was inherent in the fact that they engaged the services
of the petitioner as truck driver. They exercised this power by terminating the petitioners services albeit in the
guise of "severance of contractual relation" due allegedly to the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the
most important. Compared to an employee, an independent contractor is one who carries on a distinct and
independent business and undertakes to perform the job, work, or service on its own account and under its own
responsibility according to its own manner and method, free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof.17 Hence, while an
independent contractor enjoys independence and freedom from the control and supervision of his principal, an
employee is subject to the employers power to control the means and methods by which the employees work
is to be performed and accomplished.18
Although the respondents denied that they exercised control over the manner and methods by which the
petitioner accomplished his work, a careful review of the records shows that the latter performed his work as
truck driver under the respondents supervision and control. Their right of control was manifested by the
following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used exclusively to
deliver respondent companys goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of
two specific places only, to wit: at its office in Metro Manila at 2320 Osmea Street, Makati City or at
BEPZ, Mariveles, Bataan;20 and
4. Respondents determined how, where and when the petitioner would perform his task by issuing to
him gate passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the chronological order and priority of
delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver
the same according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by
the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be delivered to the
customers as, for example, the words "tomorrow morning" was written on slip no. 2776.
These circumstances, to the Courts mind, prove that the respondents exercised control over the means and
methods by which the petitioner accomplished his work as truck driver of the respondent company. On the other
hand, the Court is hard put to believe the respondents allegation that the petitioner was an independent
contractor engaged in providing delivery or hauling services when he did not even own the truck used for such
services. Evidently, he did not possess substantial capitalization or investment in the form of tools, machinery
and work premises. Moreover, the petitioner performed the delivery services exclusively for the respondent
company for a continuous and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably
establish the existence of an employer-employee relationship between the respondent company and the

petitioner. It bears stressing that the existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract and providing therein that the employee is an independent contractor
when, as in this case, the facts clearly show otherwise. Indeed, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be.22
Having established that there existed an employer-employee relationship between the respondent company and
the petitioner, the Court shall now determine whether the respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause.23 In this case,
the respondents failed to prove any such cause for the petitioners dismissal. They insinuated that the petitioner
abandoned his job. To constitute abandonment, these two factors must concur: (1) the failure to report for work
or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship.24Obviously, the petitioner did not intend to sever his relationship with the respondent company for
at the time that he allegedly abandoned his job, the petitioner just filed a complaint for regularization, which
was forthwith amended to one for illegal dismissal. A charge of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for reinstatement.25
Neither can the respondents claim that the petitioner was guilty of gross negligence in the proper maintenance
of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a want or absence of or
failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.26 The negligence, to warrant removal from service,
should not merely be gross but also habitual.27 The single and isolated act of the petitioners negligence in the
proper maintenance of the truck alleged by the respondents does not amount to "gross and habitual neglect"
warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was not dismissed from the service
but due to complainants breach of their contractual relation, i.e., his violation of the terms and conditions of the
contract, we are very much inclined to believe complainants story that his dismissal from the service was
anchored on his insistent demand that he be considered a regular employee. Because complainant in his right
senses will not just abandon for that reason alone his work especially so that it is only his job where he depends
chiefly his existence and support for his family if he was not aggrieved by the respondent when he was told that
his services as driver will be terminated on February 23, 1995.28
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement,
without loss of seniority rights and other privileges, and to the payment of full backwages, inclusive of
allowances, and other benefits or their monetary equivalent, computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.29 However, as found by the Labor Arbiter, the
circumstances obtaining in this case do not warrant the petitioners reinstatement. A more equitable disposition,
as held by the Labor Arbiter, would be an award of separation pay equivalent to one month for every year of
service from the time of his illegal dismissal up to the finality of this judgment in addition to his full backwages,
allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court of
Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE.
The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the
respondents guilty of illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 153511

July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD, in

his capacity as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.
DECISION
BERSAMIN, J.:
This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. On
August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor
practice, constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays,
separation pay, service incentive leave pay, and 13111 month pay. He prayed for attorney's fees, moral damages
off P100,000.00 and exemplary damages for P100,000.00.1
Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant from September
1992 with an initial rate of P400.00/night that was given to him after each nights performance; that his rate had
increased to P750.00/night; and that during his employment, he could not choose the time of performance,
which had been fixed from 7:00 pm to 10:00 pm for three to six times/week. He added that the Legend Hotels
restaurant manager had required him to conform with the venues motif; that he had been subjected to the rules
on employees representation checks and chits, a privilege granted to other employees; that on July 9, 1999, the
management had notified him that as a cost-cutting measure his services as a pianist would no longer be
required effective July 30, 1999; that he disputed the excuse, insisting that Legend Hotel had been lucratively
operating as of the filing of his complaint; and that the loss of his employment made him bring his complaint.2
In its defense, petitioner denied the existence of an employer-employee relationship with respondent, insisting
that he had been only a talent engaged to provide live music at Legend Hotels Madison Coffee Shop for three
hours/day on two days each week; and stated that the economic crisis that had hit the country constrained
management to dispense with his services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the
parties had no employer-employee relationship.3 The LA explained thusly:
xxx
On the pivotal issue of whether or not there existed an employer-employee relationship between the parties, our
finding is in the negative. The finding finds support in the service contract dated September 1, 1992 xxx.
xxx
Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply (third
paragraph, page 4), the picture would not change because of the admission by complainant in his letter dated
October 8, 1996 (Annex "C") that what he was receiving was talent fee and not salary.
This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular
employees of the hotel who are paid by monthly xxx.
xxx
And thus, absent the power to control with respect to the means and methods by which his work was to be
accomplished, there is no employer-employee relationship between the parties xxx.

xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED.4
Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31,
2001.5
Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC,6 holding:
xxx
Applying the above-enumerated elements of the employee-employer relationship in this case, the question to be
asked is, are those elements present in this case?
The answer to this question is in the affirmative.
xxx
Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the power of control
that is more decisive.
In this regard, public respondent failed to take into consideration that in petitioners line of work, he was
supervised and controlled by respondents restaurant manager who at certain times would require him to
perform only tagalog songs or music, or wear barong tagalog to conform with Filipiniana motif of the place and
the time of his performance is fixed by the respondents from 7:00 pm to 10:00 pm, three to six times a week.
Petitioner could not choose the time of his performance. xxx.
As to the status of petitioner, he is considered a regular employee of private respondents since the job of the
petitioner was in furtherance of the restaurant business of respondent hotel. Granting that petitioner was initially
a contractual employee, by the sheer length of service he had rendered for private respondents, he had been
converted into a regular employee xxx.
xxx
xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses, which
is recognized by law under Article 283 of the Labor Code, xxx.
xxx
WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7
Issues
In this appeal, petitioner contends that the CA erred:
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION
OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE
REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY
EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999

UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP

BETWEEN THE PARTIES.
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE
INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO.
023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR
OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW
PROOF THAT THE NLRC AND THE LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS
IMPROPER SINCE IT RAISED QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS
CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING
THAT A PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR
ISSUES OF GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY
THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT
BAR.
The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed in the
CA was the proper recourse; and into two substantive issues, namely: (a) whether or not respondent was an
employee of petitioner; and (b) if respondent was petitioners employee, whether he was validly terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondents petition for certiorari was improper as a remedy against the NLRC due to
its raising mainly questions of fact and because it did not demonstrate that the NLRC was guilty of grave abuse
of discretion.
The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail the
decision of the NLRC may raise factual issues, and the CA may then review the decision of the NLRC and pass
upon such factual issues in the process.8 The power of the CA to review factual issues in the exercise of its
original jurisdiction to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg. 129, which
pertinently provides that the CA "shall have the power to try cases and conduct hearings, receive evidence and
perform any and all acts necessary to resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new trials or further proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
We next ascertain if the CA correctly found that an employer-employee relationship existed between the parties.
The issue of whether or not an employer-employee relationship existed between petitioner and respondent is
essentially a question of fact.9 The factors that determine the issue include who has the power to select the
employee, who pays the employees wages, who has the power to dismiss the employee, and who exercises

control of the methods and results by which the work of the employee is accomplished.10 Although no particular
form of evidence is required to prove the existence of the relationship, and any competent and relevant evidence
to prove the relationship may be admitted,11 a finding that the relationship exists must nonetheless rest on
substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate
to justify a conclusion.12
Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts.
However, where, like here, there is a conflict between the factual findings of the Labor Arbiter and the NLRC,
on the one hand, and those of the CA, on the other hand, it becomes proper for the Court, in the exercise of its
equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and reexamine the questioned findings.13
A review of the circumstances reveals that respondent was, indeed, petitioners employee. He was undeniably
employed as a pianist in petitioners Madison Coffee Shop/Tanglaw Restaurant from September 1992 until his
services were terminated on July 9, 1999.
First of all, petitioner actually wielded the power of selection at the time it entered into the service contract
dated September 1, 1992 with respondent. This is true, notwithstanding petitioners insistence that respondent
had only offered his services to provide live music at petitioners Tanglaw Restaurant, and despite petitioners
position that what had really transpired was a negotiation of his rate and time of availability. The power of
selection was firmly evidenced by, among others, the express written recommendation dated January 12, 1998
by Christine Velazco, petitioners restaurant manager, for the increase of his remuneration.14
Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that
defines and governs an employment relationship, whose terms are not restricted to those fixed in the written
contract, for other factors, like the nature of the work the employee has been called upon to perform, are also
considered. The law affords protection to an employee, and does not countenance any attempt to subvert its
spirit and intent. Any stipulation in writing can be ignored when the employer utilizes the stipulation to deprive
the employee of his security of tenure. The inequality that characterizes employer-employee relations generally
tips the scales in favor of the employer, such that the employee is often scarcely provided real and better
options.15
Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees that
were not included in the definition of wage under the Labor Code; and that such talent fees were but the
consideration for the service contract entered into between them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights a
week. Such rate of remuneration was later increased to P750.00 upon restaurant manager Velazcos
recommendation. There is no denying that the remuneration denominated as talent fees was fixed on the basis of
his talent and skill and the quality of the music he played during the hours of performance each night, taking
into account the prevailing rate for similar talents in the entertainment industry.16
Respondents remuneration, albeit denominated as talent fees, was still considered as included in the term wage
in the sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration.
Anent this, Article 97(f) of the Labor Code clearly states:
xxx 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.

Clearly, respondent received compensation for the services he rendered as a pianist in petitioners hotel.
Petitioner cannot use the service contract to rid itself of the consequences of its employment of respondent.
There is no denying that whatever amounts he received for his performance, howsoever designated by
petitioner, were his wages.
It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama,17 every employer
is required to pay his employees by means of a payroll, which should show in each case, among others, the
employees rate of pay, deductions made from such pay, and the amounts actually paid to the employee. Yet,
petitioner did not present the payroll of its employees to bolster its insistence of respondent not being its
employee.
That respondent worked for less than eight hours/day was of no consequence and did not detract from the CAs
finding on the existence of the employer-employee relationship. In providing that the " normal hours of work of
any employee shall not exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of
number of hours as "normal hours of work" but did not prohibit work of less than eight hours.
Thirdly, the power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship.18 This is the so-called control test, and is
premised on whether the person for whom the services are performed reserves the right to control both the end
achieved and the manner and means used to achieve that end.19
Petitioner submits that it did not exercise the power of control over respondent and cites the following to
buttress its submission, namely: (a) respondent could beg off from his nightly performances in the restaurant for
other engagements; (b) he had the sole prerogative to play and perform any musical arrangements that he
wished; (c) although petitioner, through its manager, required him to play at certain times a particular music or
song, the music, songs, or arrangements, including the beat or tempo, were under his discretion, control and
direction; (d) the requirement for him to wear barong Tagalog to conform with the Filipiniana motif of the
venue whenever he performed was by no means evidence of control; (e) petitioner could not require him to do
any other work in the restaurant or to play the piano in any other places, areas, or establishments, whether or not
owned or operated by petitioner, during the three hour period from 7:00 pm to 10:00 pm, three to six times a
week; and (f) respondent could not be required to sing, dance or play another musical instrument.
A review of the records shows, however, that respondent performed his work as a pianist under petitioners
supervision and control. Specifically, petitioners control of both the end achieved and the manner and means
used to achieve that end was demonstrated by the following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00
pm, three to six times a week;
b. He could not choose the place of his performance;
c. The restaurants manager required him at certain times to perform only Tagalog songs or music, or to
wear barong Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees representation check and chits, a privilege granted to
other employees.
Relevantly, it is worth remembering that the employer need not actually supervise the performance of duties by
the employee, for it sufficed that the employer has the right to wield that power.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code
of Discipline, and that the power to terminate the working relationship was mutually vested in the parties, in
that either party might terminate at will, with or without cause.

The claim is contrary to the records. Indeed, the memorandum informing respondent of the discontinuance of
his service because of the present business or financial condition of petitioner20 showed that the latter had the
power to dismiss him from employment.21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner terminated to prevent losses, the
conclusion that his termination was by reason of retrenchment due to an authorized cause under the Labor Code
is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is
a management prerogative resorted to by employers to avoid or to minimize business losses. On this matter,
Article 283 of the Labor Code states:
Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the intended date thereof. xxx. 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.
The Court has laid down the following standards that an employer should meet to justify retrenchment and to
foil abuse, namely:
(a) The expected losses should be substantial and not merely de minimis in extent;
(b) The substantial losses apprehended must be reasonably imminent;
(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses;
and
(d) The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled
must be proved by sufficient and convincing evidence.22
Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less exacting
standard of proof would render too easy the abuse of retrenchment as a ground for termination of services of
employees.23
Was the retrenchment of respondent valid?
In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the
employer. Here, petitioner did not submit evidence of the losses to its business operations and the economic
havoc it would thereby imminently sustain. It only claimed that respondents termination was due to its "present
business/financial condition." This bare statement fell short of the norm to show a valid retrenchment. Hence,
we hold that there was no valid cause for the retrenchment of respondent.
Indeed, not every loss incurred or expected to be incurred by an employer can justify retrenchment.1wphi1 The
employer must prove, among others, that the losses are substantial and that the retrenchment is reasonably
necessary to avert such losses. Thus, by its failure to present sufficient and convincing evidence to prove that
retrenchment was necessary, respondents termination due to retrenchment is not allowed.

The Court realizes that the lapse of time since the retrenchment might have rendered respondent's reinstatement
to his former job no longer feasible. If that should be true, then petitioner should instead pay to him separation
pay at the rate of one. month pay for every year of service computed from September 1992 (when he
commenced to work for the petitioners) until the finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.
WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of
Appeals promulgated on February 11, 2002, subject to the modification that should reinstatement be no longer
feasible, petitioner shall pay to respondent separation pay of one month for every year of service computed from
September 1992 until the finality of this decision, and full backwages from the time his compensation was
withheld until the finality of this decision.
Costs of suit to be paid by the petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 177592

June 9, 2014

AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN

SUNGAHID, MAXIMO LEE, JOSE G. MORA TO, REX GABILAN, AND EUGEMA L.
LAURENTE, Petitioners,
vs.
PETRON CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial capital,
investment, tools and the like. However, where the principal is the one claiming that the contractor is a
legitimate contractor, the burden of proving the supposed status of the contractor rests on the principal.1
This Petition for Review on Certiorari2 assails the Decision3 dated May 10, 2006 of the Court of Appeals (CA)
in CA-G.R. SP No. 01291 which granted the Petition for Certiorari filed therewith, reversed and set aside the
February 18, 2005 Decision4 and August 24, 2005 Resolution5 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-000481-2003 and dismissed the Complaint for illegal dismissal filed by
petitioners Avelino Alilin (Alilin), Teodoro Calesa (Calesa), Charlie Hindang (Hindang), Eutiquio Gindang
(Gindang), Allan Sungahid (Sungahid), Maximo Lee (Lee), Jose G. Morato (Morato), Rex Gabilan (Gabilan)
and Eugema L. Laurente (Laurente) against respondent Petron Corporation (Petron). Also assailed in this
Petition is the CA Resolution6dated March 30, 2007 which denied petitioners Motion for Reconsideration7 and
Supplemental Motion for Reconsideration.8
Factual Antecedents
Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the country for
receiving, storing and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo D. Gindang
(Romualdo), started recruiting laborers for fielding to Petrons Mandaue Bulk Plant. When Romualdo died
in1989, his son Romeo D. Gindang (Romeo), through Romeo D. Gindang Services(RDG), took over the
business and continued to provide manpower services to Petron. Petitioners were among those recruited by
Romualdo D. Gindang Contractor and RDG to work in the premises of the said bulk plant, with the
corresponding dates of hiring and work duties, to wit:

Employees

Date of Hiring

Duties

Eutiquio Gindang

1968

utility/tanker receiver/barge loader/warehouseman/mixer

Eugema L. Laurente

June 1979

telephone operator/order taker

Teodoro Calesa

August 1, 1981

utility/tanker receiver/barge loader/sounder/gauger

Rex Gabilan

July 1, 1987

warehouseman/forklift driver/tanker receiver/barge loader

Charlie T. Hindang

September 18, 1990 utility/tanker receiver/barge loader/sounder/gauger

Allan P. Sungahid

September 18, 1990 filler/sealer/painter/tanker receiver/utility

Maximo S. Lee

September 18, 1990 gasul filler/painter/utility

Avelino S. Alilin

July 16, 1992

carpenter/driver

Jose Gerry M. Morato

March 16, 1993

cylinder checker/tanker receiver/grass cutter/janitor/utility

On June 1, 2000, Petron and RDG entered into a Contract for Services9 for the period from June 1, 2000 to May
31, 2002, whereby RDG undertook to provide Petron with janitorial, maintenance, tanker receiving, packaging
and other utility services in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further
extended until September 30, 2002. Upon expiration thereof, no further renewal of the service contract was
done.
Proceedings before the Labor Arbiter
Alleging that they were barred fromcontinuing their services on October 16, 2002, petitioners Alilin, Calesa,
Hindang, Gindang, Sungahid, Lee, Morato and Gabilan filed a Complaint10 for illegal dismissal, underpayment
of wages, damages and attorneys fees against Petron and RDG on November 12, 2002. Petitioner Laurente
filed another Complaint11 for illegal dismissal, underpayment of wages, non-payment of overtime pay, holiday
pay, premium pay for holiday, rest day, 13th month pay, service incentive leave pay, allowances, separation pay,
retirement benefits, damages and attorneys fees against Petron and RDG. The said complaints were later
consolidated.
Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the latter is a
labor-only contractor, which merely acted as an agent of Petron, their true employer. They asseverated that their
jobs, which are directly related to Petrons business, entailed them to work inside the premises of Petron using
the required equipment and tools furnished by it and that they were subject to Petrons supervision. Claiming to
be regular employees, petitioners thus asserted that their dismissal allegedly in view of the expiration of the
service contract between Petron and RDG is illegal.
RDG corroborated petitioners claim that they are regular employees of Petron. It alleged that Petron directly
supervised their activities; they performed jobs necessary and desirable to Petrons business; Petron provided
petitioners with supplies, tools and equipment used in their jobs; and that petitioners workplace since the start
of their employment was at Petrons bulk plant in Mandaue City. RDG denied liability over petitioners claim of
illegal dismissal and further argued that Petron cannot capitalize on the service contract to escape liability.
Petron, on the other hand, maintained that RDG is an independent contractor and the real employer of the
petitioners. It was RDG which hired and selected petitioners, paid their salaries and wages, and directly
supervised their work. Attesting to these were two former employees of RDG and Petrons Mandaue Terminal
Superintendent whose joint affidavit12 and affidavit,13 respectively, were submitted by Petron. Anent its
allegation that RDG is an independent contractor, Petron presented the following documents: (1) RDGs
Certificate of Registration issued by the Department of Labor and Employment (DOLE) on December 27,
2000;14 (2) RDGs Certificate of Registration of Business Name issued by the Department of Trade and Industry
(DTI) on August 18, 2000;15 (3) Contractors Pre-Qualification Statement;16 (4) Conflict of Interest Statement
signed by Romeo Gindang as manager of RDG;17(5) RDGs Audited Financial Statements for the years
199818 199919 and 2000;20 (6) RDGs Mayors Permit for the years 200021 and 2001;22 (7) RDGs Certificate of
Accreditation issued by DTI in October 1991;23 (8) performance bond24 and insurance policy25 posted to insure
against liabilities; (9) Social Security System (SSS) Online Inquiry System Employee Contributions and
Employee Static Information;26 and, (10) Romeos affidavit27 stating that he had paid the salaries of his
employees assigned to Petron for the period of November 4, 2001 to December 31, 2001. Petron argued that
with the expiration of the service contract it entered with RDG, petitioners term of employment has
concomitantly ended. And not being the employer, Petron cannot be held liable for petitioners claim of illegal
dismissal.

In a Decision28 dated June 12, 2003,the Labor Arbiter ruled that petitioners are regular employees of Petron. It
found that their jobs were directly related to Petrons business operations; they worked under the supervision of
Petrons foreman and supervisor; and they were using Petrons tools and equipment in the performance of their
works. The Labor Arbiter also found that Petron merely utilized RDG in its attempt to hide the existence of
employee-employer relationship between it and petitioners and avoid liability under labor laws. And there being
no showing that petitioners dismissal was for just or authorized cause, the Labor Arbiter declared them to have
been illegally dismissed. Petron was thus held solidarily liable with Romeo for the payment of petitioners
separation pay (in lieu of reinstatement due to strained relations with Petron) fixed at one month pay for every
year of service and backwages computed on the basis of the last salary rate at the time of dismissal. The
dispositive portion of the Decision reads: WHEREFORE, premises considered, judgment is hereby rendered
ordering the respondents Petron Corporation and Romeo Gindang to pay the complainants as follows:
1. Teodoro Calesa

P 136,890.00

2. Eutiquio Gindang

P 202,800.00

3. Charlie T. Gindang

P 91,260.00

4. Allan P. Sungahid

P 91,260.00

5. Jose Gerry Morato

P 76,050.00

6. Avelino A. Alilin

P 95,680.00

7. Rex S. Gabilan

P 106,470.00

8. Maximo S. Lee

P 91,260.00

9. Eugema Minao Laurente

P 150,800.00

Total award

P1,042,470.00

The other claims are dismissed for lack of merit.

SO ORDERED.29
Proceedings before the National Labor Relations Commission
Petron continued to insist that there is no employer-employee relationship between it and petitioners. The
NLRC, however, was not convinced. In its Decision30 of February 18, 2005, the NLRC ruled that petitioners are
Petrons regular employees because they are performing job assignments which are germane to its main
business. Thus:
WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby affirmed. It is understood that
the grant of backwages shall be until finality of the Decision.
The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.
SO ORDERED.31
The NLRC also denied Petrons Motion for Reconsideration in its Resolution32 of August 24, 2005.
Proceedings before the Court of Appeals
Petron filed a Petition for Certiorari with prayer for the issuance of a temporary restraining order or writ of
injunction before the CA. The said court resolved to grant the injunction.33 Hence, a Writ of Preliminary
Injunction34 to restrain the implementation of the February 18, 2005 Decision and August 24, 2005 Resolution
of the NLRC was issued on March 3, 2006.
In a Decision35 dated May 10, 2006, the CA found no employer-employee relationship between the parties.
According to it, the records of the case do not show that petitioners were directly hired, selected or employed by
Petron; that their wages and other wage related benefits were paid by the said company; and that Petron
controlled the manner by which they carried out their tasks. On the other hand, RDG was shown to be
responsible for paying petitioners wages. In fact, SSS records show that RDG is their employer and actually the
one remitting their contributions thereto. Also, two former employees of RDG who were likewise assigned in
the Mandaue Bulk Plant confirmed by way of a joint affidavit that it was Romeo and his brother Alejandre

Gindang who supervised their work, not Petrons foreman or supervisor. This was even corroborated by the
Terminal Superintendent of the Mandaue Bulk Plant.
The CA also found RDG to be an independent labor contractor with sufficient capitalization and investment as
shown by its financial statement for year-end 2000. In addition, the works for which RDG was contracted to
provide were menial which were neither directly related nor sensitive and critical to Petrons principal business.
The CA disposed of the case as follows:
WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the August 24, 2005
Resolution of the Fourth Division of the National Labor Relations Commission in NLRC Case No. V-0004812003, entitled "Teodoro Calesa et al. vs. Petron Corporation and R.D. Gindang Services", having been rendered
with grave abuse of discretion amounting to excess of jurisdiction, are hereby REVERSED and SET ASIDE and
a NEW ONE is entered DISMISSING private respondents complaint against petitioner. It is so ordered.36
Petitioners filed a Motion for Reconsideration37 insisting that Petron illegally dismissed them; that RDG is a
labor-only contractor; and that they performed jobs which are sensitive to Petrons business operations. To
support these, they attached to their Supplemental Motion for Reconsideration38 Affidavits39 of former
employees of Petron attesting to the fact that their jobs were critical to Petrons business operations and that
they were carried out under the control of a Petron employee.
Petitioners motions were, however, denied by the CA in a Resolution40 dated March 30, 2007.
Hence, this Petition.
Issue
The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon such finding
hinges the determination of whether an employer-employee relationship exists between the parties as to make
Petron liable for petitioners dismissal.
Our Ruling
The Petition is impressed with merit. The conflicting findings of the Labor Arbiter and the NLRC on one hand,
and of the CA on the other, constrains the Court to review the factual issues involved in this case.
As a general rule, the Court does not review errors that raise factual questions.41 Nonetheless, while it is true
that the determination of whether an employer-employee relationship existed between the parties basically
involves a question of fact, the conflicting findings of the Labor Arbiter and the NLRC on one hand, and of the
CA on the other, constrains the Court to review and reevaluate such factual findings.42
Labor-only contracting, distinguished
from permissible job contracting.
The prevailing rule on labor-only contracting at the time Petron and RDG entered into the Contract for Services
in June 2000 is DOLE Department Order No. 10, series of 1997,43 the pertinent provision of which reads:
Section 4. x x x
xxxx
(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for a principal and the following
elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment to actually perform
the job, work or service under its own account and responsibility; and
(ii) The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.
xxxx

Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3 (d) and (e)
and Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the performance
of any of the following:
(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of
products or services, provided that the normal production capacity or regular workforce of the principal
cannot reasonably cope with such demands;
(b) Works or services temporarily or occasionally needed by the principal for undertakings requiring
expert or highly technical personnel to improve the management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products, only for the duration
of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of the
principal, including casual work, janitorial, security, landscaping, and messengerial services, and work
not related to manufacturing processes in manufacturing establishments;
(e) Services involving the public display of manufacturers products which do not involve the act of
selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual or peculiar skills, expertise, tools or
equipment the performance of which is beyond the competence of the regular workforce or production
capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute services for absent
regular employees, provided that the period of service shall be coextensive with the period of absence
and the same is made clear to the substitute employee at the time of engagement. The phrase "absent
regular employees" includes those who are serving suspensions or other disciplinary measures not
amounting to termination of employment meted out by the principal, but excludes those on strike where
all the formal requisites for the legality of the strike have been prima facie complied with based on the
records filed with the National Conciliation and Mediation Board.
"Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to farm out
with a contractor or subcontractor the performance of a specific job, work, or service within a definite or
predetermined period, regardless of whether such job, work or, service is to be performed or completed within
or outside the premises of the principal. Under this arrangement, the following conditions must be met: (a) the
contractor carries on a distinct and independent business and undertakes the contract work on his 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 his work except as to the results thereof;
(b) the contractor has substantial capital or investment; and (c) the agreement between the principal and
contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety
and health standards, free exercise of the right to self-organization, security of tenure, and social welfare
benefits."44 Labor-only contracting, on the other hand, is a prohibited act, defined as "supplying workers to an
employer who 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."45 "[I]n distinguishing between prohibited
labor-only contracting and permissible job contracting, the totality of the facts and the surrounding
circumstances of the case shall be considered."46 Generally, the contractor is presumed to be a labor-only
contractor, unless such contractor overcomes the burden of proving that it has the substantial capital,
investment, tools and the like. However, where the principal is the one claiming that the contractor is a
legitimate contractor, as in the present case, said principal has the burden of proving that supposed status.47 It is
thus incumbent upon Petron, and not upon petitioners as Petron insists,48 to prove that RDG is an independent
contractor.
Petron failed to discharge the burden of
proving that RDG is a legitimate
contractor. Hence, the presumption that
RDG is a labor-only contractor stands.
Here, the audited financial statements and other financial documents of RDG for the years 1999 to 2001
establish that it does have sufficient working capital to meet the requirements of its service contract. In fact, the

financial evaluation conducted by Petron of RDGs financial statements for years 1998-2000 showed RDG to
have a maximum financial capability of Php4.807 Million as of December 1998,49 and Php1.611 Million as of
December 2000.50 Petron was able to establish RDGs sufficient capitalization when it entered into the service
contract in 2000. The Court stresses though that this determination of RDGs status as an independent contractor
is only with respect to its financial capability for the period covered by the financial and other documents
presented. In other words, the evidence adduced merely proves that RDG was financially qualified as a
legitimate contractor but only with respect to its last service contract with Petron in the year 2000.
As may be recalled, petitioners have rendered work for Petron for a long period of time even before the service
contract was executed in 2000. The respective dates on which petitioners claim to have started working for
Petron, as well as the fact that they have rendered continuous service to it until October 16, 2002, when they
were prevented from entering the premises of Petrons Mandaue Bulk Plant, were not at all disputed by Petron.
In fact, Petron even recognized that some of the petitioners were initially fielded by Romualdo Gindang, the
father of Romeo, through RDGs precursor, Romualdo D.Gindang Contractor, while the others were provided
by Romeo himself when he took over the business of his father in 1989.1wphi1 Hence, while Petron was able
to establish that RDG was financially capable as a legitimate contractor at the time of the execution of the
service contract in 2000, it nevertheless failed to establish the financial capability of RDG at the time when
petitioners actually started to work for Petron in 1968, 1979, 1981, 1987, 1990,1992 and 1993.
Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor Code, in force since 1976 and
prior to DOLE Department Order No. 10, series of 1997,52 provide that for job contracting to be permissible,
one of the conditions that has to be met is that the contractor must have substantial capital or investment. Petron
having failed to show that this condition was met by RDG, it can be concluded, on this score alone, that RDG is
a mere labor-only contractor. Otherwise stated, the presumption that RDG is a labor-only contractor stands due
to the failure of Petron to discharge the burden of proving the contrary.
The Court also finds, as will be discussed below, that the works performed by petitioners were directly related
to Petrons business, another factor which negates Petrons claim that RDG is an independent contractor.
Petrons power of control over
petitioners exists in this case.
"[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an employeremployee relationship between the principal and the employees of the supposed contractor."53 In this case, the
employer employee relationship between Petron and petitioners becomes all the more apparent due to the
presence of the power of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals54 that:
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employeremployee relationship between the parties. The four elements of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
power to control the employees conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative factor, so
important, in fact, that, the other elements may even be disregarded." (Emphasis supplied)
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do
not detract from the conclusion that there exists an employer-employee relationship between the parties due to
Petrons power of control over the petitioners. One manifestation of the power of control is the power to transfer
employees from one work assignment to another.55 Here, Petron could order petitioners to do work outside of
their regular "maintenance/utility" job. Also, petitioners were required to report for work everyday at the bulk
plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety helmets as
prescribed by the safety and security measures being implemented within the bulk plant. All these imply
control. In an industry where safety is of paramount concern, control and supervision over sensitive operations,
such as those performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron deals with
commodities that are highly volatile and flammable which, if mishandled or not properly attended to, may cause
serious injuries and damage to property and the environment. Naturally, supervision by Petron is essential in
every aspect of its product handling in order not to compromise the integrity, quality and safety of the products
that it distributes to the consuming public.

Petitioners already attained regular

status as employees of Petron.
Petitioners were given various work assignments such as tanker receiving, barge loading, sounding, gauging,
warehousing, mixing, painting, carpentry, driving, gasul filling and other utility works. Petron refers to these
work assignments as menial works which could be performed by any able-bodied individual. The Court finds,
however, that while the jobs performed by petitioners may be menial and mechanical, they are nevertheless
necessary and related to Petrons business operations. If not for these tasks, Petrons products will not reach the
consumers in their proper state. Indeed, petitioners roles were vital inasmuch as they involve the preparation of
the products that Petron will distribute to its consumers.
Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to petitioners,
the Court notes the undisputed fact that for many years, it was the same able-bodied individuals (petitioners)
who performed the tasks for Petron. The engagement of petitioners for the same works for a long period of time
is a strong indication that such works were indeed necessary to Petrons business. In view of these, and
considering further that petitioners length of service entitles them to become regular employees under the
Labor Code, petitioners are deemed by law to have already attained the status as Petrons regular employees. As
such, Petron could not terminate their services on the pretext that the service contract it entered with RDG has
already lapsed. For one, and as previously discussed, such regular status had already attached to them even
before the execution of the service contract in 2000. For another, the same does not constitute a just or
authorized cause for a valid dismissal of regular employees.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an agent of
Petron. Consequently, the employer-employee relationship which the Court finds to exist in this case is between
petitioners as employees and Petron as their employer. Petron therefore, being the principal employer and RDG,
being the labor-only contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims.56
WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and March 30, 2007 Resolution of the
Court of Appeals in CA-G.R. SP No. 01291 are REVERSED and SET ASIDE. The February 18, 2005 Decision
and August 24, 2005 Resolution of the National Labor Relations Commission in NLRC Case No. V-0004812003 are hereby REINSTATED and AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 126383 November 28, 1997

SAN JUAN DE DIOS HOSPITAL EMPLOYEES ASSOCIATION-AFW/MA. CONSUELO
MACQUILING LEONARDO MARTINEZ, DOMINGO ELA, JR., RODOLFO CALUCIN, JR., PERLA
MENDOZA, REX RAPHAEL REYES, ROGELIO BELMONTE, and 375 other EMPLOYEE-UNION
MEMBERS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, and SAN JUAN DE DIOS HOSPITAL, respondents.

FRANCISCO, J.:
Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios Hospital Employees
Association, sent on July 08, 1991, a "four (4)-page letter with attached support signatures . . . requesting and
pleading for the expeditious implementation and payment by respondent" Juan De Dios Hospital "of the '40HOURS/5-DAY WORKWEEK' with compensable weekly two (2) days off provided for by Republic Act 5901

as clarified for enforcement by the Secretary of Labor's Policy Instructions No. 54 dated April 12,
1988." 1 Respondent hospital failed to give a favorable response; thus, petitioners filed a complaint regarding
their "claims for statutory benefits under the above-cited law and policy issuance" 2, docketed as NLRC NCR
Case No. 00-08-04815-19. On February 26, 1992, the Labor Arbiter 3 dismissed the complaint. Petitioners
appealed before public respondent National Labor Relations Commission 4 (NLRC), docketed as NLRC NCR
CA 003028-92, which affirmed the Labor Arbiter's decision. Petitioners' subsequent motion for reconsideration
was denied; hence, this petition under Rule 65 of the Rules of Court ascribing grave abuse of discretion on the
part of NLRC in concluding that Policy Instructions No. 54 "proceeds from a wrong interpretation of RA
5901" 5 and Article 83 of the Labor Code.
As the Court sees it, the core issue is whether Policy Instructions No. 54 issued by then Labor Secretary (now
Senator) Franklin M. Drilon is valid or not.
The policy instruction in question provides in full as follows:
Policy Instruction No. 54
To: All Concerned
Subject: Working Hours and Compensation of Hospital/Clinic Personnel
This issuance clarifies the enforcement policy of this Department on the working hours and
compensation of personnel employed by hospitals/clinics with a bed capacity of 100 or more and
those located in cities and municipalities with a population of one million or more.
Republic Act 5901 took effect on 21 June 1969 prescribes a 40-hour/5 day work week for
hospital/clinic personnel. At the same time, the Act prohibits the diminution of the compensation
of these workers who would suffer a reduction in their weekly wage by reason of the shortened
workweek prescribed by the Act. In effect, RA 5901 requires that the covered hospital workers
who used to work seven (7) days a week should be paid for such number of days for working
only 5 days or 40 hours a week.
The evident intention of RA 5901 is to reduce the number of hospital personnel, considering the
nature of their work, and at the same time guarantee the payment to them of a full weekly wage
for seven (7) days. This is quite clear in the Exemplary Note of RA 5901 which states:
As compared with the other employees and laborers, these hospital and health
clinic personnel are over-worked despite the fact that their duties are more
delicate in nature. If we offer them better working conditions, it is believed that
the "brain drain", that our country suffers nowadays as far as these personnel are
concerned will be considerably lessened. The fact that these hospitals and health
clinics personnel perform duties which are directly concerned with the health and
lives of our people does not mean that they should work for a longer period than
most employees and laborers. They are also entitled to as much rest as other
workers. Making them work longer than is necessary may endanger, rather than
protect the health of their patients. Besides, they are not receiving better pay than
the other workers. Therefore, it is just and fair that they may be made to enjoy the
privileges of equal working hours with other workers except those excepted by
law. (Sixth Congress of the Republic of the Philippines, Third Session, House of
Representatives, H. No. 16630)
The Labor Code in its Article 83 adopts and incorporates the basic provisions of RA 5901
and retains its spirit and intent which is to shorten the workweek of covered hospital personnel
and at the same time assure them of a full weekly wage.

Consistent with such spirit and intent, it is the position of the Department that personnel in
subject hospital and clinics are entitled to a full weekly wage for seven (7) days if they have
completed the 40-hour/5-day workweek in any given workweek.
All enforcement and adjudicatory agencies of this Department shall be guided by this issuance in
the disposition of cases involving the personnel of covered hospitals and clinics.
Done in the City of Manila, this 12th day of April, 1988.
(Sgd.) FRANKLIN
M. DRILON
Secretary
(Emphasis Added)
We note that Policy Instruction No. 54 relies and purports to implement Republic Act No. 5901, otherwise
known as "An Act Prescribing Forty Hours A Week Of Labor For Government and Private Hospitals Or Clinic
Personnel", enacted on June 21, 1969. Reliance on Republic Act No. 5901, however, is misplaced for the said
statute, as correctly ruled by respondent NLRC, has long been repealed with the passage of the Labor Code on
May 1, 1974, Article 302 of which explicitly provides: "All labor laws not adopted as part of this Code either
directly or by reference are hereby repealed. All provisions of existing laws, orders, decree, rules and
regulations inconsistent herewith are likewise repealed." Accordingly, only Article 83 of the Labor Code which
appears to have substantially incorporated or reproduced the basic provisions of Republic Act No. 5901 may
support Policy Instructions No. 54 on which the latter's validity may be gauged. Article 83 of the Labor Code
states:
Art. 83. Normal Hours of Work. The normal hours of work of any employee shall not exceed
eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least one million (1,000,000)
or in hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular
office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for meals,
except where the exigencies of the service require that such personnel work for six (6) days or
forty-eight (48) hours, in which case they shall be entitled to an additional compensation of at
least thirty per cent (30%) of their regular wage for work on the sixth day. For purposes of this
Article, "health personnel" shall include: resident physicians, nurses, nutritionists, dietitians,
pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists,
midwives, attendants and all other hospital or clinic personnel. (Emphasis supplied)
A cursory reading of Article 83 of the Labor Code betrays petitioners' position that "hospital employees" are
entitled to "a full weekly salary with paid two (2) days' off if they have completed the 40-hour/5-day
workweek". 6What Article 83 merely provides are: (1) the regular office hour of eight hours a day, five days per
week for health personnel, and (2) where the exigencies of service require that health personnel work for six
days or forty-eight hours then such health personnel shall be entitled to an additional compensation of at least
thirty percent of their regular wage for work on the sixth day. There is nothing in the law that supports then
Secretary of Labor's assertion that "personnel in subject hospitals and clinics are entitled to a full weekly wage
for seven (7) days if they have completed the 40-hour/5-day workweek in any given workweek". Needless to
say, the Secretary of Labor exceeded his authority by including a two days off with pay in contravention of the
clear mandate of the statute. Such act the Court shall not countenance. Administrative interpretation of the law,
we reiterate, is at best merely advisory, 7 and the Court will not hesitate to strike down an administrative
interpretation that deviates from the provision of the statute.
Indeed, even if we were to subscribe with petitioners' erroneous assertion that Republic Act No. 5901 has
neither been amended nor repealed by the Labor Code, we nevertheless find Policy Instructions No. 54 invalid.
A perusal of Republic Act No. 5901 8 reveals nothing therein that gives two days off with pay for health

personnel who complete a 40-hour work or 5-day workweek. In fact, the Explanatory Note of House Bill No.
16630 (later passed into law as Republic Act No. 5901) explicitly states that the bill's sole purpose is to shorten
the working hours of health personnel and not to dole out a two days off with pay.
Hence:
The accompanying bill seeks to grant resident physicians, staff nurses, nutritionist, midwives,
attendants and other hospital and health clinic personnel of public and private hospitals and
clinics,the privilege of enjoying the eight hours a week exclusive of time for lunch granted by law
to all government employees and workers except those employed in schools and in courts. At
present those hospitals and clinics, work six days a week, 8 hours a day or 48 hours a week.
As compared with the other employees and laborers, these hospital and health clinic personnel
are over-worked despite the fact that their duties are more delicate in nature. If we offer them
better working conditions, it is believed that the "brain drain", that our country suffers nowadays
as far as these personnel are concerned will be considerably lessened. The fact that these
hospitals and health clinic personnel perform duties which are directly concerned with the
health and lives of our people does not mean that they should work for a longer period than most
employees and laborers.They are also entitled to as much rest as other workers. Making them
work longer than is necessary may endanger, rather than protect, the health of their patients.
Besides, they are not receiving better pay than the other workers. Therefore, it is just and fair
that they be made to enjoy the privileges of equal working hours with other workers except those
excepted by law.
In the light of the foregoing, approval of this bill is strongly recommended.
(SGD.) SERGIO H.
LOYOLA
"Congressman, 3rd
District
Manila" (Annex "F"
of petition, emphasis
supplied)
Further, petitioners' position is also negated by the very rules and regulations promulgated by the Bureau
of Labor Standards which implement Republic Act No. 5901. Pertinent portions of the implementing
rules provide:
RULES AND REGULATIONS IMPLEMENTING
REPUBLIC ACT NO. 5901
By virtue of Section 79 of the Revised Administrative Code, as modified by section 18 of
Implementation Report for Reorganization Plan No. 20-A on Labor, vesting in the Bureau of
Labor Standards the authority to promulgate rules and regulations to implement wage and hour
laws, the following rules and regulations to are hereby issued for the implementation of Republic
Act No. 5901.
CHAPTER I Coverage
Sec. 1. General Statement on Coverage. Republic Act No. 5901, hereinafter referred to as the
Act, shall apply to:
(a) All hospitals and clinics, including those with a bed capacity of less than one hundred, which
are situated in cities or municipalities with a population of one million or more; and to

(b) All hospitals and clinics with a bed capacity of at least one hundred, irrespective of the size of
population of the city or municipality where they may be situated.
xxx xxx xxx
Sec. 7. Regular Working Day. The regular working days of covered employees shall be not more
than five days in a workweek. The workweek may begin at any hour and on any day, including
Saturday or Sunday, designated by the employer.
Employers are not precluded from changing the time at which the workday or workweek begins,
provided that the change is not intended to evade the requirements of these regulations on the
payment of additional compensation.
xxx xxx xxx
Sec. 15. Additional Pay Under the Act and C.A. No. 444. (a) Employees of covered hospitals and
clinics who are entitled to the benefits provided under the Eight-Hour Labor Law, as amended,
shall be paid an additional compensation equivalent to their regular rate plus at least twenty-five
percent thereof for work performed on Sunday and Holidays, not exceeding eight hours, such
employees shall be entitled to an additional compensation of at least 25% of their regular rate.
(b) For work performed in excess of forty hours a week, excluding those rendered in excess of
eight hours a day during the week, employees covered by the Eight-Hour Labor Law shall be
entitled to an additional straight-time pay which must be equivalent at least to their regular rate.
If petitioners are entitled to two days off with pay, then there appears to be no sense at all why Section 15 of the
implementing rules grants additional compensation equivalent to the regular rate plus at least twenty-five
percent thereof for work performed on Sunday to health personnel, or an "additional straight-time pay which
must be equivalent at least to the regular rate" "[f]or work performed in excess of forty hours a week. . . . Policy
Instructions No. 54 to our mind unduly extended the statute. The Secretary of Labor moreover erred in invoking
the "spirit and intent" of Republic Act No. 5901 and Article 83 of the Labor Code for it is an elementary rule of
statutory construction that when the language of the law is clear and unequivocal, the law must be taken to
mean exactly what it says. 9 No additions or revisions may be permitted. Policy Instructions No. 54 being
inconsistent with and repugnant to the provision of Article 83 of the Labor Code, as well as to Republic Act No.
5901, should be, as it is hereby, declared void.
WHEREFORE, the decision appealed from is AFFIRMED. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 120592 March 14, 1997

TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL NOEL A. CRUZ, respondents.

REGALADO, J.:
Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A. Cruz, head of
the E.N.A. Cruz and Associates law firm, entered into a retainer agreement on February 26, 1987 whereby the
former obligated itself to pay the latter a monthly retainer fee of P3,000.00 in consideration of the law firm's
undertaking to render the services enumerated in their contract. 1 Parenthetically, said retainer agreement was
terminated by the union on April 4, 1990. 2
During the existence of that agreement, petitioner union referred to private respondent the claims of its
members for holiday, mid-year and year-end bonuses against their employer, Traders Royal Bank (TRB). After
the appropriate complaint was filed by private respondent, the case was certified by the Secretary of Labor to
the National Labor Relations Commission (NLRC) on March 24, 1987 and docketed as NLRC-NCR Certified
Case No. 0466. 3
On September 2, 1988, the NLRC rendered a decision in the foregoing case in favor of the employees, awarding
them holiday pay differential, mid-year bonus differential, and year-end bonus differential. 4 The NLRC, acting
on a motion for the issuance of a writ of execution filed by private respondent as counsel for petitioner union,
raffled the case to Labor Arbiter Oswald Lorenzo. 5
However, pending the hearing of the application for the writ of execution, TRB challenged the decision of the
NLRC before the Supreme Court. The Court, in its decision promulgated on August 30, 1990, 6 modified the
decision of the NLRC by deleting the award of mid-year and year-end bonus differentials while affirming the
award of holiday pay differential. 7
The bank voluntarily complied with such final judgment and determined the holiday pay differential to be in the
amount of P175,794.32. Petitioner never contested the amount thus found by TRB. 8 The latter duly paid its
concerned employees their respective entitlement in said sum through their payroll. 9
After private respondent received the above decision of the Supreme Court on September 18, 1990, 10 he
notified the petitioner union, the TRB management and the NLRC of his right to exercise and enforce his
attorney's lien over the award of holiday pay differential through a letter dated October 8, 1990. 11
Thereafter, on July 2, 1991, private respondent filed a motion before Labor Arbiter Lorenzo for the
determination of his attorney's fees, praying that ten percent (10%) of the total award for holiday pay
differential computed by TRB at P175,794.32, or the amount of P17,579.43, be declared as his attorney's fees,
and that petitioner union be ordered to pay and remit said amount to him. 12
The TRB management manifested before the labor arbiter that they did not wish to oppose or comment on
private respondent's motion as the claim was directed against the union, 13 while petitioner union filed a
comment and opposition to said motion on July 15, 1991. 14 After considering the position of the parties, the
labor arbiter issued an order15 on November 26, 1991 granting the motion of private respondent, as follows:
WHEREFORE, premises considered, it is hereby ordered that the TRADERS ROYAL BANK
EMPLOYEES UNION with offices at Kanlaon Towers, Roxas Boulevard is hereby ordered (sic)
to pay without delay the attorney's fees due the movant law firm, E.N.A. CRUZ and
ASSOCIATES the amount of P17,574.43 or ten (10%) per cent of the P175,794.32 awarded by
the Supreme Court to the members of the former.
This constrained petitioner to file an appeal with the NLRC on December 27, 1991, seeking a reversal of
that order. 16
On October 19, 1994, the First Division of the NLRC promulgated a resolution affirming the order of the labor
arbiter. 17 The motion for reconsideration filed by petitioner was denied by the NLRC in a resolution dated May
23, 1995, 18hence the petition at bar.

Petitioner maintains that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in
upholding the award of attorney's fees in the amount of P17,574.43, or ten percent (10%) of the P175,794.32
granted as holiday pay differential to its members, in violation of the retainer agreement; and that the challenged
resolution of the NLRC is null and void, 19 for the reasons hereunder stated.
Although petitioner union concedes that the NLRC has jurisdiction to decide claims for attorney's fees, it
contends that the award for attorney's fees should have been incorporated in the main case and not after the
Supreme Court had already reviewed and passed upon the decision of the NLRC. Since the claim for attorney's
fees by private respondent was neither taken up nor approved by the Supreme Court, no attorney's fees should
have been allowed by the NLRC.
Thus, petitioner posits that the NLRC acted without jurisdiction in making the award of attorney's fees, as said
act constituted a modification of a final and executory judgment of the Supreme Court which did not award
attorney's fees. It then cited decisions of the Court declaring that a decision which has become final and
executory can no longer be altered or modified even by the court which rendered the same.
On the other hand, private respondent maintains that his motion to determine attorney's fees was just an incident
of the main case where petitioner was awarded its money claims. The grant of attorney's fees was the
consequence of his exercise of his attorney's lien. Such lien resulted from and corresponds to the services he
rendered in the action wherein the favorable judgment was obtained. To include the award of the attorney's fees
in the main case presupposes that the fees will be paid by TRB to the adverse party. All that the non-inclusion of
attorney's fees in the award means is that the Supreme Court did not order TRB to pay the opposing party
attorney's fees in the concept of damages. He is not therefore precluded from filing his motion to have his own
professional fees adjudicated.
In view of the substance of the arguments submitted by petitioner and private respondent on this score, it
appears necessary to explain and consequently clarify the nature of the attorney's fees subject of this petition, in
order to dissipate the apparent confusion between and the conflicting views of the parties.
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. 20 In its
ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his
agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the
losing party in a litigation. The basis of this is any of the cases provided by law where such award can be made,
such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless
they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.
It is the first type of attorney's fees which private respondent demanded before the labor arbiter. Also, the
present controversy stems from petitioner's apparent misperception that the NLRC has jurisdiction over claims
for attorney's fees only before its judgment is reviewed and ruled upon by the Supreme Court, and that
thereafter the former may no longer entertain claims for attorney's fees.
It will be noted that no claim for attorney's fees was filed by private respondent before the NLRC when it acted
on the money claims of petitioner, nor before the Supreme Court when it reviewed the decision of the NLRC. It
was only after the High Tribunal modified the judgment of the NLRC awarding the differentials that private
respondent filed his claim before the NLRC for a percentage thereof as attorney's fees.
It would obviously have been impossible, if not improper, for the NLRC in the first instance and for the
Supreme Court thereafter to make an award for attorney's fees when no claim therefor was pending before them.
Courts generally rule only on issues and claims presented to them for adjudication. Accordingly, when the labor
arbiter ordered the payment of attorney's fees, he did not in any way modify the judgment of the Supreme
Court.

As an adjunctive episode of the action for the recovery of bonus differentials in NLRC-NCR Certified Case No.
0466, private respondent's present claim for attorney's fees may be filed before the NLRC even though or, better
stated, especially after its earlier decision had been reviewed and partially affirmed. It is well settled that a claim
for attorney's fees may be asserted either in the very action in which the services of a lawyer had been rendered
or in a separate action. 21
With respect to the first situation, the remedy for recovering attorney's fees as an incident of the main action
may be availed of only when something is due to the client. 22 Attorney's fees cannot be determined until after
the main litigation has been decided and the subject of the recovery is at the disposition of the court. The issue
over attorney's fees only arises when something has been recovered from which the fee is to be paid. 23
While a claim for attorney's fees may be filed before the judgment is rendered, the determination as to the
propriety of the fees or as to the amount thereof will have to be held in abeyance until the main case from which
the lawyer's claim for attorney's fees may arise has become final. Otherwise, the determination to be made by
the courts will be premature. 24 Of course, a petition for attorney's fees may be filed before the judgment in
favor of the client is satisfied or the proceeds thereof delivered to the client. 25
It is apparent from the foregoing discussion that a lawyer has two options as to when to file his claim for
professional fees. Hence, private respondent was well within his rights when he made his claim and waited for
the finality of the judgment for holiday pay differential, instead of filing it ahead of the award's complete
resolution. To declare that a lawyer may file a claim for fees in the same action only before the judgment is
reviewed by a higher tribunal would deprive him of his aforestated options and render ineffective the foregoing
pronouncements of this Court.
Assailing the rulings of the labor arbiter and the NLRC, petitioner union insists that it is not guilty of unjust
enrichment because all attorney's fees due to private respondent were covered by the retainer fee of P3,000.00
which it has been regularly paying to private respondent under their retainer agreement. To be entitled to the
additional attorney's fees as provided in Part D (Special Billings) of the agreement, it avers that there must be a
separate mutual agreement between the union and the law firm prior to the performance of the additional
services by the latter. Since there was no agreement as to the payment of the additional attorney's fees, then it is
considered waived.
En contra, private respondent contends that a retainer fee is not the attorney's fees contemplated for and
commensurate to the services he rendered to petitioner. He asserts that although there was no express agreement
as to the amount of his fees for services rendered in the case for recovery of differential pay, Article 111 of the
Labor Code supplants this omission by providing for an award of ten percent (10%) of a money judgment in a
labor case as attorney's fees.
It is elementary that an attorney is entitled to have and receive a just and reasonable compensation for services
performed at the special instance and request of his client. As long as the lawyer was in good faith and honestly
trying to represent and serve the interests of the client, he should have a reasonable compensation for such
services. 26 It will thus be appropriate, at this juncture, to determine if private respondent is entitled to an
additional remuneration under the retainer agreement 27 entered into by him and petitioner.
The parties subscribed therein to the following stipulations:
xxx xxx xxx
The Law Firm shall handle cases and extend legal services under the parameters of the following terms and
conditions:
A. GENERAL SERVICES
1. Assurance that an Associate of the Law Firm shall be designated and be available on a day-today basis depending on the Union's needs;

2. Legal consultation, advice and render opinion on any actual and/or anticipatory situation
confronting any matter within the client's normal course of business;
3. Proper documentation and notarization of any or all transactions entered into by the Union in
its day-to-day course of business;
4. Review all contracts, deeds, agreements or any other legal document to which the union is a
party signatory thereto but prepared or caused to be prepared by any other third party;
5. Represent the Union in any case wherein the Union is a party litigant in any court of law or
quasi-judicial body subject to certain fees as qualified hereinafter;
6. Lia(i)se with and/or follow-up any pending application or any papers with any government
agency and/or any private institution which is directly related to any legal matter referred to the
Law Firm.
B. SPECIAL LEGAL SERVICES
1. Documentation of any contract and other legal instrument/documents arising and/or required
by your Union which do not fall under the category of its ordinary course of business activity but
requires a special, exhaustive or detailed study and preparation;
2. Conduct or undertake researches and/or studies on special projects of the Union;
3. Render active and actual participation or assistance in conference table negotiations with TRB
management or any other third person(s), juridical or natural, wherein the presence of counsel is
not for mere consultation except CBA negotiations which shall be subject to a specific agreement
(pursuant to PD 1391 and in relation to BP 130 & 227);
4. Preparation of Position Paper(s), Memoranda or any other pleading for and in behalf of the
Union;
5. Prosecution or defense of any case instituted by or against the Union; and,
6. Represent any member of the Union in any proceeding provided that the particular member
must give his/her assent and that prior consent be granted by the principal officers. Further, the
member must conform to the rules and policies of the Law Firm.
C. FEE STRUCTURE
In consideration of our commitment to render the services enumerated above when required or
necessary, your Union shall pay a monthly retainer fee of THREE THOUSAND PESOS (PHP
3,000.00), payable in advance on or before the fifth day of every month.
An Appearance Fee which shall be negotiable on a case-to-case basis.
Any and all Attorney's Fees collected from the adverse party by virtue of a successful litigation
shall belong exclusively to the Law Firm.
It is further understood that the foregoing shall be without prejudice to our claim for
reimbursement of all out-of-pocket expenses covering filing fees, transportation, publication
costs, expenses covering reproduction or authentication of documents related to any matter
referred to the Law Firm or that which redound to the benefit of the Union.
D. SPECIAL BILLINGS

In the event that the Union avails of the services duly enumerated in Title B, the Union shall pay
the Law Firm an amount mutually agreed upon PRIOR to the performance of such services. The
sum agreed upon shall be based on actual time and effort spent by the counsel in relation to the
importance and magnitude of the matter referred to by the Union. However, charges may
be WAIVEDby the Law Firm if it finds that time and efforts expended on the particular services
are inconsequential but such right of waiver is duly reserved for the Law Firm.
xxx xxx xxx
The provisions of the above contract are clear and need no further interpretation; all that is required to be done
in the instant controversy is its application. The P3,000.00 which petitioner pays monthly to private respondent
does not cover the services the latter actually rendered before the labor arbiter and the NLRC in behalf of the
former. As stipulated in Part C of the agreement, the monthly fee is intended merely as a consideration for the
law firm'scommitment to render the services enumerated in Part A (General Services) and Part B (Special Legal
Services) of the retainer agreement.
The difference between a compensation for a commitment to render legal services and a remuneration for legal
services actually rendered can better be appreciated with a discussion of the two kinds of retainer fees a client
may pay his lawyer. These are a general retainer, or a retaining fee, and a special
retainer. 28
A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future services as general counsel for
any ordinary legal problem that may arise in the routinary business of the client and referred to him for legal
action. The future services of the lawyer are secured and committed to the retaining client. For this, the client
pays the lawyer a fixed retainer fee which could be monthly or otherwise, depending upon their arrangement.
The fees are paid whether or not there are cases referred to the lawyer. The reason for the remuneration is that
the lawyer is deprived of the opportunity of rendering services for a fee to the opposing party or other parties. In
fine, it is a compensation for lost opportunities.
A special retainer is a fee for a specific case handled or special service rendered by the lawyer for a client. A
client may have several cases demanding special or individual attention. If for every case there is a separate and
independent contract for attorney's fees, each fee is considered a special retainer.
As to the first kind of fee, the Court has had the occasion to expound on its concept in Hilado vs. David 29 in this
wise:
There is in legal practice what is called a "retaining fee," the purpose of which stems from the
realization that the attorney is disabled from acting as counsel for the other side after he has
given professional advice to the opposite party, even if he should decline to perform the
contemplated services on behalf of the latter. It is to prevent undue hardship on the attorney
resulting from the rigid observance of the rule that a separate and independent fee for
consultation and advice was conceived and authorized. "A retaining fee is a preliminary fee
given to an attorney or counsel to insure and secure his future services, and induce him to act for
the client. It is intended to remunerate counsel for being deprived, by being retained by one
party, of the opportunity of rendering services to the other and of receiving pay from him,
and the payment of such fee, in the absence of an express understanding to the contrary, is
neither made nor received in payment of the services contemplated; its payment has no relation
to the obligation of the client to pay his attorney for the services for which he has retained him to
perform." (Emphasis supplied).
Evidently, the P3,000.00 monthly fee provided in the retainer agreement between the union and the law firm
refers to a general retainer, or a retaining fee, as said monthly fee covers only the law firm's pledge, or as
expressly stated therein, its "commitment to render the legal services enumerated." The fee is not payment for
private respondent's execution or performance of the services listed in the contract, subject to some particular
qualifications or permutations stated there.

Generally speaking, where the employment of an attorney is under an express valid contract fixing the
compensation for the attorney, such contract is conclusive as to the amount of compensation. 30 We cannot,
however, apply the foregoing rule in the instant petition and treat the fixed fee of P3,000.00 as full and
sufficient consideration for private respondent's services, as petitioner would have it.
We have already shown that the P3,000.00 is independent and different from the compensation which private
respondent should receive in payment for his services. While petitioner and private respondent were able to fix
a fee for the latter's promise to extend services, they were not able to come into agreement as to the law firm's
actual performance of services in favor of the union. Hence, the retainer agreement cannot control the measure
of remuneration for private respondent's services.
We, therefore, cannot favorably consider the suggestion of petitioner that private respondent had already waived
his right to charge additional fees because of their failure to come to an agreement as to its payment.
Firstly, there is no showing that private respondent unequivocally opted to waive the additional charges in
consonance with Part D of the agreement. Secondly, the prompt actions taken by private respondent, i.e.,
serving notice of charging lien and filing of motion to determine attorney's fees, belie any intention on his part
to renounce his right to compensation for prosecuting the labor case instituted by the union. And, lastly, to adopt
such theory of petitioner may frustrate private respondent's right to attorney's fees, as the former may simply
and unreasonably refuse to enter into any special agreement with the latter and conveniently claim later that the
law firm had relinquished its right because of the absence of the same.
The fact that petitioner and private respondent failed to reach a meeting of the minds with regard to the payment
of professional fees for special services will not absolve the former of civil liability for the corresponding
remuneration therefor in favor of the latter.
Obligations do not emanate only from contracts. 31 One of the sources of extra-contractual obligations found in
our Civil Code is the quasi-contract premised on the Roman maxim that nemo cum alterius detrimento
locupletari protest. As embodied in our law, 32 certain lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense
of another.
A quasi-contract between the parties in the case at bar arose from private respondent's lawful, voluntary and
unilateral prosecution of petitioner's cause without awaiting the latter's consent and approval. Petitioner cannot
deny that it did benefit from private respondent's efforts as the law firm was able to obtain an award of holiday
pay differential in favor of the union. It cannot even hide behind the cloak of the monthly retainer of P3,000.00
paid to private respondent because, as demonstrated earlier, private respondent's actual rendition of legal
services is not compensable merely by said amount.
Private respondent is entitled to an additional remuneration for pursuing legal action in the interest of petitioner
before the labor arbiter and the NLRC, on top of the P3,000.00 retainer fee he received monthly from petitioner.
The law firm's services are decidedly worth more than such basic fee in the retainer agreement. Thus, in Part C
thereof on "Fee Structure," it is even provided that all attorney's fees collected from the adverse party by virtue
of a successful litigation shall belong exclusively to private respondent, aside from petitioner's liability for
appearance fees and reimbursement of the items of costs and expenses enumerated therein.
A quasi-contract is based on the presumed will or intent of the obligor dictated by equity and by the principles
of absolute justice. Some of these principles are: (1) It is presumed that a person agrees to that which will
benefit him; (2) Nobody wants to enrich himself unjustly at the expense of another; and (3) We must do unto
others what we want them to do unto us under the same circumstances. 33
As early as 1903, we allowed the payment of reasonable professional fees to an interpreter, notwithstanding the
lack of understanding with his client as to his remuneration, on the basis of quasi-contract. 34 Hence, it is not
necessary that the parties agree on a definite fee for the special services rendered by private respondent in order

that petitioner may be obligated to pay compensation to the former. Equity and fair play dictate that petitioner
should pay the same after it accepted, availed itself of, and benefited from private respondent's services.
We are not unaware of the old ruling that a person who had no knowledge of, nor consented to, or protested
against the lawyer's representation may not be held liable for attorney's fees even though he benefited from the
lawyer's services. 35 But this doctrine may not be applied in the present case as petitioner did not object to
private respondent's appearance before the NLRC in the case for differentials.
Viewed from another aspect, since it is claimed that petitioner obtained respondent's legal services and
assistance regarding its claims against the bank, only they did not enter into a special contract regarding the
compensation therefor, there is at least the innominate contract of facio ut des (I do that you may give). 36 This
rule of law, likewise founded on the principle against unjust enrichment, would also warrant payment for the
services of private respondent which proved beneficial to petitioner's members. In any case, whether there is an
agreement or not, the courts can fix a reasonable compensation which lawyers should receive for their
professional services. 37 However, the value of private respondent's legal services should not be established on
the basis of Article 111 of the Labor Code alone. Said article provides:
Art. 111. Attorney's fees. (a) In cases of unlawful withholding of wages the culpable party
may be assessed attorney's fees equivalent to ten percent of the amount of the wages recovered.
xxx xxx xxx
The implementing provision 38 of the foregoing article further states:
Sec. 11. Attorney's fees. Attorney's fees in any judicial or administrative proceedings for the
recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from
the total amount due the winning party.
In the first place, the fees mentioned here are the extraordinary attorney's fees recoverable as indemnity for
damages sustained by and payable to the prevailing part. In the second place, the ten percent (10%) attorney's
fees provided for in Article 111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing
Rules is the maximum of the award that may thus be granted. 39 Article 111 thus fixes only the limit on the
amount of attorney's fees the victorious party may recover in any judicial or administrative proceedings and it
does not even prevent the NLRC from fixing an amount lower than the ten percent (10%) ceiling prescribed by
the article when circumstances warrant it. 40
The measure of compensation for private respondent's services as against his client should properly be
addressed by the rule of quantum meruit long adopted in this jurisdiction. Quantum meruit, meaning "as much
as he deserves," is used as the basis for determining the lawyer's professional fees in the absence of a
contract, 41but recoverable by him from his client.
Where a lawyer is employed without a price for his services being agreed upon, the courts shall fix the amount
onquantum meruit basis. In such a case, he would be entitled to receive what he merits for his services. 42
It is essential for the proper operation of the principle that there is an acceptance of the benefits by one sought to
be charged for the services rendered under circumstances as reasonably to notify him that the lawyer performing
the task was expecting to be paid compensation therefor. The doctrine of quantum meruit is a device to prevent
undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying
for it. 43
Over the years and through numerous decisions, this Court has laid down guidelines in ascertaining the real
worth of a lawyer's services. These factors are now codified in Rule 20.01, Canon 20 of the Code of
Professional Responsibility and should be considered in fixing a reasonable compensation for services rendered
by a lawyer on the basis of quantum meruit. These are: (a) the time spent and the extent of services rendered or
required; (b) the novelty and difficulty of the questions involved; (c) the importance of the subject matter; (d)

the skill demanded; (e) the probability of losing other employment as a result of acceptance of the proffered
case; (f) the customary charges for similar services and the schedule of fees of the IBP chapter to which the
lawyer belongs; (g) the amount involved in the controversy and the benefits resulting to the client from the
services; (h) the contingency or certainty of compensation; (i) the character of the employment, whether
occasional or established; and (j) the professional standing of the lawyer.
Here, then, is the flaw we find in the award for attorney's fees in favor of private respondent. Instead of
adopting the above guidelines, the labor arbiter forthwith but erroneously set the amount of attorney's fees on
the basis of Article 111 of the Labor Code. He completely relied on the operation of Article 111 when he fixed
the amount of attorney's fees at P17,574.43. 44 Observe the conclusion stated in his order. 45
xxx xxx xxx
FIRST. Art. 111 of the Labor Code, as amended, clearly declares movant's right to a ten (10%)
per cent of the award due its client. In addition, this right to ten (10%) per cent attorney's fees is
supplemented by Sec. 111, Rule VIII, Book III of the Omnibus Rules Implementing the Labor
Code, as amended.
xxx xxx xxx
As already stated, Article 111 of the Labor Code regulates the amount recoverable as attorney's fees in the
nature of damages sustained by and awarded to the prevailing party. It may not be used therefore, as the lone
standard in fixing the exact amount payable to the lawyer by his client for the legal services he rendered. Also,
while it limits the maximum allowable amount of attorney's fees, it does not direct the instantaneous and
automatic award of attorney's fees in such maximum limit.
It, therefore, behooves the adjudicator in questions and circumstances similar to those in the case at bar,
involving a conflict between lawyer and client, to observe the above guidelines in cases calling for the operation
of the principles of quasi-contract and quantum meruit, and to conduct a hearing for the proper determination of
attorney's fees. The criteria found in the Code of Professional Responsibility are to be considered, and not
disregarded, in assessing the proper amount. Here, the records do not reveal that the parties were duly heard by
the labor arbiter on the matter and for the resolution of private respondent's fees.
It is axiomatic that the reasonableness of attorney's fees is a question of fact. 46 Ordinarily, therefore, we would
have remanded this case for further reception of evidence as to the extent and value of the services rendered by
private respondent to petitioner. However, so as not to needlessly prolong the resolution of a comparatively
simple controversy, we deem it just and equitable to fix in the present recourse a reasonable amount of
attorney's fees in favor of private respondent. For that purpose, we have duly taken into account the accepted
guidelines therefor and so much of the pertinent data as are extant in the records of this case which are assistive
in that regard. On such premises and in the exercise of our sound discretion, we hold that the amount of
P10,000.00 is a reasonable and fair compensation for the legal services rendered by private respondent to
petitioner before the labor arbiter and the NLRC.
WHEREFORE, the impugned resolution of respondent National Labor Relations Commission affirming the
order of the labor arbiter is MODIFIED, and petitioner is hereby ORDERED to pay the amount of TEN
THOUSAND PESOS (P10,000.00) as attorney's fees to private respondent for the latter's legal services
rendered to the former.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 132805 February 2, 1999

PHILIPPINE AIRLINES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ROMULUS PROTACIO and
DR. HERMINIO A. FABROS, respondents.

PUNO, J.:
Petitioner Philippine Airlines, Inc. assails the decision of the National Labor Relations Commission dismissing
its appeal from the decision of Labor Arbiter Romulus S. Protacio which declared the suspension of private
respondent Dr. Herminio A. Fabros illegal and ordered petitioner to pay private respondent the amount
equivalent to all the benefits he should have received during his period of suspension plus P500,000.00 moral
damages.
The facts are as follow:
Private respondent was employed as flight surgeon at petitioner company. He was assigned at the PAL Medical
Clinic at Nichols and was on duty from 4:00 in the afternoon until 12:00 midnight.
On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic to have his dinner at his
residence, which was about five-minute drive away. A few minutes later, the clinic received an emergency call
from the PAL Cargo Services. One of its employees, Mr. Manuel Acosta, had suffered a heart attack. The nurse
on duty, Mr. Merlino Eusebio, called private respondent at home to inform him of the emergency. The patient
arrived at the clinic at 7:50 in the evening and Mr. Eusebio immediately rushed him to the hospital. When
private respondent reached the clinic at around 7:51 in the evening, Mr. Eusebio had already left with the
patient. Mr. Acosta died the following day.
Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon ordered the Chief Flight
Surgeon to conduct an investigation. The Chief Flight Surgeon, in turn, required private respondent to explain
why no disciplinary sanction should be taken against him.
In his explanation, private respondent asserted that he was entitled to a thirty-minute meal break; that he
immediately left his residence upon being informed by Mr. Eusebio about the emergency and he arrived at the
clinic a few minutes later; that Mr. Eusebio panicked and brought the patient to the hospital without waiting for
him.
Finding private respondent's explanation unacceptable, the management charged private respondent with
abandonment of post while on duty. He was given ten days to submit a written answer to the administrative
charge.
In his answer, private respondent reiterated the assertions in his previous explanation. He further denied that he
abandoned his post on February 17, 1994. He said that he only left the clinic to have his dinner at home. In fact,
he returned to the clinic at 7:51 in the evening upon being informed of the emergency.
After evaluating the charge as well as the answer of private respondent, petitioner company decided to suspend
private respondent for three months effective December 16, 1994.
Private respondent filed a complaint for illegal suspension against petitioner.
On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a decision 1 declaring the suspension of private
respondent illegal. It also ordered petitioner to pay private respondent the amount equivalent to all the benefits

he should have received during his period of suspension plus P500,000.00 moral damages. The dispositive
portion of the decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered declaring the
suspension of complainant as illegal, and ordering the respondents the restitution to the
complainant of all employment benefits equivalent to his period of suspension, and the payment
to the complainant of P500,000.00 by way of moral damages. 2
Petitioner appealed to the NLRC. The NLRC, however, dismissed the appeal after finding that the decision of
the Labor Arbiter is supported by the facts on record and the law on the matter. 3 The NLRC likewise denied
petitioner's motion for reconsideration. 4
Hence, this petition raising the following arguments:
1. The public respondents acted without or in excess of their
jurisdiction and with grave abuse of discretion in nullifying the 3month suspension of private respondent despite the fact that the
private respondent has committed an offense that warranted the
imposition of disciplinary action.
2. The public respondents acted without or in excess of their
jurisdiction and with grave abuse of discretion in holding the
petitioner liable for moral damages:
(a) Despite the fact that no formal hearing
whatsoever was conducted for complainant to
substantiate his claim;
(b) Despite the absence of proof that the petitioner
acted in bad faith in imposing the 3-month
suspension; and
(c) Despite the fact that the Labor Arbiter's award of
moral damages is highly irregular, considering that
it was more than what the private respondent prayed
for. 5
We find that public respondents did not err in nullifying the three-month suspension of private respondent.
They, however, erred in awarding moral damages to private respondent.
First, as regards the legality of private respondent's suspension. The facts do not support petitioner's allegation
that private respondent abandoned his post on the evening of February 17, 1994. Private respondent left the
clinic that night only to have his dinner at his house, which was only a few minutes' drive away from the clinic.
His whereabouts were known to the nurse on duty so that he could be easily reached in case of emergency.
Upon being informed of Mr. Acosta's condition, private respondent immediately left his home and returned to
the clinic. These facts belie petitioner's claim of abandonment.
Petitioner argues that being a full-time employee, private respondent is obliged to stay in the company premises
for not less than eight (8) hours. Hence, he may not leave the company premises during such time, even to take
his meals.
We are not impressed.
Art. 83 and 85 of the Labor Code read:

Art. 83. Normal hours of work. The normal hours of work of any employee shall not exceed
eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least one million (1,000,000)
or in hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular
office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for meals,
except where the exigencies of the service require that such personnel work for six (6) days or
forty-eight (48) hours, in which case they shall be entitled to an additional compensation of at
least thirty per cent (30%) of their regular wage for work on the sixth day. For purposes of this
Article, "health personnel" shall include: resident physicians, nurses, nutritionists, dieticians,
pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists,
midwives, attendants and all other hospital or clinic personnel. (emphasis supplied)
Art. 85. Meal periods. Subject to such regulations as the Secretary of Labor may prescribe, it
shall be the duty of every employer to give his employees not less than sixty (60) minutes timeoff for their regular meals.
Sec. 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further states:
Sec. 7. Meal and Rest Periods. Every employer shall give his employees, regardless of sex,
not less than one (1) hour time-off for regular meals, except in the following cases when a meal
period of not less than twenty (20) minutes may be given by the employer provided that such
shorter meal period is credited as compensable hours worked of the employee;
(a) Where the work is non-manual work in nature or does not involve strenuous physical
exertion;
(b) Where the establishment regularly operates not less than sixteen hours a day;
(c) In cases of actual or impending emergencies or there is urgent work to be performed on
machineries, equipment or installations to avoid serious loss which the employer would
otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods.
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as
compensable working time.
Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be inferred that
employees must take their meals within the company premises. Employees are not prohibited from going out of
the premises as long as they return to their posts on time. Private respondent's act, therefore, of going home to
take his dinner does not constitute abandonment.
We now go to the award of moral damages to private respondent.
Not every employee who is illegally dismissed or suspended is entitled to damages. As a rule, moral damages
are recoverable only where the dismissal or suspension of the employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy.6 Bad faith does not simply mean negligence or bad judgment. It involves a state of mind dominated by
ill will or motive. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or
some moral obliquity. 7 The person claiming moral damages must prove the existence of bad faith by clear and
convincing evidence for the law always presumes good faith. 8
In the case at bar, there is no showing that the management of petitioner company was moved by some evil
motive in suspending private respondent. It suspended private respondent on an honest, albeit erroneous, belief
that private respondent's act of leaving the company premises to take his meal at home constituted abandonment

of post which warrants the penalty of suspension. Also, it is evident from the facts that petitioner gave private
respondent all the opportunity to refute the charge against him and to defend himself. These negate the
existence of bad faith on the part of petitioner. Under the circumstances, we hold that private respondent is not
entitled to moral damages.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The portion of the assailed decision awarding
moral damages to private respondent is DELETED. All other aspects of the decision are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 122240 November 18, 1999

CRISTONICO B. LEGAHI, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and UNITED PHILIPPINE LINES, INC.,
NORTHSOUTH SHIP MGT., (PTE), LTD., SINGAPORE, GREGORIO V. DE LIMA, JR., TOR
KARLSEN and PIONEER INSURANCE & SURETY CORP., respondents.

KAPUNAN, J.:
At issue is the validity of petitioner's dismissal from his employment.
In a complaint filed with the Philippine Overseas Employment Administration (POEA), Cristonico B. Legahi
alleged that he was hired as "Chief Cook" aboard M/V "Federal Nord" by the Northsouth Ship Management
(PTE), Ltd., Singapore and represented by its local agent United Philippine Lines, Inc. (UPLI).
The contract of employment stipulated that his term of employment was for ten months beginning October 9,
1992 with a basic monthly salary of US$450.00 with 44 hours weekly as minimum number of hours worked
with a fixed overtime pay (OT) of $185.00 and three (3) days leave with pay every month.
Sometime in November, 1992 petitioner was asked by the Shipmaster to prepare a victualling cost statement for
the month of October, 1992. After learning that such preparation involves mathematical skills, as it would
require estimation of food cost, value of stocks, etc. he intimated that he did not know how to do such work as it
was not part of the duties of a chief cook. He was told that it was not a difficult job and that he only needed to
copy the previous forms. After much reluctance, petitioner nonetheless prepared the statement in deference to
the Shipmaster.
In December, petitioner was requested again to prepare the victualling cost statement for the month of
November. He obeyed since he was afraid he would earn the ire of his superiors if he refused.
Sometime in January, 1993, the Shipmaster asked petitioner to do the victualling cost statement for December
which he complied. On January 6, 1993, the Shipmaster requested the petitioner to prepare a corrected
victualling statement for the same month of December. Petitioner asked the Shipmaster if he could defer the
correction as he was busy doing his chores. The response certainly did not sit well with the Shipmaster so he
was called for a meeting which petitioner did not attend.

On January 14, 1993, a committee was formed headed by the Shipmaster himself with the Chief Officer, Chief
Engineer and Bosun as members.
In this meeting, the Shipmaster read to him the offenses he committed on board. He was asked to answer the
charges but petitioner opted to remain silent. Thereafter, petitioner was informed that he was dismissed.
The next day, petitioner was repatriated to the Philippines through the assistance of the Philippine Consulate.
Upon arrival or on February 16, 1993, petitioner filed with the POEA a complaint for illegal dismissal against
private respondents. He sought the payment of his salary corresponding to the unexpired portion of his contract,
unpaid overtime pay, leave pay, salary differential and damages.
In answer to the complaint, private respondent stated that prior to petitioner's deployment, he was asked if he
knew how to prepare the victualling cost statement which he answered yes. On January 6, 1993, petitioner was
asked to prepare the statement. He refused and even arrogantly replied that "the Shipmaster should let some
other officer do the job since he only came to the ship to cook." On January 13, 1993, petitioner left the vessel
without permission and did not perform his job that day. On January 14, 1993, a committee was formed to hear
the case of petitioner. Petitioner remained silent so the committee decided to send him home. Contrary to
petitioner's allegation, it was not the Philippine Consulate, but the shipowner's agent, Navios Ship Agencies,
which arranged his repatriation. The respondent noticed petitioner to be very homesick and surmised that he
deliberately committed the offenses just so he could be sent home. Upon his return, petitioner did not even
report to the local representative UPLI implying that he had no cause of action against them. Petitioner was
terminated for just cause and must, therefore, reimburse private respondent for the cost of repatriation.
On April 6, 1994, the POEA promulgated a decision finding that there was just cause for petitioner's dismissal.
On appeal to the National Labor Relations Commission (NLRC), the Commission affirmed in toto the POEA
decision.
Hence, this petition.
To constitute a valid dismissal from employment, two (2) requisites must concur: (a) the dismissal must be for
any of the causes provided in Article 282 of the Labor Code, and (b) the employee must be accorded due
process, the elements of which are notice and the opportunity to be heard and to defend himself. 1
Procedural due process requires that the employee must be apprised of the charges against him. He must be
given reasonable time to answer the charges, allowed ample opportunity to be heard and defend himself, and
assisted by a representative if the employee so desires. 2 Two written notices are required before termination of
employment can be legally effected. They are: (1) notice which apprises the employee of the particular acts or
omissions for which his dismissal is sought, and (2) the subsequent notice which informs the employee of the
employer's decision to dismiss him; 3 not to mention the opportunity to answer and rebut the charges against
him, in between such notices. 4
In the case at bar, the evidence on record belies private respondents' claim that petitioner was afforded due
process. The abstract of the logbook states:
M/V FEDERAL NORD
ABSTRACT FROM DECK LOG BOOK RE: CH/COOK LEGAHI CRISTONICO B.
6th JANUARY 1993
AT 0900 HRS. TODAY THE MASTER WAS ASKING THE CH/COOK LAGAHE,
CRISTONICO IF HE OR THE R/OFF COULD HELP HIM WITH THE VICT. COST
STATEMENT WHICH HE WAS NOT ABLE TO DO HIMSELF CORRECT.

WHEN THE MASTER TOLD HIM TO TAKE TIME AND TRY TO CORRECT HIS REPLY IN
A BAD WAY WAS, LET SOME OFFICERS DO THE JOB. I ONLY COME TO THE SHIP TO
COOK. HE ALSO REFUSED TO MEET IN THE MASTER'S OFFICE TOGETHER WITH
THE CH/OFFICER WHEN HE WAS ORDERED TO.
SINCE HE IS REFUSING TO TAKE ORDERS FROM THE MASTER OF THE SHIP HE
WILL BE SENT HOME IN FIRST POSSIBLE PORT WERE HE CAN BE RELIEFED (SIC).
13th JANUARY 1993
AT 0700 HRS. THE CH/COOK LEGAHI CRISTONICO B. LEFT THE VESSEL WITHOUT
PERMISSION, HE RETURNED LATER IN THE DAY BUT WAS NOT DOING ANY WORK.
14th JANUARY 1993
AT 1030 HRS. A HEARING WAS HELD IN THE OWNERS OFFICE REGARDING THE
DISMISSAL OF CH/COOK LEGAHI CRISTONICO B. MASTER AS CHAIRMAN AND
COMMITTEE CONSISTING OF CH/OFF. PULGO LEONIDES T., CH/ENGR. SERMONINA
TOMAS C., AND BOSUN DAMOCLES CAMILO A. THE CASE OF DISMISSAL WAS
READ OUT FOR THE CH/COOK LEGAHI ACCORDING TO THE PROCEDURE PARA 16
IN THE SEAMAN'S ACT. ENTERED IN THE LOG BOOK 6/1-93 AND 13/1-93. AT 1140
THE HEARING WAS ENDED, AND AT 1200 HRS. THE CH/COOK LEGAHI WILL LEAVE
THE VESSEL TO BE SENT HOME. 5
Reading between the lines from the entries of the logbook, which by the very nature of things could well be
self-serving, it is rather apparent that as early as January 6, 1993, the employer had already decided to dismiss
petitioner and sent home for his alleged refusal to obey the orders of his superiors. On January 14, 1993, the
committee read to petitioner his alleged offenses which were his refusal to take orders from his superior on
January 6 and his leaving the vessel without permission on January 13. When petitioner remained silent, the
committee informed him that he was dismissed. He was sent home that same day. Petitioner was not given
reasonable time to answer the charges hurled against him or to defend himself. The notice apprising him of the
charges and the notice of dismissal were done in one morning all in the January 14 committee hearing. The
submission that the entry in the logbook made on January 6 which stated that for petitioner's refusal "to take
orders from the master of the ship he will be sent home in first possible port" was sufficient compliance of the
first notice requirement is not well-taken. This is not the kind of notice that satisfies due process contemplated
by law. In such a case where there is a failure to comply with the requirements of the law as to the notice and
hearing, the dismissal is certainly tainted with illegality.
On the substantive issue, we find no just cause for petitioner's dismissal. According to the POEA, petitioner was
found guilty for insubordination for his refusal "to obey the order of the master to prepare the victual statement
on January 6, 1993," 6 which was presumably for the month of January.
The NLRC, which simply adopted in toto the findings of the POEA, concluded that complainant refused albeit
in a bad manner the request of the Shipmaster to prepare a correct victualling cost statement for the month
ofDecember.
Based on the POEA findings, petitioner was dismissed because of his refusal to prepare the victualling
statement for the month of January, 1993. The facts as found by the POEA are all muddled up. The victualling
cost statement for the month of January was not yet due when he was asked to prepare the same on January 6 of
that month. A victualling cost statement was necessary to show the food expense incurred for the past month,
not for the present month. Thus, from the victualling statements submitted for the month of October, November
and December, 1992, it can be seen that the period indicated therein began on the first day of each month and
ended on the last day of said month. This means that the report for October was made in November, for
November in December, and that for December in January. Such being the case, petitioner's refusal to prepare

the victualling statement of January was justified since the victualling cost for the month of January was not yet
due or necessary.
On the other hand, the NLRC's conclusion that petitioner refused to correct the victualling statement for the
month of December as ordered to, was also not sufficient basis for his dismissal. There is no doubt that
petitioner had complied with his superior's orders to prepare the statement for December. It was only the
correction of the December statement that he requested to defer which the Shipmaster took as a downright
refusal to make and considered such act as a serious and gross insubordination.
For willful disobedience to be considered as just cause for dismissal, the employee's conduct must be willful or
intentional, the willfulness being characterized by a wrongful and perverse attitude and 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. 7
In the instant case, it was actually not petitioner's duty to prepare the victualling statement. The allegation that
this was part of his duty as chief cook and the fact that he was aware of such duty when he was interviewed for
the post is only self-serving and without basis. The employment contract does not mention anything that this
was part of his duty as chief cook. 8 A perusal of the victualling cost statement form meanwhile reveals that only
the signatures of a Relieving Chief Steward and the Chief Master were required. 9 Nowhere does it contain that
the signature of the chief cook was necessary. Even assuming that petitioner refused to obey the order of his
superior to prepare a corrected victualling cost statement for December, although he maintained that he just
asked for time to do it, as he was then busy performing his usual duty, which we believe to be the case, his
refusal cannot be considered as one being characterized by a "wrongful and perverse attitude." From the
beginning, petitioner already intimated that he did not know how to accomplish the victual cost statement since
it entailed some mathematical skills which he admittedly did not have. Indeed, to use his own words, "he came
aboard only to cook." His capability on manual skill was limited to cooking and nothing more and for which
reason he applied for the job as chief cook and was eventually hired as such. The fact that he was able to do the
victualling cost statements for the past three months was an extra work on his part. His failure or alleged refusal
to go on with the work did not merit the severest penalty of dismissal from the service and his immediate
repatriation without even affording him due process of law. 10
Petitioner's dismissal without a valid cause constitute a breach of contract. Consequently, he should only be paid
the unexpired portion of his employment contract. However, the payment of the overtime pay should be
disallowed in the light of our ruling in the case of Cagampan v. NLRC, 11 where we held that:
Petitioners have conveniently adopted the view that the "guaranteed or fixed overtime pay of
30% of the basic salary per month" embodied in their employment contract should be awarded to
them as part of a "package benefit." They have theorized that even without sufficient evidence of
actual rendition of overtime work, they would automatically be entitled to overtime pay. Their
thinking is erroneous for being illogical and unrealistic. Their thinking even runs counter to the
intention behind the provision. 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.
We already resolved the question of overtime pay of worker aboard a vessel in the case of National Shipyards
and Steel Corporation v. CIR (3 SCRA 890). We ruled:

We can not agree with the Court below that respondent Malondras should be paid overtime
compensation for every hour in excess of the regular working hours that he was on board his
vessel or barge each day, irrespective of whether or not he actually put in work during those
hours. Seamen are required to stay on board their vessels by the very nature of their duties, and it
is for this reason that, in addition to their regular compensation, they are given free living
quarters and subsistence allowances when required to be on board. It could not have been the
purpose of our law to require their employers to pay them overtime even when they are not
actually working; otherwise, every sailor on board a vessel would be entitled to overtime for
sixteen hours each a day, even if he spent all those hours resting or sleeping in his bunk, after his
regular tour of duty. The correct criterion in determining whether or not sailors are entitled to
overtime pay is not, therefore, whether they were on board and can not leave ship beyond the
regular eight working hours a day, but whether they actually rendered service in excess of said
number of hours. (Emphasis supplied)
In the same vein, the claim for day's leave pay for the unexpired portion of the contract is unwarranted since the
same is given during the actual service of the seaman. 12
The claim for moral and exemplary damages are deleted for lack of sufficient basis. Considering that petitioner
was forced to litigate, we hold that the amount of P10,000.00 is a reasonable and fair compensation for the legal
services rendered by counsel.
WHEREFORE, the petition is GRANTED. The decision of the NLRC is SET ASIDE. Private respondent is
hereby ORDERED to pay only the petitioner his salary equivalent to seven (7) months corresponding to the
unexpired portion of the contract plus attorney's fees of P10,000.00.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 144664

March 15, 2004

ASIAN TRANSMISSION CORPORATION, petitioner,

vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN as Voluntary
Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel Arbitrators; BISIG NG
ASIAN TRANSMISSION LABOR UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his
capacity as Secretary of Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her
capacity as Director of Bureau of Working Conditions, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the 1995 Rules of
Civil Procedure the nullification of the March 28, 2000 Decision1 of the Court of Appeals denying its petition to
annul 1) the March 11, 1993 "Explanatory Bulletin"2 of the Department of Labor and Employment (DOLE)
entitled "Workers Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good Friday", which
bulletin the DOLE reproduced on January 23, 1998, 2) the July 31, 1998 Decision3 of the Panel of Voluntary
Arbitrators ruling that the said explanatory bulletin applied as well to April 9, 1998, and 3) the September 18,
19984 Resolution of the Panel of Voluntary Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:

The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B. Trajano, issued an
Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees are entitled to 200%
of their basic wage on April 9, 1993, whether unworked, which[,] apart from being Good Friday [and,
therefore, a legal holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from being Good Friday is
alsoAraw ng Kagitingan, i.e., two regular holidays falling on the same day, this Department is of the view
that the covered employees are entitled to at least two hundred percent (200%) of their basic wage even if said
holiday is unworked. The first 100% represents the payment of holiday pay on April 9, 1993 as Good Friday
and the second 100% is the payment of holiday pay for the same date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy Thursday and Araw
ng Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to pay its daily paid
employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng Asian Transmission Labor
Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement (CBA) existing
between petitioner and BATLU, the controversy was submitted for voluntary arbitration. x x x x On July 31,
1998,the Office of the Voluntary Arbitrator rendered a decision directing petitioner to pay its covered employees
"200% and not just 100% of their regular daily wages for the unworked April 9, 1998 which covers two regular
holidays, namely, Araw ng Kagitignan and Maundy Thursday." (Emphasis and underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday, Good Friday, the
ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the
twenty-fifth and thirtieth of December and the day designated by law for holding a general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular holidays are
now:
1. New Years Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25

10. Rizal Day December 30

In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the Voluntary Arbitrator held
that Article 94 of the Labor Code provides for holiday pay for every regular holiday, the computation of which
is determined by a legal formula which is not changed by the fact that there are two holidays falling on one day,
like on April 9, 1998 when it was Araw ng Kagitingan and at the same time was Maundy Thursday; and that
that the law, as amended, enumerates ten regular holidays for every year should not be interpreted as authorizing
a reduction to nine the number of paid regular holidays "just because April 9 (Araw ng Kagitingan) in certain
years, like 1993 and 1998, is also Holy Friday or Maundy Thursday."
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator, holding that the
Collective Bargaining Agreement (CBA) between petitioner and BATLU, the law governing the relations
between them, clearly recognizes their intent to consider Araw ng Kagitingan and Maundy Thursday, on
whatever date they may fall in any calendar year, as paid legal holidays during the effectivity of the CBA and
that "[t]here is no condition, qualification or exception for any variance from the clear intent that all holidays
shall be compensated."5
The Court of Appeals further held that "in the absence of an explicit provision in law which provides for [a]
reduction of holiday pay if two holidays happen to fall on the same day, any doubt in the interpretation and
implementation of the Labor Code provisions on holiday pay must be resolved in favor of labor."
By the present petition, petitioners raise the following issues:
I
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE BARGAINING
AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF
THE AGREEMENTS MADE BY THE PARTIES THEMSELVES
II
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES
ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE OF
THE SAID EXPLANATORY BULLETIN
III
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN WHILE
ADMITTING THAT THE SAID BULLEITN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASIJUDICIAL, OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and Employment]
DOLE MAY PROMULGATE
IV
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT
(DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE GUISE OF
PROVIDING GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED GRAVE ABUSE OF
DISCRETION, AS IT LEGISLATED AND INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER
AS TO CREATE OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW
V

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN
REITERATING ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING THAT
THE SAME POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME
COURT TO THE CONTRARY
VI
WHETHER OR NOT RESPONDENTS ACTS WILL DEPRIVE PETITIONER OF PROPERTY WITHOUT
DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL PROTECTION OF LAWS
The petition is devoid of merit.
At the outset, it bears noting that instead of assailing the Court of Appeals Decision by petition for review
oncertiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner lodged the present petition for
certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it
in the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by
a special civil action of certiorari. If the aggrieved party fails to do so within the reglementary period, and the
decision accordingly becomes final and executory, he cannot avail himself of the writ of certiorari, his
predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a
special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997
Rules of Civil Procedure. Rule 45 is clear that the decisions, final orders or resolutions of the Court of Appeals
in any case, i.e., regardless of the nature of the action or proceeding involved, may be appealed to this Court by
filing a petition for review, which would be but a continuation of the appellate process over the original case.
Under Rule 45 the reglementary period to appeal is fifteen (15) days from notice of judgment or denial of
motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no
plain, speedy and adequate remedy in the ordinary course of law against its perceived grievance. A remedy is
considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the injurious effects of
the judgment and the acts of the lower court or agency. In this case, appeal was not only available but also a
speedy and adequate remedy.6
The records of the case show that following petitioners receipt on August 18, 2000 of a copy of the August 10,
2000 Resolution of the Court of Appeals denying its Motion for Reconsideration, it filed the present petition for
certiorari on September 15, 2000, at which time the Court of Appeals decision had become final and executory,
the 15-day period to appeal it under Rule 45 having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall afford
protection to labor.7 Its purpose is not merely "to prevent diminution of the monthly income of the workers on
account of work interruptions. In other words, although the worker is forced to take a rest, he earns what he
should earn, that is, his holiday pay."8 It is also intended to enable the worker to participate in the national
celebrations held during the days identified as with great historical and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of August),
Bonifacio Day (November 30) and Rizal Day (December 30) were declared national holidays to afford Filipinos
with a recurring opportunity to commemorate the heroism of the Filipino people, promote national identity, and
deepen the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to celebrate the contributions

of the working class to the development of the nation, while the religious holidays designated in Executive
Order No. 203 allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment of ten paid regular
holidays.9 The provision is mandatory,10 regardless of whether an employee is paid on a monthly or daily
basis.11Unlike a bonus, which is a management prerogative,12 holiday pay is a statutory benefit demandable
under the law. Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that two holidays
fall on the same date should not operate to reduce to nine the ten holiday pay benefits a worker is entitled to
receive.
It is elementary, under the rules of statutory construction, that when the language of the law is clear and
unequivocal, the law must be taken to mean exactly what it says.13 In the case at bar, there is nothing in the law
which provides or indicates that the entitlement to ten days of holiday pay shall be reduced to nine when two
holidays fall on the same day.
Petitioners assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11, 1993 Explanatory
Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees are entitled to an additional
days pay if a holiday falls on a Sunday. This Court, in answering the issue in the negative, observed that in
fixing the monthly salary of its employees, Wellington took into account "every working day of the
year including the holidays specified by law and excluding only Sunday." In the instant case, the issue is
whether daily-paid employees are entitled to be paid for two regular holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and interpretation of its
provisions, including its implementing rules and regulations, shall be resolved in favor of labor. For the working
mans welfare should be the primordial and paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides that
"Nothing in the law or the rules shall justify an employer in withdrawing or reducing any benefits, supplements
or payments for unworked regular holidays as provided in existing individual or collective agreement or
employer practice or policy."17
From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated itself to pay for
the legal holidays as required by law. Thus, the 1997-1998 CBA incorporates the following provision:
ARTICLE XIV
PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Years Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)

10. General Election designated by law, if declared public non-working holiday

11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular holiday shall be entitled to
the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in holiday payment in addition to
normal vacation pay but will not entitle the employee to another vacation leave.
Under similar circumstances, the COMPANY will give a days wage for November 1st and December 31st
whenever declared a holiday. When required to work on said days, the employee will be paid according to Art.
VI, Sec. 3B hereof.18
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 157634

May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,

vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO
ALAMARES, EDGARDO TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA,
WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO LLARENA,
GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS
BROOLA, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals (CA)1 in
CA-G.R. SP No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor Relations
Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and the Resolution2 denying petitioners'
motion for reconsideration. The assailed CA decision reversed the NLRC Decision which had dismissed all of
respondents' complaints,3 and reinstated the Joint Decision of the Labor Arbiter4 which ruled that respondents
were illegally dismissed and entitled to their money claims.
The facts, culled from the records, are as follows:5
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of petitioner Pacita
O. Po,6 whose mother, petitioner Josefa Po Lam, manages the establishment.7 The hotel and restaurant
employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the following people,
all respondents in this case, with the following jobs:8
1. Wenefredo Loveres

Accountant and Officer-in-charge

2. Paterno Llarena

Front Desk Clerk

3. Gregorio Nicerio

Supervisory Waiter

4. Amado Macandog

Roomboy

5. Luis Guades

Utility/Maintenance Worker

6. Santos Broola

Roomboy

7. Teodoro Laurenaria

Waiter

8. Eduardo Alamares

Roomboy/Waiter

9. Lourdes Camigla

Cashier

10. Chona Bumalay

Cashier

11. Jose Atractivo

Technician

12. Amado Alamares

Dishwasher and Kitchen Helper

13. Roger Burce

Cook

14. Rolando Adana

Waiter

15. Miguel Torrefranca

Cook

16. Edgardo Torrefranca

Cook

Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said hotel and
restaurant at Rizal Street, the hotel operations of the business were suspended on March 31, 1997.9 The
operation of the restaurant was continued in its new location at Elizondo Street, Legazpi City, while waiting for
the construction of a new Mayon Hotel & Restaurant at Pearanda Street, Legazpi City.10 Only nine (9) of the
sixteen (16) employees continued working in the Mayon Restaurant at its new site.11
On various dates of April and May 1997, the 16 employees filed complaints for underpayment of wages and
other money claims against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave pay (SILP)
and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages;
nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for holiday and rest
day; SILP; nightshift differential pay and separation pay plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of
holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA,
overtime, holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift
differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay,
SILP, and damages;13 and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay
for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of the
employees. The Labor Arbiter awarded substantially all of respondents' money claims, and held that
respondents Loveres, Macandog and Llarena were entitled to separation pay, while respondents Guades, Nicerio
and Alamares were entitled to their retirement pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the proper respondent in
these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a petition
forcertiorari with the CA which rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners now come to this Court, seeking the reversal of
the CA decision on the following grounds:
I. The Honorable Court of Appeals erred in reversing the decision of the National Labor Relations
Commission (Second Division) by holding that the findings of fact of the NLRC were not supported by
substantial evidence despite ample and sufficient evidence showing that the NLRC decision is indeed
supported by substantial evidence;
II. The Honorable Court of Appeals erred in upholding the joint decision of the labor arbiter which ruled
that private respondents were illegally dismissed from their employment, despite the fact that the reason
why private respondents were out of work was not due to the fault of petitioners but to causes beyond
the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the award of monetary benefits by the labor
arbiter in his joint decision in favor of the private respondentS, including the award of damages to six
(6) of the private respondents, despite the fact that the private respondents have not proven by
substantial evidence their entitlement thereto and especially the fact that they were not illegally
dismissed by the petitioners.
IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner of the business
establishment, petitioner Mayon Hotel and Restaurant, thus disregarding the certificate of registration of
the business establishment ISSUED by the local government, which is a public document, and the
unqualified admissions of complainants-private respondents.14
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel &
Restaurant, and the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of
holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift differential pay?

It is petitioners' contention that the above issues have already been threshed out sufficiently and definitively by
the NLRC. They therefore assail the CA's reversal of the NLRC decision, claiming that based on the ruling
in Castillo v. NLRC,15 it is non sequitur that the CA should re-examine the factual findings of both the NLRC
and the Labor Arbiter, especially as in this case the NLRC's findings are allegedly supported by substantial
evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an appellate agency reviewing decisions of
Labor Arbiters, to disagree with and set aside the latter's findings.16 But it stands to reason that the NLRC should
state an acceptable cause therefore, otherwise it would be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the extraordinary writ
of certiorari.17 And when the factual findings of the Labor Arbiter and the NLRC are diametrically opposed and
this disparity of findings is called into question, there is, necessarily, a re-examination of the factual findings to
ascertain which opinion should be sustained.18 As ruled in Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and
respect, we are constrained to take a second look at the facts before us because of the diversity in the
opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of the Labor
Arbiter and those of the NLRC opens the door to a review thereof by this Court.20
The CA, therefore, did not err in reviewing the records to determine which opinion was supported by substantial
evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative bodies like the NLRC are
affirmed only if they are supported by substantial evidence that is manifest in the decision and on the
records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor
Arbiter. Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter does not
automatically call for a full review of the facts by this Court. The NLRC's decision, so long as it is not
bereft of substantial support from the records, deserves respect from this Court. As a rule, the original
and exclusive jurisdiction to review a decision or resolution of respondent NLRC in a petition
for certiorari under Rule 65 of the Rules of Court does not include a correction of its evaluation of the
evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus, the NLRC's factual
findings, if supported by substantial evidence, are entitled to great respect and even finality, unless
petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or had
misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had
been properly appreciated. (citations omitted)22
After careful review, we find that the reversal of the NLRC's decision was in order precisely because it was not
supported by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in fact, the
owner of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review, agreed
with the Labor Arbiter that notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa
Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the complaints
filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the
labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There were
conflicting documents submitted by Josefa herself. She was ordered to submit additional documents to
clearly establish ownership of the hotel and restaurant, considering the testimonies given by the
[respondents] and the non-appearance and failure to submit her own position paper by Pacita Po. But
Josefa did not comply with the directive of the Labor Arbiter. The ruling of the Supreme Court in
Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in
this wise:
When the evidence tends to prove a material fact which imposes a liability on a party, and he has
it in his power to produce evidence which from its very nature must overthrow the case made

against him if it is not founded on fact, and he refuses to produce such evidence, the presumption
arises that the evidence[,] if produced, would operate to his prejudice, and support the case of his
adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter
relied also on the testimonies of the witnesses, during the hearing of the instant case. When the
conclusions of the labor arbiter are sufficiently corroborated by evidence on record, the same should be
respected by appellate tribunals, since he is in a better position to assess and evaluate the credibility of
the contending parties.23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa Po Lam is
the owner of Mayon Hotel & Restaurant. They allege that the documents they submitted to the Labor Arbiter
sufficiently and clearly establish the fact of ownership by petitioner Pacita Po, and not her mother, petitioner
Josefa Po Lam. They contend that petitioner Josefa Po Lam's participation was limited to merely (a) being the
overseer; (b) receiving the month-to-month and/or year-to-year financial reports prepared and submitted by
respondent Loveres; and (c) visitation of the premises.24 They also put emphasis on the admission of the
respondents in their position paper submitted to the Labor Arbiter, identifying petitioner Josefa Po Lam as the
manager, and Pacita Po as the owner.25 This, they claim, is a judicial admission and is binding on respondents.
They protest the reliance the Labor Arbiter and the CA placed on their failure to submit additional documents to
clearly establish ownership of the hotel and restaurant, claiming that there was no need for petitioner Josefa Po
Lam to submit additional documents considering that the Certificate of Registration is the best and primary
evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that petitioner Josefa Po Lam is
merely the overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter. Despite
receipt of the Labor Arbiter's notice and summons, other notices and Orders, petitioner Pacita Po failed to
appear in any of the proceedings with the Labor Arbiter in these cases, nor file her position paper.26 It was only
on appeal with the NLRC that Pacita Po signed the pleadings.27 The apathy shown by petitioner Pacita Po is
contrary to human experience as one would think that the owner of an establishment would naturally be
concerned when all her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lam's claim that she is merely an overseer. The
findings of the Labor Arbiter on this question were based on credible, competent and substantial evidence. We
again quote the Joint Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam
claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased the
same from one Palanos in 1981, Josefa failed to submit the document of sale from said Palanos to Pacita
as allegedly the sale was only verbal although the license to operate said hotel and restaurant is in the
name of Pacita which, despite our Order to Josefa to present the same, she failed to comply (p. 38, tsn.
August 13, 1998). While several documentary evidences were submitted by Josefa wherein Pacita was
named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were
documentary evidences also that were submitted by Josefa showing her ownership of said enterprise (pp.
468 to 469; vol. II, rollo). While Josefa explained her participation and interest in the business as merely
to help and assist her daughter as the hotel and restaurant was near the former's store, the testimonies of
[respondents] and Josefa as well as her demeanor during the trial in these cases proves (sic) that Josefa
Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified that it was Josefa who exercises all
the acts and manifestation of ownership of the hotel and restaurant like transferring employees from the
Greatwall Palace Restaurant which she and her husband Roy Po Lam previously owned; it is Josefa to
whom the employees submits (sic) reports, draws money for payment of payables and for marketing,
attending (sic) to Labor Inspectors during ocular inspections. Except for documents whereby Pacita Po
appears as the owner of Mayon Hotel and Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant. The least that can be said is
that it is absurd for a person to purchase a hotel and restaurant in the very heart of the City of Legazpi
verbally. Assuming this to be true, when [petitioners], particularly Josefa, was directed to submit
evidence as to the ownership of Pacita of the hotel and restaurant, considering the testimonies of
[respondents], the former should [have] submitted the lease contract between the owner of the building
where Mayon Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly
establish ownership by the latter of said enterprise. Josefa failed. We are not surprised why some
employers employ schemes to mislead Us in order to evade liabilities. We therefore consider and hold

Josefa Po Lam as the owner/proprietor of Mayon Hotel and Restaurant and the proper respondent in
these cases.28
Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being the best proof of
ownership, is misplaced. Notwithstanding the certificate of registration, doubts were cast as to the true nature of
petitioner Josefa Po Lam's involvement in the enterprise, and the Labor Arbiter had the authority to resolve this
issue. It was therefore within his jurisdiction to require the additional documents to ascertain who was the real
owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical rules of
procedure may be relaxed in labor cases to serve the demand of substantial justice.29 The rule of evidence
prevailing in court of law or equity shall not be controlling in labor cases and it is the spirit and intention of the
Labor Code that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due
process.30 Labor laws mandate the speedy administration of justice, with least attention to technicalities but
without sacrificing the fundamental requisites of due process.31
Similarly, the fact that the respondents' complaints contained no allegation that petitioner Josefa Po Lam is the
owner is of no moment. To apply the concept of judicial admissions to respondents who are but lowly
employees - would be to exact compliance with technicalities of law that is contrary to the demands of
substantial justice. Moreover, the issue of ownership was an issue that arose only during the course of the
proceedings with the Labor Arbiter, as an incident of determining respondents' claims, and was well within his
jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on the issue
of ownership.33 The essence of due process in administrative proceedings is simply an opportunity to explain
one's side or an opportunity to seek reconsideration of the action or ruling complained of.34 And there is nothing
in the records which would suggest that petitioners had absolute lack of opportunity to be heard.35 Obviously,
the choice not to present evidence was made by petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on appeal with
the NLRC, nothing was submitted to negate the Labor Arbiter's finding that Pacita Po is not the real owner of
the subject hotel and restaurant. Indeed, no such evidence was submitted in the proceedings with the CA nor
with this Court. Considering that petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is most
telling that they continue to withhold evidence which would shed more light on this issue. We therefore agree
with the CA that the failure to submit could only mean that if produced, it would have been adverse to
petitioners' case.37
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of petitioner
Mayon Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres, Llarena,
Nicerio, Macandog, Guades, Atractivo and Broola.38
The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents Loveres,
Macandog and Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66 and 65 years old
respectively at the time of the dismissal, the Labor Arbiter granted retirement benefits pursuant to Article 287 of
the Labor Code as amended.39 The Labor Arbiter ruled that respondent Atractivo was not entitled to separation
pay because he had been transferred to work in the restaurant operations in Elizondo Street, but awarded him
damages. Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is attendant in the case at bar"
and that respondents "did not submit any evidence to that effect, but the finding and conclusion of the Labor
Arbiter [are] merely based on his own surmises and conjectures."41 In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that none of the above-named
respondents were illegally dismissed, or entitled to separation or retirement pay. According to petitioners, even
the Labor Arbiter and the CA admit that when the illegal dismissal case was filed by respondents on April 1997,
they had as yet no cause of action. Petitioners therefore conclude that the filing by respondents of the illegal
dismissal case was premature and should have been dismissed outright by the Labor Arbiter.42 Petitioners also

claim that since the validity of respondents' dismissal is a factual question, it is not for the reviewing court to
weigh the conflicting evidence.43
We do not agree. Whether respondents are still working for petitioners is a factual question. And the records
are unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel
operations and transferred its restaurant operations in Elizondo Street, respondents Loveres, Macandog, Llarena,
Guades and Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the other hand,
was also laid-off when the Elizondo Street operations closed, as were all the other respondents. Since then,
respondents have not been permitted to work nor recalled, even after the construction of the new premises at
Pearanda Street and the reopening of the hotel operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the complaint was filed:44
[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of
the hotel. After more than one year from the temporary closure of Mayon Hotel and the temporary
transfer to another site of Mayon Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the
hotel and restaurant will be transferred has been finally constructed and the same is operated as a hotel
with bar and restaurant nevertheless, none of [respondents] herein who were employed at Mayon Hotel
and Restaurant which was also closed on April 30, 1998 was/were recalled by [petitioner] to continue
their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had not filed an
amended complaint to question the cessation of their employment after the closure of Mayon Hotel &
Restaurant on March 31, 1997.45
The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with the NLRC.
It confounds us, therefore, how the NLRC could have so cavalierly treated this uncontroverted factual finding
by ruling that respondents have not introduced any evidence to show that they were illegally dismissed, and that
the Labor Arbiter's finding was based on conjecture.46 It was a serious error that the NLRC did not inquire as to
thelegality of the cessation of employment. Article 286 of the Labor Code is clear there is termination of
employment when an otherwise bona fide suspension of work exceeds six (6) months.47 The cessation of
employment for more than six months was patent and the employer has the burden of proving that the
termination was for a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts to exculpate themselves from the charges. First,
in the proceedings with the Labor Arbiter, they claimed that it could not be illegal dismissal because the lay-off
was merely temporary (and due to the expiration of the lease contract over the old premises of the hotel).
Theyspecifically invoked Article 286 of the Labor Code to argue that the claim for separation pay was
premature and without legal and factual basis.49 Then, because the Labor Arbiter had ruled that there was
already illegal dismissal when the lay-off had exceeded the six-month period provided for in Article 286,
petitioners raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is
misplaced, considering that the reason why private respondents were out of work was not due to the
fault of petitioners. The failure of petitioners to reinstate the private respondents to their former positions
should not likewise be attributable to said petitioners as the private respondents did not submit any
evidence to prove their alleged illegal dismissal. The petitioners cannot discern why they should be
made liable to the private respondents for their failure to be reinstated considering that the fact that they
were out of work was not due to the fault of petitioners but due to circumstances beyond the control of
petitioners, which are the termination and non-renewal of the lease contract over the subject premises.
Private respondents, however, argue in their Comment that petitioners themselves sought the application
of Article 286 of the Labor Code in their case in their Position Paper filed before the Labor Arbiter. In
refutation, petitioners humbly submit that even if they invoke Article 286 of the Labor Code, still the
fact remains, and this bears stress and emphasis, that the temporary suspension of the operations of the
establishment arising from the non-renewal of the lease contract did not result in the termination of
employment of private respondents and, therefore, the petitioners cannot be faulted if said private
respondents were out of work, and consequently, they are not entitled to their money claims against the
petitioners.50
It is confounding how petitioners have fashioned their arguments. After having admitted, in effect, that
respondents have been laid-off since April 1997, they would have this Court excuse their refusal to reinstate
respondents or grant them separation pay because these same respondents purportedly have not proven the
illegality of their dismissal.

Petitioners' arguments reflect their lack of candor and the blatant attempt to use technicalities to muddle the
issues and defeat the lawful claims of their employees. First, petitioners admit that since April 1997, when
hotel operations were suspended due to the termination of the lease of the old premises, respondents Loveres,
Macandog, Llarena, Nicerio and Guades have not been permitted to work. Second, even after six monthsof
what should have been just a temporary lay-off, the same respondents were still not recalled to work. As a
matter of fact, the Labor Arbiter even found that as of the time when he rendered his Joint Decision on July
2000 or more than three (3) years after the supposed "temporary lay-off," the employment of all of the
respondents with petitioners had ceased, notwithstanding that the new premises had been completed and the
same operated as a hotel with bar and restaurant. This is clearly dismissal or the permanent severance or
complete separation of the worker from the service on the initiative of the employer regardless of the reasons
therefor.51
On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of the
complaint, respondents had no cause of action to file the case for illegal dismissal. According to the CA and the
Labor Arbiter, the lay-off of the respondents was merely temporary, pending construction of the new building at
Pearanda Street.52
While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the evidence
on record belie any claim of petitioners that the lay-off of respondents on that same date was merely temporary.
On the contrary, we find substantial evidence that petitioners intended the termination to be permanent. First,
respondents Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for illegal
dismissalimmediately after the closure of the hotel operations in Rizal Street, notwithstanding the alleged
temporary nature of the closure of the hotel operations, and petitioners' allegations that the employees assigned
to the hotel operations knew about this beforehand. Second, in their position paper submitted to the Labor
Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the employer-employee relationship
was merely suspended, and therefore the claim for separation pay was premature and without legal or factual
basis.53 But they made no mention of any intent to recall these respondents to work upon completion of
the new premises. Third,the various pleadings on record show that petitioners held respondents, particularly
Loveres, as responsible for mismanagement of the establishment and for abuse of trust and confidence.
Petitioner Josefa Po Lam's affidavit on July 21, 1998, for example, squarely blamed respondents, specifically
Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner Mayon Hotel & Restaurant to
sustain "continuous losses until it is closed." She then asserts that respondents "are not entitled to separation pay
for they were not terminated and if ever the business ceased to operate it was because of losses."54 Again,
petitioners make the same allegation in their memorandum on appeal with the NLRC, where they alleged that
three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and confidence.55 Even the petition filed in this court made
reference to the separation of the respondents due to "severe financial losses and reverses," again imputing it to
respondents' mismanagement.56 The vehemence of petitioners' accusation of mismanagement against
respondents, especially against Loveres, is inconsistent with the desire to recall them to work. Fourth,
petitioners' memorandum on appeal also averred that the case was filed "not because of the business being
operated by them or that they were supposedly not receiving benefits from the Labor Code which is true, but
because of the fact that the source of their livelihood, whether legal or immoral, was stopped on March 31,
1997, when the owner of the building terminated the Lease Contract."57Fifth, petitioners had inconsistencies in
their pleadings (with the NLRC, CA and with this Court) in referring to the closure,58 i.e., in the petition filed
with this court, they assert that there is no illegal dismissal because there was "only a temporary cessation or
suspension of operations of the hotel and restaurant due to circumstances beyond the control of petitioners, and
that is, the non-renewal of the lease contract..."59 And yet, in the same petition, they also assert that: (a) the
separation of respondents was due to severe financial losses and reverses leading to the closure of the
business; and (b) petitioner Pacita Po had to close shop and was bankrupt and has no liquidity to put up her
own building to house Mayon Hotel & Restaurant.60 Sixth, and finally, the uncontroverted finding of the Labor
Arbiter that petitioners terminated all the other respondents, by not employing them when the Hotel and
Restaurant transferred to its new site on Pearanda Street.61 Indeed, in this same memorandum, petitioners
referred to all respondents as "former employees of Mayon Hotel & Restaurant."62
These factors may be inconclusive individually, but when taken together, they lead us to conclude that
petitioners really intended to dismiss all respondents and merely used the termination of the lease (on Rizal
Street premises) as a means by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely temporary,
itbecame dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.

We are not impressed by petitioners' claim that severe business losses justified their failure to reinstate
respondents. The evidence to prove this fact is inconclusive. But more important, serious business losses do not
excuse the employer from complying with the clearance or report required under Article 283 of the Labor Code
and its implementing rules before terminating the employment of its workers.63 In the absence of justifying
circumstances, the failure of petitioners to observe the procedural requirements set out under Article 284, taints
their actuations with bad faith, especially since they claimed that they have been experiencing losses in the three
years before 1997. To say the least, if it were true that the lay-off was temporary but then serious business losses
prevented the reinstatement of respondents, then petitioners should have complied with the requirements of
written notice. The requirement of law mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact of the loss of their jobs and the
corresponding income, but more importantly, to give the Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized cause of termination.64
And even assuming that the closure was due to a reason beyond the control of the employer, it still has to accord
its employees some relief in the form of severance pay.65
While we recognize the right of the employer to terminate the services of an employee for a just or authorized
cause, the dismissal of employees must be made within the parameters of law and pursuant to the tenets of fair
play.66 And in termination disputes, the burden of proof is always on the employer to prove that the dismissal
was for a just or authorized cause.67 Where there is no showing of a clear, valid and legal cause for termination
of employment, the law considers the case a matter of illegal dismissal.68
Under these circumstances, the award of damages was proper. As a rule, moral damages are recoverable where
the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or
was done in a manner contrary to morals, good customs or public policy.69 We believe that the dismissal of the
respondents was attended with bad faith and meant to evade the lawful obligations imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from employment in 1997 as a
matter of fact, but without legal redress. This runs counter to notions of fair play, substantial justice and the
constitutional mandate that labor rights should be respected. If doubts exist between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of the latter the employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.70 It is a timehonored rule that in controversies between a laborer and his master, doubts reasonably arising from the
evidence, or in the interpretation of agreements and writing should be resolved in the former's favor.71 The
policy is to extend the doctrine to a greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum aid and protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos
Broola cannot be granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of dismissal were
entitled to their retirement benefits pursuant to Article 287 of the Labor Code as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had not discharged the burden of proving that the
monetary claims of the respondents have been paid.74 The CA thus reinstated the Labor Arbiter's grant of
respondents' monetary claims, including damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as there was no illegal
dismissal, then respondents are not entitled to their monetary claims or separation pay and damages. Petitioners'
arguments are not only tiring, repetitive and unconvincing, but confusing and confused entitlement to labor
standard benefits is a separate and distinct concept from payment of separation pay arising from illegal
dismissal, and are governed by different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their complaint,
position paper, affidavits and other documents the labor standard benefits they are entitled to, and which they
alleged that petitioners have failed to pay them. It was therefore petitioners' burden to prove that they have paid

these money claims. One who pleads payment has the burden of proving it, and even where the employees must
allege nonpayment, the general rule is that the burden rests on the defendant to prove nonpayment, rather than
on the plaintiff to prove non payment.75 This petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e., affidavits
executed by some of respondents during an ocular inspection conducted by an inspector of the DOLE; notices
of inspection result and Facility Evaluation Orders issued by DOLE, are not sufficient to prove
payment.76 Despite repeated orders from the Labor Arbiter,77 petitioners failed to submit the pertinent employee
files, payrolls, records, remittances and other similar documents which would show that respondents rendered
work entitling them to payment for overtime work, night shift differential, premium pay for work on holidays
and rest day, and payment of these as well as the COLA and the SILP documents which are not in
respondents' possession but in the custody and absolute control of petitioners.78 By choosing not to fully and
completely disclose information and present the necessary documents to prove payment of labor standard
benefits due to respondents, petitioners failed to discharge the burden of proof.79 Indeed, petitioners' failure to
submit the necessary documents which as employers are in their possession, inspite of orders to do so, gives rise
to the presumption that their presentation is prejudicial to its cause.80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in
his power to produce evidence which from its very nature must overthrow the case made against him if
it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the
evidence, if produced, would operate to his prejudice, and support the case of his adversary.81
Petitioners next claim that the cost of the food and snacks provided to respondents as facilities should have been
included in reckoning the payment of respondents' wages. They state that although on the surface respondents
appeared to receive minimal wages, petitioners had granted respondents other benefits which are considered
part and parcel of their wages and are allowed under existing laws.82 They claim that these benefits make up for
whatever inadequacies there may be in compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A,
which allow the deduction of facilities provided by the employer through an appropriate Facility Evaluation
Order issued by the Regional Director of the DOLE.84 Petitioners also aver that they give five (5) percent of the
gross income each month as incentives. As proof of compliance of payment of minimum wages, petitioners
submitted the Notice of Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.85
The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision:86
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the
DOLE Regional Office whereby the cost of meals given by [petitioners] to [respondents] were specified
for purposes of considering the same as part of their wages, We cannot consider the cost of meals in the
Orders as applicable to [respondents]. [Respondents] were not interviewed by the DOLE as to the
quality and quantity of food appearing in the applications of [petitioners] for facility evaluation prior to
its approval to determine whether or not [respondents] were indeed given such kind and quantity of
food. Also, there was no evidence that the quality and quantity of food in the Orders were voluntarily
accepted by [respondents]. On the contrary; while some [of the respondents] admitted that they were
given meals and merienda, the quality of food serve[d] to them were not what were provided for in the
Orders and that it was only when they filed these cases that they came to know about said Facility
Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself,
who applied for evaluation of the facility (food) given to [respondents], testified that she did not inform
[respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could not be
deducted without compliance with certain legal requirements. As stated in Mabeza v. NLRC,87 the employer
simply cannot deduct the value from the employee's wages without satisfying the following: (a) proof that such
facilities are customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily accepted
in writing by the employee; and (c) the facilities are charged at fair and reasonable value. The records are clear
that petitioners failed to comply with these requirements. There was no proof of respondents' written
authorization. Indeed, the Labor Arbiter found that while the respondents admitted that they were given meals
and merienda, the quality of food served to them was not what was provided for in the Facility Evaluation
Orders and it was only when they filed the cases that they came to know of this supposed Facility Evaluation
Orders.88 Petitioner Josefa Po Lam herself admitted that she did not inform the respondents of the facilities she
had applied for.89

Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter therefore
erred when he ruled that the cost of the meals actually provided to respondents should be deducted as part of
their salaries, on the ground that respondents have availed themselves of the food given by petitioners.90 The
law is clear that mere availment is not sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of respondents on record that they were required to eat
in the hotel and restaurant so that they will not go home and there is no interruption in the services of Mayon
Hotel & Restaurant. As ruled in Mabeza, food or snacks or other convenience provided by the employers are
deemed as supplements if they are granted for the convenience of the employer. The criterion in making a
distinction between a supplement and a facility does not so much lie in the kind (food, lodging) but the
purpose.91 Considering, therefore, that hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter in the operations of a small hotel,
such as petitioners' business.92 The deduction of the cost of meals from respondents' wages, therefore, should be
removed.
We also do not agree with petitioners that the five (5) percent of the gross income of the establishment can be
considered as part of the respondents' wages. We quote with approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the
same cannot be considered as part of their wages in determining their claims for violation of labor
standard benefits. Although called profit share[,] such is in the nature of share from service charges
charged by the hotel. This is more explained by [respondents] when they testified that what they
received are not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104;
vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts received by [respondents] as
profit share are to be considered part of their wages and had been agreed by them prior to their
employment. Further, how can the amounts receive[d] by [respondents] be considered as profit share
when the same [are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of
the gross receipt of an enterprise. Profits are realized after expenses are deducted from the gross income.
On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter. We note that
petitioners themselves have admitted that the establishment employs "more or less sixteen (16)
employees,"93therefore they are estopped from claiming that the applicable minimum wage should be for service
establishments employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense to
payment of labor standard benefits. The employer cannot exempt himself from liability to pay minimum wages
because of poor financial condition of the company. The payment of minimum wages is not dependent on the
employer's ability to pay.94
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been reprehensible. They have terminated
the respondents' employment in an underhanded manner, and have used and abused the quasi-judicial and
judicial processes to resist payment of their employees' rightful claims, thereby protracting this case and causing
the unnecessary clogging of dockets of the Court. They have also forced respondents to unnecessary hardship
and financial expense. Indeed, the circumstances of this case would have called for exemplary damages, as the
dismissal was effected in a wanton, oppressive or malevolent manner,95 and public policy requires that these
acts must be suppressed and discouraged.96
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00 each to all
respondents. While it is true that other forms of damages under the Civil Code may be awarded to illegally
dismissed employees,97 any award of moral damages by the Labor Arbiter cannot be based on the Labor Code
but should be grounded on the Civil Code.98 And the law is clear that exemplary damages can only be awarded
if plaintiff shows proof that he is entitled to moral, temperate or compensatory damages.99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broola specifically claimed
damages from petitioners, then only they are entitled to exemplary damages.sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted to each respondent. It is
settled that in actions for recovery of wages or where an employee was forced to litigate and incur expenses to

protect his rights and interest, he is entitled to an award of attorney's fees.100 This case undoubtedly falls within
this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court of
Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB
V Case Nos. 04-00079-97 and 04-00080-97 is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres,
Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
(3) Removing the deductions for food facility from the amounts due to all respondents;
(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena, Guades,
Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres,
Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola; and
(6) Granting attorney's fees of P10,000.00 each to all respondents.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits
awarded and due to the employees concerned in accordance with the decision. The Labor Arbiter is ORDERED
to submit his compliance thereon within thirty (30) days from notice of this decision, with copies furnished to
the parties.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 100701

March 28, 2001

PRODUCERS BANK OF THE PHILIPPINES, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK EMPLOYEES
ASSOCIATION,1respondents.
GONZAGA-REYES, J.:
Before us is a special civil action for certiorari with prayer for preliminary injunction and/or restraining order
seeking the nullification of (1) the decision of public respondent in NLRC-NCR Case No. 02-00753-88, entitled
"Producers Bank Employees Association v. Producers Bank of the Philippines," promulgated on 30 April 1991,
reversing the Labor Arbiter's dismissal of private respondent's complaint and (2) public respondent's resolution
dated 18 June 1991 denying petitioner's motion for partial reconsideration.1wphi1.nt
The present petition originated from a complaint filed by private respondent on 11 February 1988 with the
Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC), charging
petitioner with diminution of benefits, non-compliance with Wage Order No. 6 and non-payment of holiday pay.
In addition, private respondent prayed for damages.2
On 31 March 1989, Labor Arbiter Nieves V. de Castro found private respondent's claims to be unmeritorious
and dismissed its complaint.3 In a complete reversal, however, the NLRC4 granted all of private respondent's
claims, except for damages.5 The dispositive portion of the NLRC's decision provides
WHEREFORE, premises considered, the appealed Decision is, as it is hereby, SET ASIDE and another
one issued ordering respondent- appellee to pay complainant-appellant:

1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;
2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding adjustment
thereof; and
3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3) years.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.
Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a Resolution issued on 18
June 1991. Hence, recourse to this Court.
Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the succeeding reasons
stated in its Petition 1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when (1) it contravened the
Supreme Court decision in Traders Royal Bank v. NLRC, et al., G.R. No. 88168, promulgated on August 30,
1990, (2) its ruling is not justified by law and Art. 100 of the Labor Code, (3) its ruling is contrary to the CBA,
and (4) the so-called "company practice invoked by it has no legal and moral bases" (p. 2, Motion for Partial
Reconsideration, Annex "H");
2. On the alleged non-compliance with Wage Order No. 6, the NLRC again gravely abused its discretion when
it patently and palpably erred in holding that it is "more inclined to adopt the stance of appellant (private
respondent UNION) in this issue since it is more in keeping with the law and its implementing provisions and
the intendment of the parties as revealed in their CBA" without giving any reason or justification for such
conclusions as the stance of appellant (private respondent UNION) does not traverse the clear and correct
finding and conclusion of the Labor Arbiter.
Furthermore, the petitioner, under conservatorship and distressed, is exempted under Wage Order No. 6.
Finally, the "wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding
adjustment thereof" (par. 2, dispositive portion, NLRC Decision), has prescribed (p. 12, Motion for Partial
Reconsideration, Annex "H").
3. On the alleged non-payment of legal holiday pay, the NLRC again gravely abused its discretion when it
patently and palpably erred in approving and adopting "the position of appellant (private respondent UNION)"
without giving any reason or justification therefor which position does not squarely traverse or refute the Labor
Arbiter's correct finding and ruling (p. 18, Motion for Partial Reconsideration, Annex "H").6
On 29 July 1991, the Court granted petitioner's prayer for a temporary restraining order enjoining respondents
from executing the 30 April 1991 Decision and 18 June 1991 Resolution of the NLRC.7
Coming now to the merits of the petition, the Court shall discuss the issues ad seriatim.
Bonuses
As to the bonuses, private respondent declared in its position papers filed with the NLRC that
1. Producers Bank of the Philippines, a banking institution, has been providing several benefits to its employees
since 1971 when it started its operation. Among the benefits it had been regularly giving is a mid-year bonus
equivalent to an employee's one-month basic pay and a Christmas bonus equivalent to an employee's one whole
month salary (basic pay plus allowance);
2. When P.D. 851, the law granting a 13th month pay, took effect, the basic pay previously being given as part of
the Christmas bonus was applied as compliance to it (P.D. 851), the allowances remained as Christmas bonus;
3. From 1981 up to 1983, the bank continued giving one month basic pay as mid-year bonus, one month basic
pay as 13th month pay but the Christmas bonus was no longer based on the allowance but on the basic pay of the
employees which is higher;

4. In the early part of 1984, the bank was placed under conservatorship but it still provided the traditional midyear bonus;
5. By virtue of an alleged Monetary Board Resolution No. 1566, bank only gave a one-half (1/2) month basic
pay as compliance of the 13th month pay and none for the Christmas bonus. In a tabular form, here are the
bank's violations:

YEAR

MID- YEAR BONUS

CHRISTMAS BONUS

13TH MO. PAY

previous years

one mo. basic

one mo. basic

one mo. Basic

1984

[one mo. basic]

-none-

one-half mo. Basic

1985

one-half mo. basic

-none-

one-half mo. Basic

1986

one-half mo. basic

one-half mo. basic

one mo. Basic

1987

one-half mo. basic

one-half mo. basic

one mo. basic

Private respondent argues that the mid-year and Christmas bonuses, by reason of their having been given for
thirteen consecutive years, have ripened into a vested right and, as such, can no longer be unilaterally
withdrawn by petitioner without violating Article 100 of Presidential Decree No. 4429 which prohibits the
diminution or elimination of benefits already being enjoyed by the employees. Although private respondent
concedes that the grant of a bonus is discretionary on the part of the employer, it argues that, by reason of its
long and regular concession, it may become part of the employee's regular compensation.10
On the other hand, petitioner asserts that it cannot be compelled to pay the alleged bonus differentials due to its
depressed financial condition, as evidenced by the fact that in 1984 it was placed under conservatorship by the
Monetary Board. According to petitioner, it sustained losses in the millions of pesos from 1984 to 1988, an
assertion which was affirmed by the labor arbiter. Moreover, petitioner points out that the collective bargaining
agreement of the parties does not provide for the payment of any mid-year or Christmas bonus. On the contrary,
section 4 of the collective bargaining agreement states that
Acts of Grace. Any other benefits or privileges which are not expressly provided in this Agreement, even
if now accorded or hereafter accorded to the employees, shall be deemed purely acts of grace dependent
upon the sole judgment and discretion of the BANK to grant, modify or withdraw .11
A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the
success of the employer's business and made possible the realization of profits. It is an act of generosity granted
by an enlightened employer to spur the employee to greater efforts for the success of the business and
realization of bigger profits.12 The granting of a bonus is a management prerogative, something given in
addition to what is ordinarily received by or strictly due the recipient.13 Thus, a bonus is not a demandable and
enforceable obligation,14 except when it is made part of the wage, salary or compensation of the employee.15
However, an employer cannot be forced to distribute bonuses which it can no longer afford to pay. To hold
otherwise would be to penalize the employer for his past generosity. Thus, in Traders Royal Bank v. NLRC,16 we
held that -

It is clear x x x that the petitioner may not be obliged to pay bonuses to its employees. The matter of
giving them bonuses over and above their lawful salaries and allowances is entirely dependent on the
profits, if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the
income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2) months
basic mid-year and two months gross year-end bonuses. The petitioner pointed out, however, that the
Bank weakened considerably after 1986 on account of political developments in the country. Suspected
to be a Marcos-owned or controlled bank, it was placed under sequestration by the present
administration and is now managed by the Presidential Commission on Good Government (PCGG).
In light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to
the employees had ripened into a company practice that may not be adjusted to the prevailing financial
condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may
not be forced to distribute bonuses which it can no longer afford to pay and, in effect, be penalized for
its past generosity to its employees. Private respondent's contention, that the decrease in the mid-year and year-end bonuses constituted a
diminution of the employees' salaries, is not correct, for bonuses are not part of labor standards in the
same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by
the Labor Code.
This doctrine was reiterated in the more recent case of Manila Banking Corporation v. NLR17 wherein the Court
made the following pronouncements
By definition, a "bonus" is a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right. It is something given in addition to what is ordinarily received by or strictly
due the recipient. The granting of a bonus is basically a management prerogative which cannot be forced
upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other
benefits aside from the employee's basic salaries or wages, especially so if it is incapable of doing so.
xxx xxx xxx
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of success
in business or realization of profits. How then can an employer be made liable to pay additional benefits
in the nature of bonuses to its employees when it has been operating on considerable net losses for a
given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80's. As early
as 1984, the Central Bank found that Manila bank had been suffering financial losses. Presumably, the
problems commenced even before their discovery in 1984. As earlier chronicled, the Central Bank
placed petitioner bank under comptrollership in 1984 because of liquidity problems and excessive
interbank borrowings. In 1987, it was placed under receivership and ordered to close operation. In 1988,
it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and
1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988. Clearly, there was no
success in business or realization of profits to speak of that would warrant the conferment of additional
benefits sought by private respondents. No company should be compelled to act liberally and confer
upon its employees additional benefits over and above those mandated by law when it is plagued by
economic difficulties and financial losses. No act of enlightened generosity and self-interest can be
exacted from near empty , if not empty coffers.
It was established by the labor arbiter18 and the NLRC19 and admitted by both parties20 that petitioner was placed
under conservatorship by the Monetary Board, pursuant to its authority under Section 28-A of Republic Act No.
265,21 as amended by Presidential Decree No. 72,22 which provides
Sec.28-A. Appointment of conservator. - Whenever, on the basis of a report submitted by the appropriate
supervising and examining department, the Monetary Board finds that a bank is in a state of continuing
inability or unwillingness to maintain a condition of solvency and liquidity deemed adequate to protect
the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of
the assets, liabilities, and the management of that banking institution, collect all monies and debts due

said bank and exercise all powers necessary to preserve the assets of the bank, reorganize the
management thereof and restore its viability .He shall have the power to overrule or revoke "the actions
of the previous management and board of directors of the bank, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall deem necessary.1wphi1.nt
xxx xxx xxx
Under Section 28-A, the Monetary Board may place a bank under the control of a conservator when it finds that
the bank is continuously unable or unwilling to maintain a condition of solvency or liquidity .In Central Bank
of the Philippines v. Court of Appeals,23 the Court declared that the order placing petitioner herein under
conservatorship had long become final and its validity could no longer be litigated upon. Also, in the same case,
the Court found that sometime in August, 1983, some news items triggered a bank-run in petitioner which
resulted in continuous over- drawings on petitioner's demand deposit account with the Central Bank; the overdrawings reached P143.955 million by 17 January 1984; and as of 13 February 1990, petitioner had overdrawings of up to P1.233 billion, which evidences petitioner's continuing inability to maintain a condition of
solvency and liquidity, thus justifying the conservatorship. Our findings in the Central Bank case coincide with
petitioner's claims that it continuously suffered losses from 1984 to 1988 as follows

YEAR

NET LOSSES IN
MILLIONS OF
PESOS

1984

P 144.418

1985

P 144.940

1986

P 132.940

1987

P 84.182

January-February
1988

P 9.271

These losses do not include the interest expenses on the overdraft loan of the petitioner to the Central Bank,
which interest as of July 31, 1987, amounted to P610.065 Million, and penalties on reserve deficiencies which
amounted to P89.029 Million. The principal balance of the overdraft amounted to P971.632 Million as of March
16, 1988.24
Petitioner was not only experiencing a decline in its profits, but was reeling from tremendous losses triggered
by a bank-run which began in 1983. In such a depressed financial condition, petitioner cannot be legally
compelled to continue paying the same amount of bonuses to its employees. Thus, the conservator was justified
in reducing the mid-year and Christmas bonuses of petitioner's employees. To hold otherwise would be to defeat
the reason for the conservatorship which is to preserve the assets and restore the viability of the financially
precarious bank. Ultimately, it is to the employees' advantage that the conservatorship achieve its purposes for
the alternative would be petitioner's closure whereby employees would lose not only their benefits, but their
jobs as well.
13th Month Pay

With regard to the 13th month pay, the NLRC adopted the position taken by private respondent and held that the
conservator was not justified in diminishing or not paying the 13th month pay and that petitioner should have
instead applied for an exemption, in accordance with section 7 of Presidential Decree No. 851 (PD 851), as
amended by Presidential Decree No. 1364, but that it did not do so.25 The NLRC held that the actions of the
conservator ran counter to the provisions of PD 851.
In its position paper,26 private respondent claimed that petitioner made the following payments to its members

YEAR

MID-YEAR BONUS

13th MONTH PAY

CHRISTMAS BONUS

1984

1 month basic

month basic

None

1985

month basic

month basic

None

1986

month basic

1 month basic

month basic

1987

month basic

1 month basic

month basic

However, in its Memorandum27 filed before this Court, private respondent revised its claims as follows

YEAR

MID- YEAR BONUS

13th MONTH PAY

CHRISTMAS BONUS

1984

1 month basic

None

month basic

1985

month basic

None

month basic

1986

month basic

1/2 month basic

1 month basic

1987

1/2 month basic

month basic

1 month basic

1988

1/2 month basic

month basic

1 month basic

Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas bonuses it has been giving
its employees from 1984 to 1988 exceeds the basic salary for one month (except for 1985 where a total of one
month basic salary was given). Hence, this amount should be applied towards the satisfaction of the 13th month
pay, pursuant to Section 2 of PD 851.28

PD 851, which was issued by President Marcos on 16 December 1975, requires all employers to pay their
employees receiving a basic salary of not more than P 1,000 a month,29 regardless of the nature of the
employment, a 13th month pay, not later than December 24 of every year.30 However, employers already paying
their employees a 13th month pay or its equivalent are not covered by the law. Under the Revised Guidelines on
the Implementation of the 13th-Month Pay Law,31 the term "equivalent" shall be construed to include Christmas
bonus, mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the basic salary.
The intention of the law was to grant some relief - not to all workers - but only to those not actually paid a
13thmonth salary or what amounts to it, by whatever name called. It was not envisioned that a double burden
would be imposed on the employer already paying his employees a 13th month pay or its equivalent whether out
of pure generosity or on the basis of a binding agreement. To impose upon an employer already giving his
employees the equivalent of a 13th month pay would be to penalize him for his liberality and in all probability,
the employer would react by withdrawing the bonuses or resist further voluntary grants for fear that if and when
a law is passed giving the same benefits, his prior concessions might not be given due credit.32
In the case at bar, even assuming the truth of private respondent's claims as contained in its position paper or
Memorandum regarding the payments received by its members in the form of 13th month pay, mid-year bonus
and Christmas bonus, it is noted that, for each and every year involved, the total amount given by petitioner
would still exceed, or at least be equal to, one month basic salary and thus, may be considered as an
"equivalent" of the 13thmonth pay mandated by PD 851.
Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of the 13th month pay.
Wage Order No. 6
Wage Order No.6, which came into effect on 1 November 1984, increased the statutory minimum wage of
workers, with different increases being specified for agricultural plantation and non-agricultural workers. The
bone of contention, however, involves Section 4 thereof which reads
All wage increase in wage and/or allowance granted by employers between June 17, 1984 and the
effectivity of this Order shall be credited as compliance with the minimum wage and allowance
adjustments prescribed herein, provided that where the increases are less than the applicable amount
provided in this Order, the employer shall pay the difference. Such increases shall not include
anniversary wage increases provided in collective bargaining agreements unless the agreement expressly
provide otherwise.
On 16 November 1984, the parties entered into a collective bargaining agreement providing for the following
salary adjustments
Article VIII. Section 1. Salary Adjustments. - Cognizant of the effects of, among others, price increases
of oil and other commodities on the employees' wages and earnings, and the certainty of continued
governmental or statutory actions adjusting employees' minimum wages, earnings, allowances, bonuses
and other fringe benefits, the parties have formulated and agreed on the following highly substantial
packaged increases in salary and allowance which take into account and cover (a) any deflation in
income of employees because of such price increases and inflation and (b) the expected governmental
response thereto in the form of statutory adjustments in wages, allowances and benefits, during the next
three (3) years of this Agreement:
(i) Effective March 1, 1984 - P225.00 per month as salary increase plus P100.00 per month as increase
in allowance to employees within the bargaining unit on March 1, 1984.
(ii) Effective March 1,1985 -P125.00 per month as salary increase plus P100.00 per month as increase in
allowance to employees within the bargaining unit on March 1,1985.
(iii) Effective March 1,1986 -P125.00 per month as salary increase plus P100.00 per month as increase
in allowance to employees within the bargaining unit on March 1, 1986.
In addition, the collective bargaining agreement of the parties also included a provision on the chargeability of
such salary or allowance increases against government-ordered or legislated income adjustments
Section 2. Pursuant to the MOLE Decision dated October 2, 1984 and Order dated October 24, 1984, the
first-year salary and allowance increases shall be chargeable against adjustments under Wage Order No.
5, which took effect on June 16, 1984. The charge ability of the foregoing salary increases against

government-ordered or legislated income adjustments subsequent to Wage Order No. 5 shall be

determined on the basis of the provisions of such government orders or legislation.
Petitioner argues that it complied with Wage Order No. 6 because the first year salary and allowance increase
provided for under the collective bargaining agreement can be credited against the wage and allowance increase
mandated by such wage order. Under Wage Order No. 6, all increases in wages or allowances granted by the
employer between 17 June 1984 and 1 November 1984 shall be credited as compliance with the wage and
allowance adjustments prescribed therein. Petitioner asserts that although the collective bargaining agreement
was signed by the parties on 16 November. 1984, the first year salary and allowance increase was made to take
effect retroactively, beginning from 1 March 1984 until 28 February 1985. Petitioner maintains that this period
encompasses the period of creditability provided for under Wage Order No. 6 and that, therefore, the balance
remaining after applying the first year salary and allowance increase in the collective bargaining agreement to
the increase mandated by Wage Order No. 5, in the amount of P125.00, should be made chargeable against the
increase prescribed by Wage Order No. 6, and if not sufficient, petitioner is willing to pay the difference.33
On the other hand, private respondent contends that the first year salary and allowance increases under the
collective bargaining agreement cannot be applied towards the satisfaction of the increases prescribed by Wage
Order No. 6 because the former were not granted within the period of creditability provided for in such wage
order. According to private respondent, the significant dates with regard to the granting of the first year
increases are 9 November 1984 the date of issuance of the MOLE Resolution, 16 November 1984 - the date
when the collective bargaining agreement was signed by the parties and 1 March 1984 the retroactive date of
effectivity of the first year increases. Private respondent points out that none of these dates fall within the period
of creditability under Wage Order No. 6 which is from 17 June 1984 to 1 November 1984. Thus, petitioner has
not complied with Wage Order No. 6.34
The creditability provision in Wage Order No. 6 is based on important public policy, that is, the encouragement
of employers to grant wage and allowance increases to their employees higher than the minimum rates of
increases prescribed by statute or administrative regulation. Thus, we held in Apex Mining Company, Inc. v.
NLRC35 that
[t]o obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to
compel employers simply to add on legislated increases in salaries or allowances without regard to what
is already being paid, would be to penalize employers who grant their workers more than the statutorily
prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the
interest of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of
employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or
allowances and pay their workers more than what the law or regulations require.
Section 1 of Article VIII of the collective bargaining agreement of the parties states that "...the parties have
formulated and agreed on the following highly substantial packaged increases in salary and allowance which
take into account and cover (a) any deflation in income of employees because of such price increases and
inflation and (b) the expected governmental response thereto in the form of statutory adjustments in wages,
allowances and benefits, during the next three (3) years of this Agreement..." The unequivocal wording of this
provision manifests the clear intent of the parties to apply the wage and allowance increases stipulated in the
collective bargaining agreement to any statutory wage and allowance, adjustments issued during the effectivity
of such agreement from 1 March 1984 to 28 February 1987. Furthermore, contrary to private respondent's
contentions, there is nothing in the wording of Section 2 of Article VIII of the collective bargaining agreement
that would prevent petitioner from crediting the first year salary and allowance increases against the increases
prescribed by Wage Order No. 6.
It would be inconsistent with the above stated rationale underlying the creditability provision of Wage Order
No. 6 if, after applying the first year increase to Wage Order No. 5, the balance was not made chargeable to the
increases under Wage Order No. 6 for the fact remains that petitioner actually granted wage and allowance
increases sufficient to cover the increases mandated by Wage Order No. 5 and part of the increases mandated by
Wage Order No. 6.
Holiday Pay
Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage during regular
holidays36 and that the employer may require an employee to work on any holiday but such employee shall be
paid a compensation equivalent to twice his regular rate. In this case, the Labor Arbiter found that the divisor
used by petitioner in arriving at the employees' daily rate for the purpose of computing salary-related benefits is

314.37This finding was not disputed by the NLRC.38 However, the divisor was reduced to 303 by virtue of an
inter-office memorandum issued on 13 August 1986, to wit
To increase the rate of overtime pay for rank and filers, we are pleased to inform that effective August
18, 1986, the acting Conservator approved the use of 303 days as divisor in the computation of Overtime
pay. The present Policy of 314 days as divisor used in the computation for cash conversion and
determination of daily rate, among others, still remain, Saturdays, therefore, are still considered paid rest
days.
Corollarily, the Acting Conservator also approved the increase of meal allowance from P25.00 to P30.00
for a minimum of four (4) hours of work for Saturdays.
Proceeding from the unambiguous terms of the above quoted memorandum, the Labor Arbiter observed that the
reduction of the divisor to 303 was for the sole purpose of increasing the employees' overtime pay and was not
meant to replace the use of 314 as the divisor in the computation of the daily rate for salary-related benefits.39
Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314 in arriving at the daily
wage rate of monthly-salaried employees. Private respondent also concedes that the divisor was changed to 303
for purposes of computing overtime pay only. In its Memorandum, private respondent states that
49. The facts germane to this issue are not debatable. The Memorandum Circular issued by the Acting
Conservator is clear. Prior to August 18,1986, the petitioner bank used a divisor of 314 days in arriving
at the daily wage rate of the monthly-salaried employees. Effective August 18, 1986, this was changed.
It adopted the following formula:
Basic salary x 12 months = Daily Wage Rate
303 days
50. By utilizing this formula even up to the present, the conclusion is inescapable that the petitioner
bank is not actually paying its employees the regular holiday pay mandated by law. Consequently, it is
bound to pay the salary differential of its employees effective November 1, 1974 up to the present.
xxx

xxx

xxx

54. Since it is a question of fact, the Inter-office Memorandum dated August 13,1986 (Annex "E")
provides for a divisor of 303 days in computing overtime pay. The clear import of this document is that
from the 365 days in a year, we deduct 52 rest days which gives a total of 313 days. Now, if 313 days is
the number of working days of the employees then, there is a disputable presumption that the employees
are paid their holiday pay. However, this is not so in the case at bar. The bank uses 303 days as its
divisor. Hence, it is not paying its employees their corresponding holiday pay.40
In Union of Filipro Employees v. Vivar, ]r.41 the Court held that "[t]he divisor assumes an important role in
determining whether or not holiday pay is already included in the monthly paid employee's salary and in the
computation of his daily rate." This was also our ruling in Chartered Bank Employees Association v. Ople,42 as
follows
It is argued that even without the presumption found in the rules and in the policy instruction, the
company practice indicates that the monthly salaries of the employees are so computed as to include the
holiday pay provided by law. The petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing
overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days
divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays form the total
number of calendar days in a year. If the employees are already paid for all non-working days, the
divisor should be 365 and not 251.
Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total number of calendar days in
a year, since Saturdays are considered paid rest days, as stated in the inter-office memorandum. Thus, the use of
314 as a divisor leads to the inevitable conclusion that the ten legal holidays are already included therein.

We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole purpose of
increasing the employees' overtime pay, and was not meant to exclude holiday pay from the monthly salary of
petitioner's employees. In fact, it was expressly stated in the inter-office memorandum - also referred to by
private respondent in its pleadings - that the divisor of 314 will still be used in the computation for cash
conversion and in the determination of the daily rate. Thus, based on the records of this case and the parties'
own admissions, the Court holds that petitioner has complied with the requirements of Article 94 of the Labor
Code.1wphi1.nt
Damages
As to private respondent's claim for damages, the NLRC was correct in ruling that there is no basis to support
the same.
WHEREFORE, for the reasons above stated, the 30 April 1991 Decision of public respondent in NLRC-NCR
Case No. 02-00753-88, entitled "Producers Bank Employees Association v. Producers Bank of the Philippines,"
and its 18 June 1991 - Resolution issued in the same case are hereby SET ASIDE, with the exception of public
respondent's ruling on damages.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 198783

April 15, 2013

ROYAL PLANT WORKERS UNION, Petitioner,

vs.
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT, Respondent.
DECISION
MENDOZA, J.:
Assailed in this petition is the May 24, 2011 Decision1 and the September 2, 2011 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers Philippines, Inc.-Cebu Plant v. Royal
Plant Workers Union, which nullified and set aside the June 11, 2010 Decision3 of the Voluntary Arbitration
Panel (Arbitration Committee) in a case involving the removal of chairs in the bottling plant of Coca-Cola
Bottlers Philippines, Inc. (CCBPI).
The Factual and Procedural
Antecedents
The factual and procedural antecedents have been accurately recited in the May 24, 2011 CA decision as
follows:
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in the manufacture,
sale and distribution of softdrink products. It has several bottling plants all over the country, one of which is
located in Cebu City. Under the employ of each bottling plant are bottling operators. In the case of the plant in
Cebu City, there are 20 bottling operators who work for its Bottling Line 1 while there are 12-14 bottling
operators who man its Bottling Line 2. All of them are male and they are members of herein respondent Royal
Plant Workers Union (ROPWU).
The bottling operators work in two shifts. The first shift is from 8 a.m. to 5 p.m. and the second shift is from 5
p.m. up to the time production operations is finished. Thus, the second shift varies and may end beyond eight

(8) hours. However, the bottling operators are compensated with overtime pay if the shift extends beyond eight
(8) hours. For Bottling Line 1, 10 bottling operators work for each shift while 6 to 7 bottling operators work for
each shift for Bottling Line 2.
Each shift has rotations of work time and break time. Prior to September 2008, the rotation is this: after two and
a half (2 ) hours of work, the bottling operators are given a 30-minute break and this goes on until the shift
ends. In September 2008 and up to the present, the rotation has changed and bottling operators are now given a
30-minute break after one and one half (1 ) hours of work.
In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their request. In 1988, the
bottling operators of then Bottling Line 1 followed suit and asked to be provided also with chairs. Their request
was likewise granted. Sometime in September 2008, the chairs provided for the operators were removed
pursuant to a national directive of petitioner. This directive is in line with the "I Operate, I Maintain, I Clean"
program of petitioner for bottling operators, wherein every bottling operator is given the responsibility to keep
the machinery and equipment assigned to him clean and safe. The program reinforces the task of bottling
operators to constantly move about in the performance of their duties and responsibilities.
With this task of moving constantly to check on the machinery and equipment assigned to him, a bottling
operator does not need a chair anymore, hence, petitioners directive to remove them. Furthermore, CCBPI
rationalized that the removal of the chairs is implemented so that the bottling operators will avoid sleeping,
thus, prevent injuries to their persons. As bottling operators are working with machines which consist of moving
parts, it is imperative that they should not fall asleep as to do so would expose them to hazards and injuries. In
addition, sleeping will hamper the efficient flow of operations as the bottling operators would be unable to
perform their duties competently.
The bottling operators took issue with the removal of the chairs. Through the representation of herein
respondent, they initiated the grievance machinery of the Collective Bargaining Agreement (CBA) in November
2008. Even after exhausting the remedies contained in the grievance machinery, the parties were still at a
deadlock with petitioner still insisting on the removal of the chairs and respondent still against such measure. As
such, respondent sent a Notice to Arbitrate, dated 16 July 2009, to petitioner stating its position to submit the
issue on the removal of the chairs for arbitration. Nevertheless, before submitting to arbitration the issue, both
parties availed of the conciliation/mediation proceedings before the National Conciliation and Mediation Board
(NCMB) Regional Branch No. VII. They failed to arrive at an amicable settlement.
Thus, the process of arbitration continued and the parties appointed the chairperson and members of the
Arbitration Committee as outlined in the CBA. Petitioner and respondent respectively appointed as members to
the Arbitration Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis Ruiz while they both chose Atty. Alice Morada
as chairperson thereof. They then executed a Submission Agreement which was accepted by the Arbitration
Committee on 01 October 2009. As contained in the Submission Agreement, the sole issue for arbitration is
whether the removal of chairs of the operators assigned at the production/manufacturing line while performing
their duties and responsibilities is valid or not.
Both parties submitted their position papers and other subsequent pleadings in amplification of their respective
stands. Petitioner argued that the removal of the chairs is valid as it is a legitimate exercise of management
prerogative, it does not violate the Labor Code and it does not violate the CBA it contracted with respondent.
On the other hand, respondent espoused the contrary view. It contended that the bottling operators have been
performing their assigned duties satisfactorily with the presence of the chairs; the removal of the chairs
constitutes a violation of the Occupational Health and Safety Standards, the policy of the State to assure the
right of workers to just and humane conditions of work as stated in Article 3 of the Labor Code and the Global
Workplace Rights Policy.
Ruling of the Arbtration Committee
On June 11, 2010, the Arbitration Committee rendered a decision in favor of the Royal Plant Workers Union
(the Union) and against CCBPI, the dispositive portion of which reads, as follows:

Wherefore, the undersigned rules in favor of ROPWU declaring that the removal of the operators chairs is not
valid. CCBPI is hereby ordered to restore the same for the use of the operators as before their removal in 2008.4
The Arbitration Committee ruled, among others, that the use of chairs by the operators had been a company
practice for 34 years in Bottling Line 2, from 1974 to 2008, and 20 years in Bottling Line 1, from 1988 to 2008;
that the use of the chairs by the operators constituted a company practice favorable to the Union; that it ripened
into a benefit after it had been enjoyed by it; that any benefit being enjoyed by the employees could not be
reduced, diminished, discontinued, or eliminated by the employer in accordance with Article 100 of the Labor
Code, which prohibited the diminution or elimination by the employer of the employees benefit; and that
jurisprudence had not laid down any rule requiring a specific minimum number of years before a benefit would
constitute a voluntary company practice which could not be unilaterally withdrawn by the employer.
The Arbitration Committee further stated that, although the removal of the chairs was done in good faith,
CCBPI failed to present evidence regarding instances of sleeping while on duty. There were no specific details
as to the number of incidents of sleeping on duty, who were involved, when these incidents happened, and what
actions were taken. There was no evidence either of any accident or injury in the many years that the bottling
operators used chairs. To the Arbitration Committee, it was puzzling why it took 34 and 20 years for CCBPI to
be so solicitous of the bottling operators safety that it removed their chairs so that they would not fall asleep
and injure themselves.
Finally, the Arbitration Committee was of the view that, contrary to CCBPIs position, line efficiency was the
result of many factors and it could not be attributed solely to one such as the removal of the chairs.
Not contented with the Arbitration Committees decision, CCBPI filed a petition for review under Rule 43
before the CA.
Ruling of the CA
On May 24, 2011, the CA rendered a contrasting decision which nullified and set aside the decision of the
Arbitration Committee. The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED and the Decision, dated 11 June 2010,
of the Arbitration Committee in AC389-VII-09-10-2009D is NULLIFIED and SET ASIDE. A new one is
entered in its stead SUSTAINING the removal of the chairs of the bottling operators from the
manufacturing/production line.5
The CA held, among others, that the removal of the chairs from the manufacturing/production lines by CCBPI
is within the province of management prerogatives; that it was part of its inherent right to control and manage
its enterprise effectively; and that since it was the employers discretion to constantly develop measures or
means to optimize the efficiency of its employees and to keep its machineries and equipment in the best of
conditions, it was only appropriate that it should be given wide latitude in exercising it.
The CA stated that CCBPI complied with the conditions of a valid exercise of a management prerogative when
it decided to remove the chairs used by the bottling operators in the manufacturing/production lines. The
removal of the chairs was solely motivated by the best intentions for both the Union and CCBPI, in line with the
"I Operate, I Maintain, I Clean" program for bottling operators, wherein every bottling operator was given the
responsibility to keep the machinery and equipment assigned to him clean and safe. The program would
reinforce the task of bottling operators to constantly move about in the performance of their duties and
responsibilities. Without the chairs, the bottling operators could efficiently supervise these machineries
operations and maintenance. It would also be beneficial for them because the working time before the break in
each rotation for each shift was substantially reduced from two and a half hours (2 ) to one and a half hours (1
) before the 30-minute break. This scheme was clearly advantageous to the bottling operators as the number of
resting periods was increased. CCBPI had the best intentions in removing the chairs because some bottling
operators had the propensity to fall asleep while on the job and sleeping on the job ran the risk of injury
exposure and removing them reduced the risk.

The CA added that the decision of CCBPI to remove the chairs was not done for the purpose of defeating or
circumventing the rights of its employees under the special laws, the Collective Bargaining Agreement (CBA)
or the general principles of justice and fair play. It opined that the principles of justice and fair play were not
violated because, when the chairs were removed, there was a commensurate reduction of the working time for
each rotation in each shift. The provision of chairs for the bottling operators was never part of the CBAs
contracted between the Union and CCBPI. The chairs were not provided as a benefit because such matter was
dependent upon the exigencies of the work of the bottling operators. As such, CCBPI could withdraw this
provision if it was not necessary in the exigencies of the work, if it was not contributing to the efficiency of the
bottling operators or if it would expose them to some hazards. Lastly, the CA explained that the provision of
chairs to the bottling operators cannot be covered by Article 100 of the Labor Code on elimination or
diminution of benefits because the employees benefits referred to therein mainly involved monetary
considerations or privileges converted to their monetary equivalent.
Disgruntled with the adverse CA decision, the Union has come to this Court praying for its reversal on the
following GROUNDS
I
THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
HOLDING THAT A PETITION FOR REVIEW UNDER RULE 43 OF THE RULES OF COURT IS THE
PROPER REMEDY OF CHALLENGING BEFORE SAID COURT THE DECISION OF THE VOLUNTARY
ARBITRATOR OR PANEL OF VOLUNTARY ARBITRATORS UNDER THE LABOR CODE.
II
THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
NULLIFYING AND SETTING ASIDE THE DECISION OF THE PANEL OF VOLUNTARY ARBITRATORS
WHICH DECLARED AS NOT VALID THE REMOVAL OF THE CHAIRS OF THE OPERATORS IN THE
MANUFACTURING AND/OR PRODUCTION LINE.
In advocacy of its positions, the Union argues that the proper remedy in challenging the decision of the
Arbitration Committee before the CA is a petition for certiorari under Rule 65. The petition for review under
Rule 43 resorted to by CCBPI should have been dismissed for being an improper remedy. The Union points out
that the parties agreed to submit the unresolved grievance involving the removal of chairs to voluntary
arbitration pursuant to the provisions of Article V of the existing CBA. Hence, the assailed decision of the
Arbitration Committee is a judgment or final order issued under the Labor Code of the Philippines. Section 2,
Rule 43 of the 1997 Rules of Civil Procedure, expressly states that the said rule does not cover cases under the
Labor Code of the Philippines. The judgments or final orders of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators are governed by the provisions of Articles 260, 261, 262, 262-A, and 262-B of the Labor Code of
the Philippines.
On the substantive aspect, the Union argues that there is no connection between CCBPIs "I Operate, I
Maintain, I Clean" program and the removal of the chairs because the implementation of the program was in
2006 and the removal of the chairs was done in 2008. The 30-minute break is part of an operators working
hours and does not make any difference. The frequency of the break period is not advantageous to the operators
because it cannot compensate for the time they are made to stand throughout their working time. The bottling
operators get tired and exhausted after their tour of duty even with chairs around. How much more if the chairs
are removed?
The Union further claims that management prerogatives are not absolute but subject to certain limitations found
in law, a collective bargaining agreement, or general principles of fair play and justice. The operators have been
performing their assigned duties and responsibilities satisfactorily for thirty (30) years using chairs. There is no
record of poor performance because the operators are sitting all the time. There is no single incident when the
attention of an operator was called for failure to carry out his assigned tasks. CCBPI has not submitted any
evidence to prove that the performance of the operators was poor before the removal of the chairs and that it has

improved after the chairs were removed. The presence of chairs for more than 30 years made the operators
awake and alert as they could relax from time to time. There are sanctions for those caught sleeping while on
duty. Before the removal of the chairs, the efficiency of the operators was much better and there was no
recorded accident. After the removal of the chairs, the efficiency of the operators diminished considerably,
resulting in the drastic decline of line efficiency.
Finally, the Union asserts that the removal of the chairs constitutes violation of the Occupational Health and
Safety Standards, which provide that every company shall keep and maintain its workplace free from hazards
that are likely to cause physical harm to the workers or damage to property. The removal of the chairs
constitutes a violation of the State policy to assure the right of workers to a just and humane condition of work
pursuant to Article 3 of the Labor Code and of CCBPIs Global Workplace Rights Policy. Hence, the unilateral
withdrawal, elimination or removal of the chairs, which have been in existence for more than 30 years,
constitutes a violation of existing practice.
The respondents position
CCBPI reiterates the ruling of the CA that a petition for review under Rule 43 of the Rules of Court was the
proper remedy to question the decision of the Arbitration Committee. It likewise echoes the ruling of the CA
that the removal of the chairs was a legitimate exercise of management prerogative; that it was done not to harm
the bottling operators but for the purpose of optimizing their efficiency and CCBPIs machineries and
equipment; and that the exercise of its management prerogative was done in good faith and not for the purpose
of circumventing the rights of the employees under the special laws, the CBA or the general principles of justice
and fair play.
The Courts Ruling
The decision in this case rests on the resolution of two basic questions. First, is an appeal to the CA via a
petition for review under Rule 43 of the 1997 Rules of Civil Procedure a proper remedy to question the decision
of the Arbitration Committee? Second, was the removal of the bottling operators chairs from CCBPIs
production/manufacturing lines a valid exercise of a management prerogative?
The Court sustains the ruling of the CA on both issues.
Regarding the first issue, the Union insists that the CA erred in ruling that the recourse taken by CCBPI in
appealing the decision of the Arbitration Committee was proper. It argues that the proper remedy in challenging
the decision of the Voluntary Arbitrator before the CA is by filing a petition for certiorari under Rule 65 of the
Rules of Court, not a petition for review under Rule 43.
CCBPI counters that the CA was correct in ruling that the recourse it took in appealing the decision of the
Arbitration Committee to the CA via a petition for review under Rule 43 of the Rules of Court was proper and
in conformity with the rules and prevailing jurisprudence.
A Petition for Review
under Rule 43 is the
proper remedy
CCBPI is correct. This procedural issue being debated upon is not novel. The Court has already ruled in a
number of cases that a decision or award of a voluntary arbitrator is appealable to the CA via a petition for
review under Rule 43. The recent case of Samahan Ng Mga Manggagawa Sa Hyatt (SAMASAH-NUWHRAIN)
v. Hon. Voluntary Arbitrator Buenaventura C. Magsalin and Hotel Enterprises of the Philippines6 reiterated the
well-settled doctrine on this issue, to wit:

In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan,7 we repeated the wellsettled rule that a decision or award of a voluntary arbitrator is appealable to the CA via petition for review
under Rule 43. We held that:
"The question on the proper recourse to assail a decision of a voluntary arbitrator has already been settled in
Luzon Development Bank v. Association of Luzon Development Bank Employees, where the Court held that
the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the
Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95 (now
embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like those of the quasi-judicial agencies, boards
and commissions enumerated therein, and consistent with the original purpose to provide a uniform procedure
for the appellate review of adjudications of all quasi-judicial entities.
Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-Olalia v. Court of
Appeals, the Court reiterated the aforequoted ruling. In Alcantara, the Court held that notwithstanding Section 2
of Rule 43, the ruling in Luzon Development Bank still stands. The Court explained, thus:
The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rules 42 of the
1997 Rules of Civil Procedure, as presently worded, is nothing more but a reiteration of the exception to the
exclusive appellate jurisdiction of the Court of Appeals, as provided for in Section 9, Batas Pambansa Blg. 129,
as amended by Republic Act No. 7902:
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the
Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions
of this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.
The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the
decisions of voluntary arbitrators issued pursuant to the Labor Code do not come within its ambit x x x."
Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended, provide:
"SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax
Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency
in the exercise of its quasi-judicial functions. Among these agencies are the x x x, and voluntary arbitrators
authorized by law.
xxxx
SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of Appeals within the period
and in the manner therein provided, whether the appeal involves questions of fact, of law, or mixed questions of
fact and law.
SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award,
judgment, final order or resolution, or from the date of its last publication, if publication is required by law for
its effectivity, or of the denial of petitioners motion for new trial or reconsideration duly filed in accordance
with the governing law of the court or agency a quo. x x x. (Emphasis supplied.)
Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrators Resolution denying petitioners motion for
reconsideration, petitioner should have filed with the CA, within the fifteen (15)-day reglementary period, a
petition for review, not a petition for certiorari.
On the second issue, the Union basically claims that the CCBPIs decision to unilaterally remove the operators
chairs from the production/manufacturing lines of its bottling plants is not valid because it violates some

fundamental labor policies. According to the Union, such removal constitutes a violation of the 1) Occupational
Health and Safety Standards which provide that every worker is entitled to be provided by the employer with
appropriate seats, among others; 2) policy of the State to assure the right of workers to a just and humane
condition of work as provided for in Article 3 of the Labor Code;8 3) Global Workplace Rights Policy of CCBPI
which provides for a safe and healthy workplace by maintaining a productive workplace and by minimizing the
risk of accident, injury and exposure to health risks; and 4) diminution of benefits provided in Article 100 of the
Labor Code.9
Opposing the Unions argument, CCBPI mainly contends that the removal of the subject chairs is a valid
exercise of management prerogative. The management decision to remove the subject chairs was made in good
faith and did not intend to defeat or circumvent the rights of the Union under the special laws, the CBA and the
general principles of justice and fair play.
Again, the Court agrees with CCBPI on the matter.
A Valid Exercise of
Management Prerogative
The Court has held that management is free to regulate, according to its own discretion and judgment, all
aspects of employment, including hiring, work assignments, working methods, time, place, and manner of
work, processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers, and discipline, dismissal and recall of workers. The exercise of management
prerogative, however, is not absolute as it must be exercised in good faith and with due regard to the rights of
labor.10
In the present controversy, it cannot be denied that CCBPI removed the operators chairs pursuant to a national
directive and in line with its "I Operate, I Maintain, I Clean" program, launched to enable the Union to perform
their duties and responsibilities more efficiently. The chairs were not removed indiscriminately. They were
carefully studied with due regard to the welfare of the members of the Union. The removal of the chairs was
compensated by: a) a reduction of the operating hours of the bottling operators from a two-and-one-half (2 )hour rotation period to a one-and-a-half (1 ) hour rotation period; and b) an increase of the break period from
15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted to avoid
instances of operators sleeping on the job while in the performance of their duties and responsibilities and
because of the fact that the chairs were not necessary considering that the operators constantly move about
while working. In short, the removal of the chairs was designed to increase work efficiency. Hence, CCBPIs
exercise of its management prerogative was made in good faith without doing any harm to the workers rights.
The fact that there is no proof of any operator sleeping on the job is of no moment. There is no guarantee that
such incident would never happen as sitting on a chair is relaxing. Besides, the operators constantly move about
while doing their job. The ultimate purpose is to promote work efficiency.
No Violation of Labor Laws
The rights of the Union under any labor law were not violated. There is no law that requires employers to
provide chairs for bottling operators. The CA correctly ruled that the Labor Code, specifically Article
13211 thereof, only requires employers to provide seats for women. No similar requirement is mandated for men
or male workers. It must be stressed that all concerned bottling operators in this case are men.
There was no violation either of the Health, Safety and Social Welfare Benefit provisions under Book IV of the
Labor Code of the Philippines. As shown in the foregoing, the removal of the chairs was compensated by the
reduction of the working hours and increase in the rest period. The directive did not expose the bottling
operators to safety and health hazards.

The Union should not complain too much about standing and moving about for one and one-half (1 ) hours
because studies show that sitting in workplaces for a long time is hazardous to ones health. The report of
VicHealth, Australia,12 disclosed that "prolonged workplace sitting is an emerging public health and
occupational health issue with serious implications for the health of our working population. Importantly,
prolonged sitting is a risk factor for poor health and early death, even among those who meet, or exceed,
national13 activity guidelines." In another report,14 it was written:
Workers needing to spend long periods in a seated position on the job such as taxi drivers, call centre and office
workers, are at risk for injury and a variety of adverse health effects.
The most common injuries occur in the muscles, bones, tendons and ligaments, affecting the neck and lower
back regions. Prolonged sitting:
reduces body movement making muscles more likely to pull, cramp or strain when stretched suddenly, causes
fatigue in the back and neck muscles by slowing the blood supply and puts high tension on the spine, especially
in the low back or neck, and
causes a steady compression on the spinal discs that hinders their nutrition and can contribute to their
premature degeneration.
Sedentary employees may also face a gradual deterioration in health if they do not exercise or do not lead an
otherwise physically active life. The most common health problems that these employees experience are
disorders in blood circulation and injuries affecting their ability to move. Deep Vein Thrombosis (DVT), where
a clot forms in a large vein after prolonged sitting (eg after a long flight) has also been shown to be a risk.
Workers who spend most of their working time seated may also experience other, less specific adverse health
effects. Common effects include decreased fitness, reduced heart and lung efficiency, and digestive problems.
Recent research has identified too much sitting as an important part of the physical activity and health equation,
and suggests we should focus on the harm caused by daily inactivity such as prolonged sitting.
Associate professor David Dunstan leads a team at the Baker IDI in Melbourne which is specifically
researching sitting and physical activity. He has found that people who spend long periods of time seated (more
than four hours per day) were at risk of:
higher blood levels of sugar and fats,
larger waistlines, and
higher risk of metabolic syndrome
regardless of how much moderate to vigorous exercise they had.
In addition, people who interrupted their sitting time more often just by standing or with light activities such as
housework, shopping, and moving about the office had healthier blood sugar and fat levels, and smaller
waistlines than those whose sitting time was not broken up.
Of course, in this case, if the chairs would be returned, no risks would be involved because of the shorter period
of working time. The study was cited just to show that there is a health risk in prolonged sitting.
No Violation of the CBA
The CBA15 between the Union and CCBPI contains no provision whatsoever requiring the management to
provide chairs for the operators in the production/manufacturing line while performing their duties and
responsibilities. On the contrary, Section 2 of Article 1 of the CBA expressly provides as follows:
Article I

SCOPE
SECTION 2. Scope of the Agreement. All the terms and conditions of employment of employees and workers
within the appropriate bargaining unit (as defined in Section 1 hereof) are embodied in this Agreement and the
same shall govern the relationship between the COMPANY and such employees and/or workers. On the other
hand, all such benefits and/or privileges as are not expressly provided for in this Agreement but which are now
being accorded, may in the future be accorded, or might have previously been accorded, to the employees
and/or workers, shall be deemed as purely voluntary acts on the part of the COMPANY in each case, and the
continuance and repetition thereof now or in the future, no matter how long or how often, shall not be construed
as establishing an obligation on the part of the COMPANY. It is however understood that any benefits that are
agreed upon by and between the COMPANY and the UNION in the Labor-Management Committee Meetings
regarding the terms and conditions of employment outside the CBA that have general application to employees
who are similarly situated in a Department or in the Plant shall be implemented. [emphasis and underscoring
supplied]
As can be gleaned from the aforecited provision, the CBA expressly provides that benefits and/or privileges, not
expressly given therein but which are presently being granted by the company and enjoyed by the employees,
shall be considered as purely voluntary acts by the management and that the continuance of such benefits and/or
privileges, no matter how long or how often, shall not be understood as establishing an obligation on the
companys part. Since the matter of the chairs is not expressly stated in the CBA, it is understood that it was a
purely voluntary act on the part of CCBPI and the long practice did not convert it into an obligation or a vested
right in favor of the Union.
No Violation of the general principles
of justice and fair play
The Court completely agrees with the CA ruling that the removal of the chairs did not violate the general
principles of justice and fair play because the bottling operators working time was considerably reduced from
two and a half (2 ) hours to just one and a half (1 ) hours and the break period, when they could sit down,
was increased to 30 minutes between rotations. The bottling operators new work schedule is certainly
advantageous to them because it greatly increases their rest period and significantly decreases their working
time. A break time of thirty (30) minutes after working for only one and a half (1 ) hours is a just and fair
work schedule.
No Violation of Article 100
of the Labor Code
The operators chairs cannot be considered as one of the employee benefits covered in Article 10016 of the
Labor Code. In the Courts view, the term "benefits" mentioned in the non-diminution rule refers to monetary
benefits or privileges given to the employee with monetary equivalents.
Such benefits or privileges form part of the employees wage, salary or compensation making them enforceable
obligations.
This Court has already decided several cases regarding the non-diminution rule where the benefits or privileges
involved in those cases mainly concern monetary considerations or privileges with monetary equivalents. Some
of these cases are: Eastern Telecommunication Phils. Inc. v. Eastern Telecoms Employees Union,17 where the
case involves the payment of 14th, 15th and 16th month bonuses; Central Azucarera De Tarlac v. Central
Azucarera De Tarlac Labor Union-NLU,18 regarding the 13th month pay, legal/special holiday pay, night
premium pay and vacation and sick leaves; TSPIC Corp. v. TSPIC Employees Union,19 regarding salary wage
increases; and American Wire and Cable Daily Employees Union vs. American Wire and Cable Company,
Inc.,20 involving service awards with cash incentives, premium pay, Christmas party with incidental benefits and
promotional increase.

In this regard, the Court agrees with the CA when it resolved the matter and wrote:
Let it be stressed that the aforequoted article speaks of non-diminution of supplements and other employee
benefits. Supplements arc privileges given to an employee which constitute as extra remuneration besides his or
her basic ordinary earnings and wages. From this definition, We can only deduce that the other employee
benefits spoken of by Article 100 pertain only to those which are susceptible of monetary considerations.
Indeed, this could only be the most plausible conclusion because the cases tackling Article 100 involve mainly
with monetary considerations or privileges converted to their monetary equivalents.
xxxx
Without a doubt, equating the provision of chairs to the bottling operators Ds something within the ambit of
"benefits'' in the context of Article 100 of the Labor Code is unduly stretching the coverage of the law. The
interpretations of Article 100 of the Labor Code do not show even with the slightest hint that such provision of
chairs for the bottling operators may be sheltered under its mantle.21
Jurisprudence recognizes the exercise of management prerogatives. Labor Jaws also discourage interference
with an employer's judgment in the conduct of its business. For this reason, the Court often declines to interfere
in legitimate business decisions of employers. The law must protect not only the welfare of the employees, but
also the right of the employers.22
WHEREFORE, the petition is DENIED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138051

June 10, 2004

JOSE Y. SONZA, petitioner,

vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of
Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of
Appeals affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed the
Labor Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement
("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was
represented by its corporate officers while MJMDC was represented by SONZA, as President and General
Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as
"AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000
for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days
of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on
behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs
and career. We consider these acts of the station violative of the Agreement and the station as in breach
thereof. In this connection, we hereby serve notice of rescission of said Agreement at our instance
effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said
Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his
salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship
existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank,
Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank
where ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to
file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent
company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer
jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a
result of a hearing. Thus, the respondents plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers
on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge
Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses
Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in
the television and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.6 The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of
a talent," it stands to reason that a "talent" as above-described cannot be considered as an employee by
reason of the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and
talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform
the services he undertook to render in accordance with his own style. The benefits conferred to
complainant under the May 1994 Agreement are certainly very much higher than those generally given
to employees. For one, complainant Sonzas monthly talent fees amount to a staggering P317,000.
Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not bound to
render eight (8) hours of work per day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to
an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific
agreement by the parties and not by reason of employer-employee relationship. As correctly put by
the respondent, "All these benefits are merely talent fees and other contractual benefits and should not
be deemed as salaries, wages and/or other remuneration accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given
to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such
benefit."
The fact that complainant was made subject to respondents Rules and Regulations, likewise, does
not detract from the absence of employer-employee relationship. As held by the Supreme Court,
"The line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC,
et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor
Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3
July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the
decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing
the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between
SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the
NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an
agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is
the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a
management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast
partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and
not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement
which specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant herein
unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission
in behalf of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the
parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement,
which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the
said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that
there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We
find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as
expressly admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular
courts, the same being in the nature of an action for alleged breach of contractual obligation on the part
of respondent-appellee. As squarely apparent from complainant-appellants Position Paper, his claims
for compensation for services, 13th month pay, signing bonus and travel allowance against respondentappellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement,
while his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the
Position Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound
itself to pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED
THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower
than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual
relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of
merely resigning from ABS-CBN, complainant-appellant served upon the latter a notice of rescission
of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring
to unpaid employee benefits, he is waiving and renouncing recovery of the remaining amount stipulated
in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said
Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock
Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint.
Complainant-appellants claims being anchored on the alleged breach of contract on the part of

respondent-appellee, the same can be resolved by reference to civil law and not to labor law.
Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the
case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action
for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABSCBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for
certiorari extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an
inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs
conclusion.12 The Court of Appeals added that it could not re-examine the parties evidence and substitute the
factual findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE
AND EVIDENCE TO SUPPORT SUCH A FINDING.14
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC
ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define
clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the
nature of the relationship between a television and radio station and one of its "talents." There is no case law
stating that a radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and
radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABSCBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an
independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual
findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial
evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that
there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for
that of the tribunal in determining where the weight of evidence lies or what evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case.
Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee on the means and methods by which the work is accomplished.18 The last
element, the so-called "control test", is the most important element.19
A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs
peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in
specifically selecting and hiring complainant over other broadcasters of possibly similar experience and
qualification as complainant belies respondents claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status,
ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its
personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We
must consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA
asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that
ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of
a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If
SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as
"SSS, Medicare, x x x and 13th month pay"20 which the law automatically incorporates into every employeremployee contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employeremployee relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to
bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC
is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the
Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to
show that ABS-CBN could terminate his services on grounds other than breach of contract, such as
retrenchment to prevent losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as "AGENT and Jay
Sonza shall faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs
talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship
between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent
fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees

during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.25
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is
not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an
employee, he would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as
president of MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.26 However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an
independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of
Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin
Pblica ("WIPR")27 that a television program host is an independent contractor. We quote the following
findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a
skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty
possesses a masters degree in public communications and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty
provided the "tools and instrumentalities" necessary for her to perform. Specifically, she provided,
or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent contractor status
because WIPR provided the "equipment necessary to tape the show." Albertys argument is misplaced.
The equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her
appearance on the show. Others provided equipment for filming and producing the show, but these were
not the primary tools that Alberty used to perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative projects because other individuals often
provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys
contracts with WIPR specifically provided that WIPR hired her "professional services as Hostess for the
Program Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of control the hirer exercises over a worker. The greater
the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well the less control the hirer exercises, the more likely the worker is considered an independent
contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his
skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside
ABS-CBNs control. SONZA did not have to render eight hours of work per day. The Agreement required
SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff
meetings.31 ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited
SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of
SONZAs work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the
right to modify the program format and airtime schedule "for more effective programming."34 ABS-CBNs sole
concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means
and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast
SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN was
completely dissatisfied with the means and methods of SONZAs performance of his work, or even with the
quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN
could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.35
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue
paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance
of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of
performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the
expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville
performers were independent contractors although the management reserved the right to delete objectionable
features in their shows. Since the management did not have control over the manner of performance of the skills
of the artists, it could only control the result of the work by deleting objectionable features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew.
No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform
his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance.38Even though ABS-CBN provided SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABSCBNs sole concern was for SONZA to display his talent during the airing of the programs.39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZAs
work as television and radio program host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its
rules and standards of performance. SONZA claims that this indicates ABS-CBNs control "not only [over] his
manner of work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering
talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code applies to
broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of
radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are
those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee
of the former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that

these general rules are merely guidelines towards the achievement of the mutually desired result, which are toprating television and radio programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee relationship.
The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it.44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired
from performing his services according to his own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which
ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABSCBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This
practice is not designed to control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time
and effort "in building up its talents as well as the programs they appear in and thus expects that said talents
remain exclusive with the station for a commensurate period of time."47 Normally, a much higher fee is paid to
talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to
ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN.
SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who
is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the
principal responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or
employed the employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC
merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of
SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel
and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and
TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that
MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering
into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent
of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of
SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job
contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to
promote their careers in the broadcast and television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979
finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in the
broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is
no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance
cannot exclude independent contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not
binding on this Court, especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without
giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the
prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as
misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting
the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type)
hearing after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint
excluding those that may have been amicably settled, and shall be accompanied by all supporting
documents including the affidavits of their respective witnesses which shall take the place of the latters
direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of
their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need
for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such
determination, ask clarificatory questions to further elicit facts or information, including but not limited
to the subpoena of relevant documentary evidence, if any from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a
formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of
right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for
not conducting a formal trial, unless under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of
due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.
Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat
talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for
violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employeremployee relationship under labor laws. Not every performance of services for a fee creates an employeremployee relationship. To hold that every person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The
right of labor to security of tenure cannot operate to deprive an individual, possessed with special skills,
expertise and talent, of his right to contract as an independent contractor. An individual like an artist or talent
has a right to render his services without any one controlling the means and methods by which he performs his
art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to
render their services only as employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television hosts what they say in their
shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by
Republic Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these
professionals are subject to the 10% value-added tax ("VAT") on services they render. Exempted from the VAT
are those under an employer-employee relationship.57 This different tax treatment accorded to talents and
broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a
contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive
leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with
the findings of the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement.
In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable by
the regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in
CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 160073 October 24, 2005
ABUNDIO BARAYOGA and BISUDECO-PHILSUCOR CORFARM WORKERS UNION (PACIWU
CHAP-TPC),Petitioners,
vs.
ASSET PRIVATIZATION TRUST,* Respondent.
DECISION

PANGANIBAN, J.:
esponsibility for the liabilities of a mortgagor towards its employees cannot be transferred via an auction sale to
a purchaser who is also the mortgagee-creditor of the foreclosed assets and chattels. Clearly, the mortgageecreditor has no employer- __________________
* The Privatization and Management Office has succeeded APT. Comment, p. 1; rollo, p. 480.
employee relations with the mortgagors workers. The mortgage constitutes a lien on the determinate properties
of the employer-debtor, because it is a specially preferred credit to which the workers monetary claims is
deemed subordinate.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 30, 2003
Decision2and the August 27, 2003 Resolution3 of the Court of Appeals (CA), in CA-GR SP No. 58813. The
disposition orfallo of the questioned Decision reads as follows:
"IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED and the assailed NLRC Decision
dated February 18, 2000 is hereby RECALLED and SET ASIDE insofar as herein petitioner APT is
concerned. No cost."4
The reversed Decision5 of the National Labor Relations Commission (NLRC) disposed as follows:
"WHEREFORE, premises considered, the decision appealed from is AFFIRMED with modifications as
follows:
1. Complainants are awarded their monetary claims for underpayment of salaries and payment of allowances
per their computation on pp. 97-99 and 142-144 of the records;
2. Complainants are declared to have been illegally dismissed and should be paid their backwages from 01
May 1991 to 30 October 1992."6
The challenged August 27, 2003 Resolution denied petitioners Motion for Reconsideration.
The Facts
The CA summarized the antecedents in this portion of its Decision, which we quote:
"Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development
Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines Sur.
"On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was created under
Proclamation No. 50, as amended, mandated to take title to and possession of, conserve, provisionally manage
and dispose of non-performing assets of the Philippine government identified for privatization or disposition.
"Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued Administrative Order
No. 14 identifying certain assets of government institutions that were to be transferred to the National
Government. Among the assets transferred was the financial claim of the Philippine National Bank against
BISUDECO in the form of a secured loan. Consequently, by virtue of a Trust Agreement executed between the
National Government and APT on February 27, 1987, APT was constituted as trustee over BISUDECOs
account with the PNB.
"Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar Corporation
(Philsucor) to take over the management of the sugar plantation and milling operations until August 31, 1992.

"Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan with PNB, its
mortgaged properties were foreclosed and subsequently sold in a public auction to APT, as the sole bidder. On
April 2, 1991, APT was issued a Sheriffs Certificate of Sale.
"On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction and
underpayment of wages and other labor standard benefits plus damages.
"In the meantime, on July 15, 1992, APTs Board of Trustees issued a resolution accepting the offer of BicolAgro-Industrial Cooperative (BAPCI) to buy the sugar plantation and mill. Again, on September 23, 1992, the
board passed another resolution authorizing the payment of separation benefits to BISUDECOs employees in
the event of the companys privatization. Then, on October 30, 1992, BAPCI purchased the foreclosed assets of
BISUDECO from APT and took over its sugar milling operations under the trade name Peafrancia Sugar Mill
(Pensumil).
"On December 17, 1992, the union filed a similar complaint, later to be consolidated with its earlier complaint
and docketed as RAB V Case No. 07-00184-91.
"On March 2, 1993, it filed an amended complaint, impleading as additional party respondents APT and
Pensumil.
"In their Position Paper, the union alleged that when Philsucor initially took over the operations of the company,
it retained BISUDECOs existing personnel under the same terms and conditions of employment. Nonetheless,
at the start of the season sometime in May 1991, Philsucor started recalling workers back to work, to the
exception of the union members. Management told them that they will be re-hired only if they resign from the
union. Just the same, thereafter, the company started to employ the services of outsiders under the pakyaw
system.
"BISUDECO, Pensumil and APT all interposed the defense of lack of employer-employee relationship.
xxxxxxxxx
"After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano disposed as follows:
WHEREFORE, premises considered, respondent APT is hereby ordered to pay herein complainants of the
mandated employment benefits provided for under Section 27 of Proclamation No. 50 which benefits had been
earlier extended to other employees similarly situated.
SO ORDERED.
"Both the union and APT elevated the labor arbiters decision before NLRC."7
The NLRC affirmed APTs liability for petitioners money claims. While no employer-employee relationship
existed between members of the petitioner union and APT, at the time of the employees illegal dismissal, the
assets of BISUDECO had been transferred to the national government through APT. Moreover, the NLRC held
that APT should have treated petitioners claim as a lien on the assets of BISUDECO. The Commission opined
that APT should have done so, considering its awareness of the pending complaint of petitioners at the time
BISUDECO sold its assets to BAPCI, and APT started paying separation pay to the workers.
Finding their computation to be in order, the NLRC awarded to petitioners their money claims for
underpayment, labor-standard benefits, and ECOLA. It also awarded them their back wages, computed at the
prevailing minimum wage, for the period May 1, 1991 (the date of their illegal dismissal) until October 30,
1992 (the sale of BISUDECO assets to the BAPCI). On the other hand, the NLRC ruled that petitioners were
not entitled to separation pay because of the huge business losses incurred by BISUDECO, which had resulted
in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of Court.

Ruling of the Court of Appeals

The CA ruled that APT should not be held liable for petitioners claims for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages, as well as other labor-standard benefits plus damages.
As found by the NLRC, APT was not the employer of petitioners, but was impleaded only for possessing
BISUDECOs mortgaged properties as trustee and, later, as the highest bidder in the foreclosure sale of those
assets.
Citing Batong Buhay Gold Mines v. Dela Serna,8 the CA concluded that petitioners claims could not be
enforced against APT as mortgagee of the foreclosed properties of BISUDECO.
Hence, this Petition.9
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
"I. Whether or not the Court of Appeals erred in ruling that Respondent Asset Privatization Trust (APT) should
not be held liable for the petitioner unions claim for unfair labor practice, illegal dismissal, illegal deduction
and underpayment of wages and other labor standard benefits plus damages.
"II. Whether or not the claims of herein petitioners cannot be enforced against APT/PNB as mortgagee of the
foreclosed properties of BISUDECO.
"III. Whether or not the entitlement of petitioners upon their claims against Respondent APT is recognized
under the law."10
In brief, the main issue raised is whether Respondent APT is liable for petitioners monetary claims.
The Courts Ruling
The Petition has no merit.
Main Issue:
Whether APT Is Liable for the Claims of
Petitioners Against Their Former Employer
It should be stressed at the outset that, pursuant to Administrative Order No. 14, Series of 1987,11 PNBs assets,
loans and receivables from its borrowers were transferred to APT as trustee of the national government. Among
the liabilities transferred to APT was PNBs financial claim against BISUDECO, not the latters assets and
chattel. Contrary to petitioners assertions, BISUDECO remained the owner of the mortgaged properties in
August 1988, when the Philippine Sugar Corporation (Philsucor) undertook the operation and management of
the sugar plantation until August 31, 1992, under a so-called Contract of Lease between the two corporations. At
the time, APT was merely a secured creditor of BISUDECO.12
It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO because of the latters
continued failure to pay outstanding loan obligations to PNB/APT. The properties were sold at public auction to
APT, the highest bidder, as indicated in the Sheriffs Certificate of Sale issued on April 2, 1991. It was only in
September 1992 (after the expiration of the lease/management Contract with Philsucor in August 1992),
however, when APT took over BISUDECO assets, preparatory to the latters privatization.
In the present case, petitioner-unions members who were not recalled to work by Philsucor in May 1991 seek
to hold APT liable for their monetary claims and allegedly illegal dismissal. Significantly, prior to the actual
sale of BISUDECO assets to BAPCI on October 30, 1992, the APT board of trustees had approved a Resolution

on September 23, 1992. The Resolution authorized the payment of separation benefits to the employees of the
corporation in the event of its privatization. Not included in the Resolution, though, were petitioner-unions
members who had not been recalled to work in May 1991.
The question now before the Court is whether APT is liable to pay petitioners monetary claims, including back
wages from May 1, 1991, to October 30, 1992 (the date of the sale of BISUDECO assets to BAPCI).
We rule in the negative. The duties and liabilities of BISUDECO, including its monetary liabilities to its
employees, were not all automatically assumed by APT as purchaser of the foreclosed properties at the auction
sale. Any assumption of liability must be specifically and categorically agreed upon. In Sundowner
Development Corp. v. Drilon,13 the Court ruled that, unless expressly assumed, labor contracts like collective
bargaining agreements are not enforceable against the transferee of an enterprise. Labor contracts are in
personam and thus binding only between the parties.
No succession of employment rights and obligations can be said to have taken place between the two. Between
the employees of BISUDECO and APT, there is no privity of contract that would make the latter a substitute
employer that should be burdened with the obligations of the corporation. To rule otherwise would result in
unduly imposing upon APT an unwarranted assumption of accounts not contemplated in Proclamation No. 50 or
in the Deed of Transfer between the national government and PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or substantially all, the
properties of the seller or transferor is not obliged to absorb the latters employees.14 The most that the
purchasing company may do, for reasons of public policy and social justice, is to give preference of
reemployment to the selling companys qualified separated employees, who in its judgment are necessary to the
continued operation of the business establishment.15
In any event, the national government (in whose trust APT previously held the mortgage credits of BISUDECO)
is not the employer of petitioner-unions members, who had been dismissed sometime in May 1991, even before
APT took over the assets of the corporation. Hence, under existing law and jurisprudence, there is no reason to
expect any kind of bailout by the national government.16 Even the NLRC found that no employer-employee
relationship existed between APT and petitioners. Thus, the Commission gravely abused its discretion in
nevertheless holding that APT, as the transferee of the assets of BISUDECO, was liable to petitioners.
Petitioners also contend that in Central Azucarera del Danao v. Court of Appeals,17 this Court supposedly ruled
that the "sale of a business of a going concern does not ipso facto terminate the employer-employee relations
insofar as the successor-employer is concerned, and that change of ownership or management of an
establishment or company is not one of the just causes provided by law for termination of employment[.]"18
A careful reading of the Courts Decision in that case plainly shows that it does not contain the words quoted by
counsel for petitioners. At this juncture, we admonish their counsel19 of his bounden duty as an officer of the
Court to refrain from misquoting or misrepresenting the text of its decisions.20 Ever present is the danger that, if
not faithfully and exactly quoted, they may lose their proper and correct meaning, to the detriment of other
courts, lawyers and the public who may thereby be misled.21
In that case, contrary to the assertions of petitioners, the Court held as follows:
"There can be no controversy for it is a principle well-recognized, that it is within the employers legitimate
sphere of management control of the business to adopt economic policies or make some changes or adjustments
in their organization or operations that would insure profit to itself or protect the investment of its stockholders.
As in the exercise of such management prerogative, the employer may merge or consolidate its business with
another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal
or termination of its employees in the process. Such dismissal or termination should not however be interpreted
in such a manner as to permit the employer to escape payment of termination pay. x x x.

"In a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated
by good faith as an element of exemption from liability. Indeed, an innocent transferee of a business
establishment has no liability to the employees of the transferor to continue employing them. Nor is the
transferee liable for past unfair labor practices of the previous owner, except, when the liability therefor is
assumed by the new employer under the contract of sale, or when liability arises because of the new owners
participation in thwarting or defeating the rights of the employees."22 (Citations omitted.)
In other words, the liabilities of the previous owner to its employees are not enforceable against the buyer or
transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was made in bad faith.
Thus, APT cannot be held responsible for the monetary claims of petitioners who had been dismissed even
before it actually took over BISUDECOs assets.
Moreover, it should be remembered that APT merely became a transferee of BISUDECOs assets for purposes
of conservation because of its lien on those assets -- a lien it assumed as assignee of the loan secured by the
corporation from PNB. Subsequently, APT, as the highest bidder in the auction sale, acquired ownership of the
foreclosed properties.
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act No. 6715,
which reads:
"Article 110. Workers preference in case of bankruptcy. In the event of bankruptcy or liquidation of the
employers business, his workers shall enjoy first preference as regards their unpaid wages and other monetary
claims shall be paid in full before the claims of the Government and other creditors may be paid."23
This Court has ruled in a long line of cases24 that under Articles 2241 and 2242 of the Civil Code, a mortgage
credit is a special preferred credit that enjoys preference with respect to a specific/determinate property of the
debtor. On the other hand, the workers preference under Article 110 of the Labor Code is an ordinary preferred
credit. While this provision raises the workers money claim to first priority in the order of preference
established under Article 2244 of the Civil Code, the claim has no preference over special preferred credits.
Thus, the right of employees to be paid benefits due them from the properties of their employer cannot have any
preference over the latters mortgage credit. In other words, being a mortgage credit, APTs lien on
BISUDECOs mortgaged assets is a special preferred lien that must be satisfied first before the claims of the
workers.
Development Bank of the Philippines v. NLRC25 explained the rationale of this ruling as follows:
"x x x. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on
a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in
their favor, a preference in application. It is a method adopted to determine and specify the order in which
credits should be paid in the final distribution of the proceeds of the insolvents assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor. x x x"
Furthermore, workers claims for unpaid wages and monetary benefits cannot be paid outside of a bankruptcy or
judicial liquidation proceedings against the employer.26 It is settled that the application of Article 110 of the
Labor Code is contingent upon the institution of those proceedings, during which all creditors are convened,
their claims ascertained and inventoried, and their preferences determined.27 Assured thereby is an orderly
determination of the preference given to creditors claims; and preserved in harmony is the legal scheme of
classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code.
The Court hastens to add that the present Petition was brought against APT alone. In holding that the latter,
which has never really been an employer of petitioners, is not liable for their claims, this Court is not reversing
or ruling upon their entitlement to back wages and other unpaid benefits from their previous employer.

On the basis of the foregoing clarification, the Court finds no reversible error in the questioned CA Decision,
which set aside the February 8, 2000 Decision of the NLRC. As a mere transferee of the mortgage credit and
later as the purchaser in a public auction of BISUDECOs foreclosed properties, APT cannot be held liable for
petitioners claims against BISUDECO: illegal dismissal, unpaid back wages and other monetary benefits.
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution AFFIRMED. Costs
against petitioners.
SO ORDERED.